Why One Company is Entering the Apartment Market Now

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ATLANTA—Graham Carpenter and Brian Metzler have been in the multifamily game for awhile—each approximately two decades. Carpenter worked at Pollack Shores Real Estate Group and Simpson Housing, while Metzler cut his teeth at Lane Company and Pollack Shores. Both have survived the Great Recession and came out on the other side.

So why then would they decide to start a new company— Atlanta-based PENLER—at what many people think is the end of the cycle?

For one thing, Carpenter and Metzler expect PENLER to be around for multiple cycles.

“We plan to be in this business for another 30 years so we’re taking a long-term approach to our business strategy,” says Carpenter, a managing partner who leads PENLER’s acquisition division. In fact, Carpenter argues that this is a great time to start an apartment company if its goal is to make opportunistic buys in oversupplied markets. “There are obviously pockets of oversupply, particularly on the luxury, high-end apartments in urban markets,” he says. “So, we’re just adjusting our investment strategies accordingly and focusing more on suburban, low-cost-basis development opportunities.”

PENLER put that strategy to work when it acquired Presley Uptown, a 230-unit property in Charlotte, NC in September. “That deal had experienced some downward pressure on rents and performance over the past 18 months because there is a lot of supply that came into the Uptown submarket after its original delivery,” Carpenter says. “We acquired it below today’s replacement costs.”

Carpenter says this acquisition is an example of how the company wants to take advantage of some of the short-term supply issues that a lot of deliveries have caused in urban markets across the country, while also taking advantage of really attractive debt available in the market today.

“The primary focus of our acquisition strategy in the near term is to look at these mid-rise properties that were built in infill areas where you have more supply coming online, but that supply is at a higher density and a much higher cost basis and therefore targeting significantly higher rents,” Carpenter says. “Acquiring these [mid-rise] projects that we can buy a little below replacement costs when the new product coming into the same markets is more expensive, we think will give us a competitive advantage.”

PENLER expects to start construction on its first multifamily development in Metro Atlanta in November with two additional development projects slated to break ground in the first half of 2020. “Our view is if we can go into good suburban markets, find quality sites and build a quality product at a reasonable cost basis where we can set our rents at very attainable levels, we think we’ll have a lot of consumers available to rent that type of product,” says managing partner Brian Metzler.

While PENLER, which was launched in early 2019, made its first acquisition in Charlotte and plans it first development in Atlanta, it aims to be active in other Southeastern markets, such as Nashville, Tampa, Orlando and Southeast Florida.

PENLER will go to the agencies or life companies for debt on acquisitions. On the equity side, it plans to rely on institutional equity, including pension funds, pension, investment banks, insurance companies, opportunity funds and pension fund advisors.

“These are all folks that Graham and I have relationships with and have been doing business with,” Metzler says.