Irvine-based Steadfast Income REIT completed almost $1B in deals last year, making it one of the country's most active multifamily buyers. President Ella Shaw Neyland tells us the success was a combination of luck and smarts. (Can't forget the elbow grease and the influence of mighty Poseidon.)
The strategy was formed back in '08 before her arrival. The goal of 7% distribution to shareholders discounted investing in the Sexy Six coastal cities at 3.5% cap rates, Ella says, and guided Steadfast's focus to the country's central corridor (from Texas, through the Great Plains, heading north). The happy accident: those “flyover states” continue to benefit from tremendous Millennial migration thanks to job creation and a lower cost of living. (Besides, they can't all fit in Brooklyn.) The new jobs like light manufacturing and personal services fall in the $45k to $75k/year salary range, which gels with the $950/month average rent of Steadfast's $1.5B portfolio across 11 states.
For anyone still not sold, Ella likes to remind them that 12,000 babies are born every day and one-third will be renters. (Some parents wish they could fast-forward to that stage.) Those babies are getting married later in life, and many would rather shack up with their dog in a studio, at least for a while. Steadfast invested $950M last year and $500M the year before, now at 63 total properties (Carrington at Champion Forest in Houston, above) with an average purchase price of $25M. It's benefited from slim competition, since institutional capital is still focused on the coasts and downtown urban cores. They also deploy money in big chunks and might not take the time to do one-off deals that Steadfast has done, she says.
But large institutional central region converts could be candidates as Steadfast, a non-traded REIT, moves toward liquidation of the portfolio. After acquiring two to five apartment properties a month for the past two years (yes, that's harder than your spin class), the company has a bit more capital to deploy before turning its focus to operations and asset management. One challenge this year could be Fannie and Freddie's uncertain future, she says, but in good times and bad, people will always need moderate income apartments, the best inflation hedge.
