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Atlanta's Job Growth Luring National Apartment Investors

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A Washington, D.C.-based apartment investor is continuing to bulk up on Atlanta apartments, and the firm is part of a wave of out-of-state investors attracted to metro multifamily as Atlanta's economy continues its boom.

StoneBridge Investments
StoneBridge Investments latest multifamily purchase, River Vista in Sandy Springs

StoneBridge Investments purchased River Vista, a 196-unit suburban apartment community in the affluent suburb of Sandy Springs in Central Perimeter for $33.4M, or $170,400 per unit. The Milestone Group sold the 23-year-old property with the help of JLL Managing Directors David Gutting and Derrick Bloom.

“With its strong employment growth, excellent quality of life and relatively low cost of living, we remain bullish on the dynamic Atlanta market,” StoneBridge Managing Director Kees Bruggen said in a release.

This is StoneBridge's fifth Atlanta property in recent years. The firm now owns more than 1,100 units in Metro Atlanta.

Bridge Investment Group, based in Salt Lake City, bought a suburban Atlanta property this past month. The firm purchased Corners 1700, a 308-unit property in Peachtree Corners, roughly 20 miles north of Downtown Atlanta in Gwinnett County, for an undisclosed sum.

Fogelman Properties, in a joint venture with New York-based DRA Advisors, also bought into the local apartment market, by acquiring Ashford East Village, a 371-unit apartment complex in East Atlanta.

In both cases, officials associated with the transactions cited local job growth and housing demand as factors for the investments.

Fogelman DRA
Ashford East Village apartments in East Atlanta

Atlanta's growth is a refrain investors are uttering when describing reasons to target Atlanta. Last month, Philadelphia REIT Independence Realty Trust executives described Atlanta on a call with stock analysts as one of the top markets for the company — along with Raleigh-Durham and Columbus, Ohio — driven by strong job growth and corporate expansion. In Atlanta, the company's revenues grew 7.6% over the past year.

“The Atlanta market continues to display optimal fundamentals for our communities. The overall market contains 440,000 units with only 8,000 units being added annually, and the majority of this new construction occurring in the Midtown [submarket],” IRT President Farrell Ender told analysts. “The limited supply combined with significant job and population growth has produced a market where there are 12 people moving to Atlanta for every one unit constructed.”

Even though developers are expected to unleash 11,300 new apartment units in Atlanta, vacancy rates should continue to fall and rents will increase, according to a second quarter Marcus & Millichap report. The report is projecting vacancy to fall from 6.2% to 4.9% by the end of the year, with rents averaging $1,290/month. Rents have climbed an average of 6.7% a year since 2015.

Those dynamics have investors paying more for apartments in Metro Atlanta, Marcus & Millichap reported. Average per-unit sales prices jumped more than 13% since last year, to $116K per unit.

“Assets are attracting out-of-state buyers,” Marcus & Millichap officials said in the report. "Many California and New York-based investors are exploring the market in search of first-year yields that are 100 to 200 basis points higher than their home metros."

CBRE Vice Chairman Kevin Geiger has been seeing this demand from outside investors growing for some time. He just helped a Kansas City investor buy an apartment community in the affluent East Cobb County areas.

“It's a good example of just another buyer from outside the region seeking Atlanta multifamily,” Geiger said.

Geiger said job growth is perhaps the biggest reason investors are flocking to the metro area. As of April, Metro Atlanta's unemployment rate shrank to 3%, according to the Georgia Department of Labor, from 4.2% at the start of the year.

That growth has a direct correlation to the health of the apartment market. More jobs means more people moving into Metro Atlanta and leasing up apartment units. For investors, it has been common to see upward of 5% rent growth in the suburbs.

“I don't see it letting off,” he said. “We're continuing to be a very liquid market and you're getting pretty spectacular yields for risk-adjusted return. And I'm not seeing any reason why we should see that lessen for the rest of 2019.”