MG Properties Closes 4,200 Units in 12-Month Buying Spree
The company has acquired 16 properties totaling $1.1 billion in total value on the Western US.
“We tend to be both consistent sellers and buyers throughout market cycles as we manage debt maturities and our portfolio allocation,” Paul Kaseburg, CIO at MG Properties Group, tells GlobeSt.com. “Our higher pace of activity in the past few years reflects both the availability of exchange capital from dispositions and the strong investment appetite from our private capital group. As cash-flow oriented investors, we have benefitted from an attractive capital markets environment and are seeing a consistent flow of opportunities that we believe will be steady performers in the medium/long term.”
MG Properties has focused its acquisitions on markets in the Western US. In the last 12 months, it has acquired properties in Washington, Oregon, Arizona, California,
Colorado and Nevada. “Western markets tend to be more supply constrained and are well positioned to benefit over the long term from employment growth and demographic shifts,” says Kaseburg. “Even within the Western states there are opportunities for a wide variety of investment strategies. As we get later in the cycle, it is becoming increasingly important to tailor strategies to individual submarkets and properties rather than making investments based on larger macro trends. Also, an important part of our strategy as an owner/operator is to leverage our existing management platform from both an operational efficiency and an acquisition evaluation perspective, so we are very selective about expanding our geographic footprint.”
MG plans to remain an active buyer through 2020. “Unless the capital markets or economy change substantially, we plan to continue to be active sellers and buyers in 2020,” says Kaseburg. “We expect to have a steady pipeline of dispositions and exchange capital, which paired with strong investment interest from our private capital group should mean that we are modestly net buyers for the year.”
For 2019, the firm is on track to exceed its goal of $700 million in acquisitions. “Transaction volume has increased in the second half of the year and we are optimistic that it will continue into 2020,” says Kaseburg.
However, that doesn’t mean there haven’t been challenges. “After such a long expansion, many properties have been recently renovated so there are fewer properties available with truly compelling value-add opportunities,” says Kaseburg. “Also, the amount of equity targeting value-add investments has grown substantially. On the legislative front, changes such as the implementation of rent control in California and Oregon and increases in Washington’s Real Estate Excise Tax have materially altered the economics of executing value-add strategies. That combination of factors has meant that risk-adjusted returns for value-add investments have compressed in comparison to stabilized and core-plus opportunities.”