Think Again About Secondary Markets
Looking to buy high-end apartments at high-end prices? Alpha cities are the place to be. But there's lots of action nationwide in other places, Passco acquisitions SVP Gary Goodman tells us. (All this underdog talk has us excited for the Jamaican team in the Winter Olympics.)
Risk-adjusted yields are usually superior in secondary and even some tertiary markets--which is where Irvine, Calif.-based Passco is leaving no stone unturned, looking for deals. "Cap rates for Class-A properties are over 100 basis points higher in those markets, and the development pipeline isn't usually as full as in so-called primary or gateway cities," Gary notes. (People forget their called gateways because they lead elsewhere... because people also live elsewhere.) Passco owns multifamily assets in 20 states.
"We're targeting strong secondary markets such as Greenville, Nashville, and Oklahoma City, as well as many secondary markets in Florida, including Tampa/St. Petersburg and suburban Dade, Broward, and Palm Beach counties," Gary says. Besides non-full pipelines, these markets offer low cost-of-living environments while providing solid employment opportunities. (They also don't have as many nosy press people sneakin' around... until now.) The company also likes NC markets: pictured is Wakefield Glen Apartments, a 246-unit property in Raleigh, that Passco recently bought for $31M.