Urban Living Hatches in Secondary Markets
Housing Trust Group is breaking leasing records with its new $63 million apartment development Aviva in Phoenix, illustrating a pent-up demand for urban-style living in the market.
“The property has completely outperformed every metric that we look at. It has been a roaring success, and it goes to show that there is pent up demand for high-quality green product,” Matthew Rieger, President and CEO of HTG, tells GlobeSt.com. Aviva is a 325-unit apartment complex with a mix of one-, two- and three-bedroom apartment units and quality amenity package that includes a 150-foot pool, a 9,000-square-foot clubhouse fitness stations and a dog park. The property is 90% leased. “We had a reasonable expectation that we would lease up the property at our expected rents,” Rieger adds. “What has been a surprise is the pent up demand and the premium that people are willing to pay for a product that is appreciably better than the competition.”
Phoenix isn’t the only secondary market that HTG is targeting. The firm has identified Arizona, Texas and Georgia has its target development markets. “We have done a good job of being selective in the markets that we venture into. As we venture out of Florida, it was important to us that we are selecting really good markets that are seeing great growth,” Rieger says. “I see a general migration of people moving from the north to the south; however, that is not necessarily just a New York-to-Miami Beach migration. There are people all over the United States that are moving into a warmer climate and we have tried to identify these other markets and other areas. As a company, we are focusing on Texas, Georgia and Arizona as our next wave of expansion nationally.”
These markets are all south of the Sun Belt and have no income tax, which has fueled both job growth and population growth. “There is also a jobs component,” adds Rieger. “These are places where businesses are moving, and new outposts are growing. Housing and jobs go hand in hand, and so we want to be in markets where there are jobs.” The firm will continue to target Phoenix for these reasons, and already plans to build a second Aviva project in Goodyear, a suburb of Phoenix.
The success of the project has attracted interest for core investors looking to buy the property, and HTG has received unsolicited offers. However, the developer is a long-term holder, and doesn’t plan to change its strategy. “We have seen a tremendous amount of interest from institutions that want to own Aviva,” says Rieger. “We don’t want to sell. We like this business, and I can’t think of anything better to do with the cash than own a great apartment building.”