IRVINE, CA—This region of the US is experiencing much more progressive growth than any other region across the nation, especially in areas such as Florida, Virginia and Lake Charles, LA, where the firm made a recent acquisition, Passco Cos.' VP of acquisitions for the Southeast Colin Gillis tells GlobeSt.com. The firm has purchased Watervue, a 264-unit class-A multifamily community in Lake Charles, an MSA the firm considers to be “a city currently experiencing record-breaking growth.”

Lake Charles is the fastest-growing city in Louisiana and boasts some of the most ideal multifamily fundamentals in the nation, according to Gillis in a prepared statement. He explains that by the year 2018, the growth rate of Lake Charles is expected to be nine times greater than the entire state of Louisiana. The MSA's current industrial boom serves as a significant indicator of the future economic growth of the region and is a key demand driver for multifamily product, he adds.

“For example, many of the area's petrochemical plants are experiencing expansion, ultimately leading to thousands of new jobs in the area,” Gillis explains. “In fact, job growth over the next 10 years is projected to be nearly 50%, which is keeping pace with the 25% job growth the region has experienced over the last five years.”

We spoke with Gillis about the acquisition, its firm's focus on the Southeast and its view of multifamily as a whole.

GlobeSt.com: What does Watervue acquisition represent for your company?

Gillis: Our acquisition of Watervue is demonstrative of our continued expansion across the Southeast and our ability to acquire high-quality income-producing assets on behalf of our investors. Watervue is a unique asset that is strategically positioned to perform well over time. It is currently 95% occupied and will benefit from the ongoing growth throughout the region, resulting in immediate positive NOI and strong rent appreciation over the next several years.

The apartment community also features top-of-the-line luxury amenities that differentiate it from competitors such as two lakes, a fitness center with panoramic views, a resort-style swimming pool, and an outdoor kitchen, among many other amenities.

GlobeSt.com: Why is your firm focused on the Southeast?

Gillis: The Southeastern part of the US is experiencing much more progressive growth than any other region across the nation. This is especially true in areas such as Florida, Virginia, Kansas, and Lake Charles, LA, where we most recently acquired Watervue.

Lake Charles has exceptionally strong market fundamentals. There is currently more than $45 billion in industrial product underway throughout the Lake Charles MSA, which is a key indicator to the future economic growth of the region and the growing demand for multifamily housing. Job growth in the area is also anticipated to reach nearly 50% over the course of the next 10 years, further adding to the continued demand for multifamily product and the long-term stability of the asset.

Florida is also undergoing rapid growth. We are one of the most active buyers across the entire state of Florida, which boasts one of the most dynamic economic profiles in the country, and we continue to find deep value across the state. Many of Florida's metropolitan areas are experiencing explosive job and population growth, creating long-term multifamily demand. In fact, in 2017, Florida dominated the Forbes Fastest-Growing Cities list with nine of the 25 fastest growing cities, more than any other state in the country.

Ultimately, many submarkets across the southeast continue to demonstrate strong economic growth and the quality market fundamentals that we look for when acquiring any new property. This is why we continue to remain extremely active throughout the region.

GlobeSt.com: How do you view the strength of the multifamily market as deal velocity begins to slow?

Gillis: The multifamily market overall continues to remain strong and a desirable asset class for investors since there will always be demand for multifamily product. That said, the multifamily market is very submarket specific. The key for investors will be paying close attention to what the submarket can support and the underlying fundamentals of that submarket and its surrounding submarkets.

There continues to be tremendous discussion regarding whether or not the multifamily market is tapering off and if supply will soon outpace demand. This may be the case in some submarkets, but this is certainly not true for the multifamily sector as a whole.

We focus on suburban markets with high-quality market fundamentals and demand drivers because these markets often provide more value to investors. Compared to multifamily properties in urban cores, suburban markets often have more development restrictions limiting the amount of new competition entering the market, resulting in stronger rent growth and long-term demand.

Many investors and developers are following the herd to gateway cities. Developers in urban cores often receive incentives from the city to encourage development and revitalization, such as tax breaks or entitlement incentives, which results in increased development activity and potential oversupply.

It is these submarkets with extremely high multifamily development pipelines where investors may see rent growth plateau or owners forced to offer concessions due to oversaturation. However, investors who are focusing on suburban areas with strong job growth, population gains and high barriers to entry will find there is significant runway left throughout the multifamily sector.

GlobeSt.com: What does your firm look for in multifamily assets to acquire?

Gillis: We target high-quality multifamily assets in strong growth markets. We look for markets with high barriers to entry, strong market fundamentals that are sustainable for the long-term and areas with limited multifamily development pipelines. We also look for properties with best-in-class amenities and unique features that will allow us to growth rents over time, increasing ROI.

We spoke with Gillis about the acquisition, its firm's focus on the Southeast and its view of multifamily as a whole.

GlobeSt.com: What does Watervue acquisition represent for your company?

GlobeSt.com: Why is your firm focused on the Southeast?

GlobeSt.com: How do you view the strength of the multifamily market as deal velocity begins to slow?

GlobeSt.com: What does your firm look for in multifamily assets to acquire?

Instant Insights /

Why Passco is Focused on the Southeast

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