Non-Traded REITs Are On An Apartment Buying Tear

Non-traded REITS bought more multifamily assets than ever in 2021, at a time when record amounts of capital have flooded the space—and the momentum is showing no signs of slowing.

A new analysis by Real Capital Analytics shows that private investors acquired a record $213.9 billion in apartments last year, accounting for 10% of those private capital acquisitions.  That share was bolstered by two big portfolio deals in the fourth quarter, including the acquisition of a $5.1 billion affordable housing portfolio by BREIT, Blackstone’s non-listed REIT from AIG. Starwood’s SREIT also nabbed a $3.5 billion portfolio from Strata Equity Group in November, RCA reported.

In January, BREIT announced it was acquiring Resource REIT in an all-cash deal at $14.75 per share for a total of $3.7 billion, which also included the assumption of the REIT’s debt. The deal saw BREIT assume a portfolio of multifamily, garden-style assets comprising 42 apartment communities totaling more than 12,600 units in submarkets spanning 13 states, including Arizona, Colorado, Florida, Georgia and Texas.

“After raising enormous amounts of capital last year, these entities favored larger deal structures rather than purchasing apartment assets one at a time,” RCA’s Haley Crimmins writes, adding that more than 75% of NTR acquisition volume was tied to portfolio sales in 2021. The average portfolio deal size in 2021 clocked in at $490 million, whereas the average deal size for an individual apartment property purchased by a non-traded REIT was about $60 million.

“Capital structure can help to determine deal structure,” Crimmins says. “The investment activity of these non-traded private REITs has been focused on portfolio megadeals which can be an effective option for deploying capital quickly. Entity-level megadeals, or the purchase of entire companies, are also an option. As more capital is raised in the non-traded REIT world, it could spell an uptick in megadeal activity for the year.”