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California Investor Enters Atlanta's Apartment Market With Gwinnett Buys

A California apartment investment firm pivoted four years ago from buying on their home turf to focusing on the Sun Belt.

Now, Lion Real Estate Group has made its debut in the Atlanta multifamily market with two northern suburb property buys, and with plans to own several thousand units in Metro Atlanta.

The pool at the Everly, formerly 2800 Sweetwater, acquired by Lion Real Estate Group in September.

“Atlanta we like because it has performed strongly in the pandemic,” Lion co-founder Jeff Weller said in an interview.

Last month, Lion bought two apartment properties from RADCO for more than $83M, more than $142,500 per unit: Ashford 6860 in Norcross and 2800 Sweetwater in Lawrenceville. The properties have since been rebranded as the Domain and the Everly, respectively. The move gives Lion an entry into the Atlanta market with a total of 584 units. But it's only a stepping stone in what Weller and his co-founding partner, Mory Barak, hope is a deeper penetration into Atlanta's suburban apartment market.

Lion's strategy is to focus on Sun Belt markets for its apartment investments, especially as people and companies are leaving the West Coast because of steepening costs and increasing taxation and regulation, Weller said. That has led Lion to buy multifamily in markets like Denver, Nashville, Dallas, Austin, Salt Lake City and Durham, North Carolina.

“We've been doing this 14 years, and in the last year, we have seen more companies move from California, Illinois and New York to markets like Nashville and Austin,” Weller said. “We think Atlanta is a natural beneficiary of COVID and what's going on with the tax situation [in California]."

Lion, which invests in multifamily and office properties for a network of high net worth and family investors, isn't the only firm shopping Metro Atlanta for multifamily, even as the pandemic takes a bite out of the region's economic performance. That has buoyed overall investment activity this year, despite the market grinding to a halt during the second quarter.

Through June, $1.5B in Metro Atlanta apartments traded hands, according to Yardi Matrix. While that was off the pace of 2019, when more than $7B sold, the price per unit continued to creep upward, a 7.2% increase this year to $129K.

Activity is returning to high gear as more investors buy into the idea that Atlanta and other Sun Belt cities will outperform the rest of the country, Cushman & Wakefield Executive Vice Chairman Mike Kemether said.

“The final four months of 2020 will outstrip the final four months of 2019,” Kemether said, adding that for every multifamily property that goes up for sale, the firm is seeing 50% more interest.

Investors' eyes are turning to the Sun Belt since the demand for units has rebounded. Atlanta, Dallas and Houston saw 7,700 to 9,000 apartment units apiece rented during the third quarter, according to a recent RealPage report. Those three markets alone accounted for 17% of the nation's multifamily absorption of 146,500 units.

But a big change in 2020 — both from investors and renters – has been a preference for suburban apartments. Of the $1.5B in sales so far this year, $869M have been properties outside the Perimeter, led by Bluerock Residential Growth REIT's purchase of The Falls at Forsyth for $83M from Preferred Apartment Communities, according to Yardi.

“That's not to suggest we've been unscathed, but the Sun Belt has outperformed the rest of the country, and specifically Atlanta has outperformed the Sun Belt,” Kemether said. “That's why if capital is making a bet, they're choosing to make that bet in the Southeast.”

Despite the previous owner of Ashford 6860 and 2800 Sweetwater infusing millions of dollars into renovations, Lion still views both apartment complexes as value-add plays and plan to infuse another $6.7M into a three-year renovation plan in an effort to bring occupancy and rents above the market average, Barak said.

"This transaction, and the eagerness of our syndicate of participating investors, continues to validate the strength of our niche approach to value-add real estate investing," Barak said in a release. “Family offices and high-net-worth individuals are on a constant search for yield in today's low-interest-rate environment.”