Equity investors Ivanhoé Cambridge and Mount Auburn have formed a programmatic joint venture to provide preferred equity to multifamily developments throughout the U.S., with a focus on enabling developers to increase the supply of multifamily housing in secondary cities.
The partnership’s primary targets include developers in Atlanta; Austin, Texas; Charlotte, North Carolina; Columbus, Ohio; Dallas/Fort Worth; Denver; Houston; Indianapolis; Jacksonville, Florida; Louisville, Kentucky; Nashville, Tennessee; Orlando, Florida; Phoenix; Raleigh, North Carolina; Salt Lake City; San Antonio; Tampa, Florida; and the Washington, D.C., suburbs. The venture aligns with Mount Auburn’s existing investment strategy, which is focused on millennial migration to secondary markets.
“We’re planning to invest this fund with developers based in the Sun Belt. We can also push up into Denver and Salt Lake, Indianapolis, and Columbus,” says Matt Pavlovich, executive vice president of Mount Auburn. “Product type-wise, it’s all conventional ground-up multifamily developments. We like to be in a market segment that we deem to be affordable, with a lowercase a, [with] rents less than one-third of the area median income. It’s mainly the renters-by-choice demographic in markets where we’re seeing significant population migration patterns—a lot of upper-income millennial migration as well as folks moving from out of state to these growth markets.”
The investors had been in dialogue about multifamily investments for some time before developing the joint venture, according to Charles-Antoine Lussier, Ivanhoé Cambridge’s senior vice president.
“We came on this discussion about preferred equity, which for us is a great risk-reward position sometimes,” Lussier says. “And today’s market is interesting. We’re not a lender per se, but we’re opportunistic in nature. So when this strategy came upon us, we were very curious about it. We can help housing and take a low-risk position.”
The joint venture aims to leverage Mount Auburn’s existing relationships with developers, as well as new investment targets within the venture’s reach, to capitalize on demand growth in secondary markets. “At Mount Auburn, we have 20-plus years of experience in the multifamily business exclusively and have done over 16,000 units since our inception,” Pavlovich says. “So our database and relationships we’ve developed over the years is really the ground floor for recruiting more developers into the program.”
Montréal-based Ivanhoé Cambridge owns over 40,000 units in assets in the U.S. and intends to keep growing its residential asset class via partnerships with developers. Los Angeles-based Mount Auburn has over $2 billion in U.S. assets across more than 10,000 units.