How TruAmerica Became a Top 10 Multifamily Player in Just Two Years
Want to get a jump-start on upcoming deals? Meet the major players at one of our upcoming national events!
TruAmerica Multifamily has been growing without pause, acquiring 42 multifamily assets totaling $1.5B in the past 12 months. That's among the reasons we're thrilled to have founder and CEO Bob Hart speak at Bisnow's full-day National Multifamily Conference on Dec. 3 at the Walter E. Washington Convention Center in DC.
After launching just two years ago in partnership with The Guardian Life Insurance Company of America, TruAmerica already ranks among the top 10 apartment buyers nationwide and top 15 globally.
The company focuses on buying and operating middle-market, Class-B properties, which puts it in a strong position in submarkets where a lot of people can best afford to rent over buying. And it's paying off, with returns for investors and living improvements for residents. Bob shared his insights on what moved TruAmerica into new markets this year, what the company looks for in its acquisitions and the outlook for the future.
Snapped: Bob with wife, Cindy, and daughter Mia, 11, at a school fair.
Bisnow: What was the driving force behind your 42 acquisitions in the past year? What types of properties are you going after to get the best returns?
Bob Hart: Our acquisitions thus far in 2015 have totaled more than $1.5B with several other acquisitions in the pipeline. Our strategy is to identify assets, including portfolio opportunities, in our key markets that provide economies of scale, large value-add components and strong rental growth.
For example, in January we acquired a 14 property, 2,669-unit, value-add portfolio with assets throughout major submarkets of Los Angeles. We saw tremendous upside in the property operations, rehab and repositioning of these well-located assets. These assets are generating 9% cash-on-cash returns out of the gate with lots of potential for NOI and same-store rent growth as we rehab and turn units over the next five years. The total capitalized value of the portfolio is $545M.
We have also been very active in the Pacific Northwest, where we have invested more than $600M since the beginning of the year. In July, we acquired a portfolio of five properties totaling approximately 1,000 units in submarkets surrounding Seattle and Portland. We followed that with the purchase of 14 properties also in Seattle and Portland, in two separate transactions which were capitalized as one large portfolio. We also recently entered the Salt Lake City market, closing on four properties totaling 1,647 units. Those communities are located relatively close to one another and each offered tremendous value-add and management upside.
Bisnow: What do you look for when making acquisitions that helps determine the long-term success of those properties?
Bob: We look for strong job-centric locations near major employment centers; easy access to major transportation corridors and public transportation; long-term job drivers; high barriers to entry for new construction; and larger-than-average renter versus single family-owner households, which is a significant factor in the western US, especially in Southern California. (We snapped Bob when he spoke to us at the Multifamily Conference held in LA in August.)
Bisnow: What brought you into new markets this year (Las Vegas, Utah and Portland)?
Bob: Las Vegas is turning around rapidly. The casinos are back, new construction is back and the long-term job drivers have returned, albeit slower than in the previous cycle. Thus there’s a good opportunity to buy well-located assets close to the Strip and in key submarkets like Henderson and drive value.
We see Salt Lake City (above) as the perfect apartment market. It has tremendous demand from a younger, growing population for quality rental housing. Apartment demand is especially high due to the growing number of families moving there for quality-of-life reasons and access to good-paying jobs. For example, Goldman Sachs employs nearly 5,000 people there.
Portland has very steady housing demand. Millennials love Portland. There are huge quality-of-life demographic factors, plenty of tech and service jobs, limited new supply and strong rent growth potential. It is one of the top growth markets in the country and more affordable and less crowded than Seattle.
Bisnow: Do the Western states continue to look fundamentally strong for apartment acquisitions going forward?
Bob: Yes, the major markets west of Denver where we focus have high homeownership barriers to entry due to higher prices than the rest of the country. There are a tremendous amount of young workers moving there as well for jobs, better climate and quality of life. We expect those markets will continue to sustain moderate (3% to 5%) and steady rent growth over the next five years and possibly beyond that.
Bisnow: Are you finding a sweet spot when repositioning older buildings once you acquire them? Are there certain improvements or amenities that give you the most value?
Bob: We focus on rehabbing the interiors to a higher standard without creating overpriced, over-rehabbed product that people cannot afford. Instead, we focus on tastefully remodeling kitchens, baths, replacing carpet with decorative laminate floors and other items in order to create a new modern look. We try to keep our costs inside $10k per unit so our return on investment hurdles are reasonable and achievable with respect to rent growth and business plan achievement. We focus a lot on demographics with household incomes in the $50k to $75k range. There’s an upper limit of rent that people can afford to pay, so we try to stay within those limits and still offer a quality product for the American workforce.
Bisnow: Tell us about your personal involvement with Chrysalis (an organization that fight homelessness through job training). What was it that made it important to work with this organization?
Bob Hart: Chrysalis has been a passion of mine for the past 15 years. The organization is dedicated to retraining and repositioning the lives of individuals emerging from homelessness and helping them find meaningful employment, live independently and stabilize their lives. Chrysalis allows people to restore their dignity and pride and become self-sufficient. I was chairman of the Board for seven years and on the Board for 15. I enjoy raising money and helping the team there sustain over 25 years of successful accomplishment retraining nearly 2,000 individuals a year through their comprehensive job training program.
Snapped: Bob with his wife, Cindy, Ron Harris of IPA, who was celebrating his 60th birthday, and Ron's wife, Carla.