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Singapore real estate giant CapitaLand enters U.S. multifamily with $835 million acquisition

Buying 16 Class-B properties in Seattle, Portland, Los Angeles, and Denver

With rents continuing to rise with little sign of slowing, multifamily real estate in the U.S. is beginning to draw some serious international investor interest.

Last month, Australian companies Lendlease and First State Super teamed up to launch an investment platform that plans to build a $2 billion multifamily portfolio in the U.S.

And now, one of Asia’s largest real estate companies is planning a U.S. invasion of its own.

Singapore’s CapitaLand announced Tuesday that it is entering the U.S. multifamily market with an $835 million acquisition of 16 apartment communities in Seattle, Portland, Los Angeles, and Denver.

And this purchase won’t be the company’s only foray into U.S. multifamily. CapitaLand said that it sees serious opportunity in the U.S. multifamily market and plans to grow its portfolio beyond this initial purchase.

“The multifamily sector in the U.S. is broad, scalable and a growth sector marked with long-term secular trends. Widely regarded as one of the most resilient and liquid institutional real estate asset classes in the U.S., this multifamily portfolio offers attractive risk-adjusted returns for CapitaLand,” Lee Chee Koon, president & group CEO of CapitaLand Group, said in a release.

“While we value add to this portfolio of freehold operating assets through asset enhancement post acquisition, we will also be looking out for more opportunities to build up a sizeable platform and strengthen our expertise in this asset class,” Koon continued.

“As the portfolio grows, we will have the option to spin off these assets into investment vehicles and partnerships,” Koon added. "Beyond expanding the long-term rental housing platform in the U.S., a market which we have ventured into since 2015, we also see potential to build this business in other fast-growing markets such as China.”

As Koon said, CapitaLand, which primarily focuses its business in Singapore and China, expanded into the U.S. in 2015. In the last few years, CapitaLand spent $600 million to buy five hotels in New York City and Silicon Valley, and took a majority stake in corporate housing provider Synergy Global Housing.

And now, the company has its sights set on the U.S. multifamily market as well.

One interesting piece of the CapitaLand’s acquisition is that all of the properties it’s acquiring are Class-B properties.

According to Gerald Yong, CEO of CapitaLand International, the company views these properties as value-add opportunities and has plans to improve the units and increase the rents.

“We are acquiring a well-diversified portfolio of multifamily assets across several suburban markets in a single transaction, each regional market with a critical mass of over 1,000 units,” Yong said.

“With leases that are generally renewed annually, we can expect to gain from the rental uplifts after the refurbishment of the portfolio that will take place in phases over the next few years,” Yong continued. 

“The stable, reliable cash flows of these Class B multifamily properties make this suburban portfolio more attractive than the higher-priced urban core segment,” Yong added. “Situated in well-established, well-connected rental communities, this portfolio of low-rise and garden-style properties continue to be a strong draw for middle-income and skilled professionals working in surrounding employment hubs.”

In total, CapitaLand is acquiring 3,787 apartment units at a price per unit of $220,000. According to the company, these properties are operating at average occupancy of more than 90%, with average length of stay of approximately two years.

As for why it sees now as the right time to expand into the U.S. multifamily business, the company said that it sees real financial upside now and in the long run as well.

“The multifamily sector in the U.S. has the highest average returns in the commercial real estate asset class, offering close to 10% annually in the last three decades,” the company said in a release. “Healthy economic fundamentals, job growth, net-in migration trends, low home ownership rates and the booming millennial generation’s preferences for geographic mobility and community living in the suburban markets have driven strong demand for rental apartments.”

As such, the company plans to grow a “sizable” U.S. multifamily portfolio and grow into an “integrated multifamily player” in the future.

Here’s a list of the properties CapitaLand is acquiring:

CapitaLand acquistions

(Click to enlarge. Image courtesy of CapitaLand)

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