Continental Closes Suburban Multifamily Development Fund

Multifamily commercial and real estate developer Continental Properties Co, recently closed its first development fund. 

The new fund, Continental Properties Real Estate Development Fund I, LP, will invest in suburban apartment communities developed and managed by Continental Properties. The fund had a total raise of $180 million of equity for a total projected construction cost of over $700 million.

The fund allows Continental to double down on its suburban multifamily strategy, which it has been executing for more than 20 years.

“Stronger rent growth and demographics favor developing and owning suburban multifamily real estate. We are confident in the markets we have targeted for development and are pleased with the strength of our development pipeline,” said Jim Schloemer, founder and chairman of Continental Properties and treasurer of the National Multifamily Housing Council in a prepared statement. 

Continental received “very strong interest” from both its long-time investors and new investors looking for ways to diversify their portfolios, according to Ed Madell, EVP and CFO of the company.

It’s no secret that apartments in the suburbs have held up better than those in cities throughout the pandemic, albeit perhaps not at the levels that originally had been forecast. A recent RCLCO report notes that suburban apartments experienced approximately 2% rent growth in 2020, compared to 3.5% the year before.

The survey also noted that while suburban markets were more broadly stable than urban ones in the US last year, there’s a great deal of differentiation across cities. Metros like Atlanta, Tampa, Dallas and Charlotte are all high-migration markets where newcomers chose both urban and suburban locations, “belying the flight to the suburbs story,” the report states. 

That said, the case for investment in the suburbs is a solid one, as growth markets become just as appealing as gateway markets. Other firms are also targeting this strategy. Earlier in March, for example, real estate development and investment firm Hillpointe closed a $110 million fund to develop Class A apartments for workforce tenants in the southeastern US. 

Continental also launched Continental Properties Real Estate Income Fund II, LP, a portfolio of up to 10 stabilized, income-producing multifamily properties developed and operated by Continental. The first closing is expected to occur in April 2021 with approximately $200 million of equity.