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Kaplan Sells Sandy Springs Project, Pivots To Build-To-Rent Sector

Square One, a mixed-use apartment project in Sandy Springs, recently sold by Kaplan Residential.

Kaplan Residential has sold one of its key mixed-use projects in Sandy Springs as the Atlanta firm pivots its business model to respond to the changes in the housing market.

Atlanta-based multifamily investment firm Audubon bought Square One, a 203-unit luxury apartment complex with 10K SF of retail from Kaplan on Wednesday for $59.2M. The project, formerly known as One City Walk, was delivered in 2016 and was 95% occupied at the time of the sale, according to Kaplan.

Cushman & Wakefield Executive Vice Chairman Robert Stickel brokered the sale.

“Cap rates are at an all-time low for Atlanta,” Kaplan partner Nathan Kaplan said. "Rental growth is projected to be extremely high, so there are a lot of buyers out there that are looking for deals."

Kaplan has developed a number of projects in Metro Atlanta since the 1980s, including Waterford on Piedmont, Cosmopolitan at Lindbergh and, most recently, Generation Atlanta, an $83M, 336-unit apartment complex in Downtown Atlanta.

But Kaplan is moving away from urban apartment developments for the time being, with its $300M development pipeline focused on the growing build-for-rent sector, where many homebuilders are constructing townhouses and single-family houses that are being offered as rentals versus for-sale product.

“Any capital that we bring in right now … is being redeployed to our BFR platform,” Kaplan said.

In June, Kaplan purchased two sites in Metro Atlanta that will be home to 400-plus new residential units, including plans for Avondale Generation East, a 239-townhome rental community adjacent to the Indian Creek MARTA Station in Stone Mountain. The firm also purchased a $4.8M site in Dallas, Georgia, where it plans to develop a single-family active adult community, also all for rent, Kaplan said.

Kaplan is among the latest seeking to build houses normally set aside as for-sale product but instead marketed to renters. Most recently, Atlanta-based RangeWater Real Estate broke ground on a 197-unit single-family neighborhood in Flowery Branch called Beacon Lake Lanier. Names like JPMorgan Chase and Blackstone Group have invested in single-family rentals or rental companies. Numerous homebuilders are breaking ground on or expanding their rental portfolios, including Lennar Corp., DR Horton and Toll Brothers, which established a $400M joint venture with BB Living to develop single-family rentals in Phoenix, Denver, Las Vegas, Jacksonville, Dallas and Houston.

Kaplan said his firm is seeing young couples and divorcées, especially those with children, who would rather rent for the time being than own a home, especially in the townhouse sector, a middle ground of sorts between traditional apartments and single-family houses.

“I just don't think fully amenitized, full townhome communities have been developed [for rental only],” he said. "It hasn't really been institutionalized."