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Last Updated: November 27, 2012 08:22pm ET

Cortland Spends $154M on Cross-State Multifamily Portfolio

Steven DeFrancis

JACKSONVILLE, FL—Marking its entry into the Florida commercial real estate market, Cortland Partners has acquired a $154 million multifamily portfolio that includes assets in Jacksonville. The 1,435-unit portfolio, which also includes properties in Dallas and Houston, increases Cortland’s multifamily real estate portfolio 20 percent.

"Cortland has selected specific markets for investment based on a research-driven assessment of market correlations to the national economy regarding job growth as well as a market-to-market correlation," Cortland Partners CEO Steven DeFrancis tells GlobeSt.com. "Our goal was to identify markets that are highly correlated with the national economy yet more resilient while also providing diversification from a cyclical perspective. We do not want all of our markets going up at the same time because they will all cycle down together."

DeFrancis explains that Houston, Dallas and Jacksonville a part of this mosaic when combined with Cortland's existing Atlanta and Charlotte presence. As he ses it, it's also important for Cortland to achieve economies of scale with a meaningful market presence. The additions in Texas allow the firm to achieve these economies of scale by tripling its portfolio concentration.

The multifamily acquisitions include Mirador and Stovall in Jacksonville, Newport on the Lake and Harborview in Houston, and Watervue in Dallas/Ft. Worth. Altogether, Cortland now boasts more than 10,000 multifamily units, making it one of the largest apartment community owners in Atlanta.

DeFrancis says the demographic population growth for Florida is undeniable, and he points to job growth and infrastructure improvements beginning to manifest in Jacksonville.

"The completion of the 295 loop across northern Jacksonville essentially relocates this sector of the city closer to jobs and entertainment venues and may have a similar effect on this portion of the city as the completion of GA 400 had on the cities of Roswell and Alpharetta in the Atlanta MSA," DeFrancis says. "The port of Jacksonville and distribution infrastructure stand to have ample gains as larger freighters are allowed through the expanded Panama Canal in 2013 and the Shands hospital expansion in the River City submarket coupled with a robust growth in new retail centers bodes well for Jacksonville’s economy."

Cortland financed the acquisitions in a portfolio transaction that involved an international syndicate of institutional and high net worth equity investors from Israel, the Netherlands, and from domestic sources in the United States. Institutional investors included Phoenix Insurance ($24.5 million), the largest insurer in Israel, and Westplan Investors ($8 million), a private equity group with whom Cortland shares numerous real estate investments. Freddie Mac, through Walker Dunlop, provided debt capital for the assets.

What's next for Cortland? "We have a number of acquisitions planned which include more in Jacksonville as we build economies of scale with additions in Dallas and Atlanta," DeFrancis says. "There continue to be ample arbitrage opportunities for us to capitalize on our competitive advantages and generate outsized risk-adjusted returns for investors."

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