Minneapolis-based multifamily investor Timberland Partners underwent a bumper period of growth in 2016, with over 2,000 new units added to its now 12,000-unit portfolio—a total unit growth of more than 20%.
The company’s most-recent acquisitions include White Bear Woods, a 304-unit community in White Bear Lake, Minn.; and a 548-unit, three-property portfolio in the Nashville, Tenn., area comprising The Falls at 109, Fountains at Meadow Wood, and The Lakes of Columbia. Timberland also recently expanded into development work, with Sundance, a 108-unit property in Bismarck, N.D., and 333 on the Park, a historic rehabilitation project in St. Paul that’s due to open in March.
Multifamily Executive talked with Matt Fransen, vice president of investments at Timberland Partners, about the present and future growth of his family’s investment firm.
Tell us about the history of Timberland Partners. How did you get your start in the company?
Timberland was actually founded by my father, Robert Fransen, in 1992. At the time, he was an apartment sales broker for CB Richard Ellis in the Twin Cities/Minneapolis–St. Paul area. He located a [parcel] in foreclosure, a 46-unit property in the Twin Cities, that he decided to buy. He didn’t have enough money to buy it on his own, so he brought in a couple of friends, our partners. So they bought that in ’92, and through the ’90s they picked up some similar light deals like that—smaller, 50- to 75-unit deals. And he continued to do that and grew it through the late ’90s and early 2000s, when my dad left the brokerage to focus on Timberland Partners.
I got my start in 2002, working primarily dispositions but also some acquisitions work for Aimco, which at the time was the largest apartment owner in the country. [Aimco] owned apartments in, I think, every single state, in almost every single market you could dream of. I hit the road and got to know a lot of different markets throughout the country, working for [Aimco] for five to six years. About 10 years ago, I left and moved back to Minneapolis to join my dad and help grow Timberland. Since I’ve been with the company, we’ve acquired over 9,000 units under my leadership in acquisition.
Today, we have about a 12,000-plus–unit apartment portfolio and have also begun to do a little bit of development work. The first development that we actually completed was about a year and a half ago in Bismarck. My dad is from North Dakota; that’s where I was born. We built an apartment community there, a 108-unit property called Sundance, and right now we’re doing a historic rehab, or adaptive reuse, of [333 on the Park], a historic, 100-year-old office building in downtown St. Paul. And that’s about 90% done, and we’re leasing and expecting to open in March.
What are Timberland's acquisition goals and criteria?
We like properties with a story. Long-term ownership, some kind of foreclosure event, or something [that] sets it apart from our competition where we think we can unleash some value. But really, what we do is we buy Class B apartments where we can come in and put in between $5,000 and $10,000 a unit, and renovate them, make them more appealing to the market. We’re generally long-term holders.
We deal in secondary and tertiary markets; that’s been our niche. We’re based in Minneapolis; we’ve got about 2,000 units locally here, and the rest are throughout the Midwest and Southeast. And we like to operate in locations that are a little bit off the beaten path. We’re not out in the country or anything, but we like tertiary markets like St. Louis; we’ve done really well in suburban Detroit; and we have five properties in the exurbs of Nashville that we’re excited about, and the same thing with Florida.
You recently did a rehabilitation of 333 on the Park in St. Paul. How did you come by this property, and what are your hopes for it?
We came across it through some mutual acquaintances. It was an office building that was about 30% occupied, and the area is becoming more of a neighborhood. The highest and best use of the property really felt more residential apartments than office. And really, the design of the building lent itself really well to multifamily. So the floor plans have high ceilings, and some of the units are going to have rooftop access with balconies up top and gas grills. So the design of the building really configured well for multifamily apartments.
Do you see particular growth potential in Tennessee?
Yeah, that was a three-property portfolio we bought. We had acquired two [other] properties in Nashville, one in 2013 and the other in 2014. It’s definitely been a market for growth that we’ve been targeting for a long time. We’re finally glad to have an East footprint now, and we just recently opened a regional office in that market.
You mentioned in your plans for further expansion that you plan to take it a little easier this year.
We’re going to be busy sourcing deals like we always are, but I think we’re just going to be selective. I think there’s some uncertainty in the market. We feel really good about the apartment market, but [with] the capital markets, with the interest rates going up and a lot of unknowns [in terms of] tax laws in the next year or so, we’re just going to be careful. We’re bullish on the industry, the Class B apartments, but we don’t know yet how to project what kind of opportunities are going to be out there this year.
What are Timberland's long-term goals?
We’re always in growth mode. We might not acquire as much this year as we did last year, but we’re going to continue to grow, and we’ll continue to find opportunities. I don’t know if there’s any tangible goal that we have, but 10 years from now we’ll be a 20,000-unit company. I see that as the path we’re going.