Taking on thousands of new units in multiple markets is a large undertaking for any company and one that can go south quickly. So when Chicago-based The Habitat Company expanded its management portfolio south, an “all-hands-on-deck approach” was used during the transitional phase.
At the end of its 44th and beginning of its 45th year, Habitat added 5,000 more units to its national management portfolio after it secured assignments for 12 rental communities in Birmingham, Ala. and Tampa, Fla. The company, which specializes in property management, acquisitions, and development, and now manages more than 25,000 units, hit the ground running at its new communities, says Bryan Sullivan, vice president of acquisitions and investment.
There were capital improvements to be made and operational strategies – marketing, leasing execution, and tenant retention – to be constructed for each property. “It was a Herculean-type of a task that they did,” Sullivan says of the Habitat team. “They made it a seamless transition.
“There’s always some level of ongoing work to be done,” he adds, “but they’ve really got the properties up and running and humming at this point.”
Those properties include seven communities comprising nearly 3,600 units in Birmingham and five properties totaling nearly 1,400 units in Tampa. Habitat has been in Tampa since 2012 and now manages six communities there, including its newest addition, the 340-unit Wildwood Acres, which is owned by a venture led by Texas-based Goff Capital Partners and includes a mix of one-, two-, three- and four-bedroom units ranging in size from 700 to 2,400 square feet.
Sullivan says Tampa is a good fit for Habitat because it’s a big rental market where 13% of the population rents. It has an occupancy rate of 96%.
Birmingham is attractive too due to its low cost of living and high rent growth –just under 10% last year, Sullivan says. He expects that trend to continue. “In some cases you have tertiary markets like Birmingham that provide more attractive yield in return metrics than you have in some of the major markets,” he says.
As a whole, Sullivan is bullish on these metros. “Even with some new supply coming on line, it gives you some comfort when they’re both getting strong levels of absorption with high levels of occupancy,” he says.
These management opportunities could lead to more in the future. “In a span of just four months, we’ve been able to expand our management portfolio by 25% while establishing a strong foothold in two very dynamic markets with favorable supply and demand fundamentals,” says Matt Fiascone, president Habitat. “Having boots on the ground in Tampa and Birmingham will better position us to evaluate and pursue additional opportunities, not only in these cities, but in others throughout the Southeast U.S. – whether via acquisition, development, or property management.”
According to Sullivan, Habitat is also looking at opportunities in Texas, Denver, Atlanta, and Minneapolis.
Despite estimating the industry is in the later stage of the current cycle, Sullivan says there’s still room to run. “We’re probably getting close to potential inflection points, but while new supply could temper some of the rent growth and some of the occupancy levels that we’ve seen over the last 12, 24, 36 months, I still think there’s extremely strong demand and we may resort back to more historical levels of occupancy and rent growth in the future as new supply continues to come on line,” he says. “But I don’t think any kind of correction would be nearly as significant or meaningful as what we went through during the downturn.”
While that plays out, Habitat will look to add to its record-high management portfolio.