Private equity investment is gobbling up an increasing share of apartment units, now accounting for at least a tenth of all ownership in the United States, with most of it concentrated in the Sun Belt region.

Multifamily Apartment Building

Private equity firms own about 8,200 apartment buildings comprised of over 2.2 million units, according to a Private Equity Stakeholder Project report. Of the 121 big private equity firms PESP tracked, the 10 largest apartment owners collectively share 41% of them, a total of 900,000 units across the country.

Blackstone is the largest private equity owner of apartments in the U.S. with over 230,000 units. Greystar follows with 138,000 units. Other major firms owning vast swaths of units include Starwood Capital, Related Cos., Cortland and Brookfield.

Sixty-two percent of these units, or 1.4 million, were purchased since 2018, and almost 930,000 since 2021.

Blackstone picked up 58% of its units in or after 2021, and more than 75% were acquired since 2018. Starwood bought 53% of its portfolio in or after 2021 and 77% since 2018.

More than half of all units are located in five states: Texas, Florida, California, Georgia and North Carolina. Texas has the largest share of private equity-owned units at over 440,000 units across 1,500 properties.

Four of the top five — Texas, Florida, Georgia and North Carolina — also saw the largest population growth from 2020 to 2024.

The top 10 metropolitan areas with the largest private equity investment are Dallas; Atlanta; Houston; Denver; Austin; Phoenix; Orlando, Florida; Charlotte and Raleigh, North Carolina; and Tampa, Florida.

Those metros are home to 860,000 units owned by private equity, with Dallas seeing the largest share at 191,431 units and 598 properties, followed by Atlanta, where private equity owns 141,500 units and 466 properties.

The report also tracked the cost-burden impact of the private equity sector on these markets.

The Tampa, Florida, metro, where 23.4% of apartments are owned by private equity, saw a 20.8% increase in households spending 30% or more of their income on housing between 2019 and 2023. The percentage of households exceeding that spending figure rose from 53% to 64% over those four years.

Equity Commonwealth has completed the sale of 1250 H Street, a 196,000-square-foot office property located in Washington, D.C., for $27.5 million.

The Chicago-based real estate investment trust (REIT) was once led by late billionaire real estate investor Sam Zell. The REIT had previously announced plans to wind down after pressure from activist investors to return cash to shareholders.

Equity Commonwealth is currently winding down its operations and liquidating its remaining office assets. In addition to the H Street property in D.C., the REIT also had assets at 17th Street Plaza in Denver, Bridgepoint Square and Capitol Tower, both of which are in Austin, Texas. Equity Commonwealth will distribute proceeds from the office sales as they are executed.

1250 H is a Clan 11-story office building located in the East End submarket of D.C. that features a newly constructed conference center and fitness facility, rooftop terrace, and a 3-level subterranean parking garage.

Equity Residential paid $108 million for a 425-unit Sandy Springs apartment complex. The multifamily community, The Bishop, was sold by a Blackstone affiliate. This transaction follows Equity Residential’s paying close to $1 billion for an apartment portfolio that included four projects from Atlanta.

The Atlanta Business Chronicle reported that Equity Residential is focused on buying newly built properties in expansion markets, including Atlanta, Austin, Dallas and Denver. At the end of last year, Equity Residential owned seven properties in Atlanta totaling about 2,100 units.

In July, Equity Residential bought a 319-unit apartment project in Old Fourth Ward for $126 million, the largest multifamily transaction in Atlanta this year. 

Rangewater developed The Bishop. The apartment complex opened in 2019.

Rents at The Bishop start at almost $1,450 for a studio, about $1,500 for a one-bedroom and $1,900 for a two-bedroom.

Newmark has arranged a structured equity facility to finance programmatic student housing acquisitions throughout the U.S. Newmark secured the continuing equity source on behalf of the sponsor, Tailwind Group, a Minnesota-based real estate development, management and leasing firm.

Newmark Vice Chairman and Head of the company’s Student Housing group Ryan Lang, Managing Director Jack Brett and Director Ben Harkrider led the equity placement.“Tailwind is one of our most valued clients, and their continued success and growth trajectory has been incredible to see,” said Lang. “We are grateful for the opportunity to advise on their strategic growth initiatives moving forward.”

Tailwind Group recently leveraged the facility to complete its first acquisition, The Reserve on West 31st, a 192-unit student housing community just 1.5 miles from The University of Kansas in Lawrence, Kansas. “We see great upside in this opportunity upon execution of our capital improvement plan combined with the strong fundamentals in the Lawrence market,” said Brandon Smith, Tailwind Group’s Vice President of Operations & Development.

Rise48 Equity acquired two Charlotte rental communities, the W Flats Apartments (247 units) and Matthews Pointe Apartments (100 units). Both properties will be rebranded to “Rise Blue Ridge” and “Rise Matthews Pointe,” respectively. 

These acquisitions mark the company’s 52nd and 53rd since 2019 and its first two deals in the Charlotte MSA. Rise48 Equity’s Zach Haptonstall adds, “We’re excited to have entered the North Carolina market with these two new acquisitions. North Carolina has been a market that we’ve been targeting for a while due to its strong fundamentals of population growth, job growth, and strong median income relative to affordable rents.”

Rise48 Equity plans to invest over $7 million in revitalizing W Flats Apartments and Matthews Pointe Apartments. Renovations at both properties will include quartz countertops, kitchen backsplashes, plumbing fixtures, stainless steel appliances, vinyl plank flooring, and updated lighting. Exterior improvements will include paint, a new LED-backlit monument sign, and improved marketing banners. 

The JLL team was led by Managing Director Mark Erland and Director Kevin Barron. “3rd and Grand is an exceptionally well-designed project that will benefit from its transit-oriented location with city incentives, Kansas City’s booming market fundamentals and its seasoned development team,” said Barron.

Upon completion in 2026, 3rd and Grand will be a mid-rise development with five stories above a one-story garage. It will feature studio, one- and two-bedroom layouts with amenities, including a fitness center, a lounge, and a state-of-the-art pool.

“3rd and Grand represents a visionary approach to urban living, combining luxurious amenities with a vibrant, transit-oriented location in the heart of Kansas City,” said Mike McKeen, Principal at EPC Real Estate Group and Bill Crandall, Principal at Copaken Brooks, in a joint statement.

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This is the third in a series of articles discussing the student housing sector. “Student Housing in 2023: Stagnation? Or Continued Investor Interest?” and “Educational Overview: Student Housing vs Multifamily” are live and available to read.

The lack of capital for CRE projects generated a multitude of headlines and expert commentary in 2023. Reports about lender pullback, stricter underwriting requirements, and over-rising interest rates abounded, at least regarding some asset types.

Interestingly, inputting the keywords “student housing” and “financing” into search engines doesn’t lead to many hits. Still, one noteworthy article from September 2023 was in the Crittenden Report. The article explained that student housing was a favored asset class, with available equity and debt from institutional sources and life companies. The report indicated that this liquidity wasn’t available to anyone. The sponsors in question had to be seasoned builders and operators. Meanwhile, the properties required the right fundamentals (i.e., proximity to campus and amenities).

In exploring student housing and capital markets, experts concurred with much of the Crittenden Report’s assertions. They also told Connect CRE that student housing financing is somewhat of a mixed bag, similar to other asset classes. Capital wasn’t abundant in 2023. However, “you do have a healthy lending environment out there,” observed Andrew Layton, chief acquisition officer with Student Quarters. “This goes back to the strength of the industry.”

Mitchell Korte, Subtext’s Executive Vice President, Development, agreed. “As student housing has evolved into an institutional asset class, we’re seeing increased interest from groups that haven’t historically invested in this product type.”

Agencies and Other Options

One thing that the student housing sector has in its favor versus other real estate types is agency financing.

Fannie Mae and Freddie Mac are multifamily housing lenders; their products also extend to student housing. Fannie Mae has a dedicated student housing team, while Freddie Mac provides student housing-specific loans ranging between $5 million and $100 million.

But GSA money can reach only so far. Other sources have had to step in to fill the gap. PMA’s Senior Project Manager and Student Housing Expert Eric Gould explained that reduced available capital has led developers and universities to find creative ways to finance projects.

“There’s been a significant increase of public-private partnership proposals in the market; this was especially the case toward the end of 2023,” Gould remarked. These arrangements have benefitted both developers and universities. “The money that traditionally would go toward land acquisition is re-allocated back into enhancing the building itself,” Gould said. “The university can benefit from additional revenue in the form of a long-term ground lease with the private entity.”

More traditional entities are dipping their toes in the water, too. “Financing is being found with life companies, debt funds, agencies and banks,” according to Colliers’ Senior Vice President, National Housing Group, Sean Baird.

You read that right. Banks.

Traditional Debt and Equity: A Cautious Approach

The above shouldn’t suggest that banks are throwing money hand over fist to student housing developers, owners and operators. Baird acknowledged that capital from traditional sources was tough to find in 2023 as equity remained on the sidelines. He also said this trend wasn’t different from other real estate sectors. Still, “as interest rates are beginning to flatline and even decline, we’re seeing more participants in the student housing space from an equity and debt standpoint,” he said, adding that banks did step in as agency lending decreased in late 2023.

From a lender standpoint, one thing student housing has going for it is continued growth and solid fundamentals. Champion Real Estate Company’s COO and Partner, Parker Champion, said that growth has opened the door to some financeable investments, though at a higher cost. “Debt funds are still available and remain the most active in the sector,” he observed. However, he observed that banks continue remaining on the sidelines, while higher interest rates mean it’s more challenging to hit debt-coverage ratios.

On the other hand, Layton said he hasn’t seen a lack of appetite from lenders toward student housing. “A lot of what we’ve seen from lenders has been fair, given the environment we find ourselves in,” he noted.

Not Flush With Cash, but Doing Okay

Overall, the experts cite the strength of the student housing sector as appealing to capital markets. Subtext explained that the fundamentals of higher enrollment and rent growth (as well as a slowdown in other investment classes) tell lenders and equity providers a compelling story.

Brent Little, president of Fountain Residential Partners, allowed that while debt and equity were constrained, especially compared to the availability before interest rates began to move, things may be starting to change. “Both debt and equity are easing in the first quarter of 2024 and will continue to flow back into the sector,” he said.

Another compelling story for lenders is the lack of distress in the sector. “Of course, there is some distress, but you’re not seeing that wave of ‘oh, my God, there are hundreds of deals underwater,’” Layton said.

The takeaway from this is that student housing isn’t drowning in capital. Nor are any other real estate sectors. However, the asset class holds its own when finding liquidity. Another positive is that more lenders are coming into the space.

Layton, for one, pointed out that demand for the product from foreign investors has increased. Domestically, “even versus five years ago, there are so many lenders out there that want to be investing in this space,” he added. “This is great because it keeps everyone competitive.”

Arctaris Impact Investors, LLC, a Boston-based impact investment firm that supports revitalization projects in underserved communities, made a lead equity investment in Liv DTLA, a $67-million market-rate affordable housing development in the South Park neighborhood of Los Angeles. The transaction marks Arctaris Impact’s first Opportunity Zone investment in Los Angeles.

Funding for the project includes Arctaris’ $13.6-million equity investment, a $34.9-million loan facilitated by the United Way of Greater Los Angeles’ Affordable Housing Initiative, and $18.1 million of equity previously raised through CrowdStreet and other impact-oriented high-net-worth individuals.

The all-studio housing project, located at 1411 S. Flower St., is being developed by Housing Diversity Corp., a Seattle-based large-scale multifamily real estate manager. Construction is 85% complete and the finished project is expected to consist of 227 units, with 40% reserved for extremely low-income and voucher-subsidized households.

On April 18, join multihousing’s leaders and dealmakers when they explore the most important topics facing the Phoenix and Scottsdale markets today. Register to attend and hear expert insights first-hand, network with the best in the industry, and sit in on discussions you won’t hear anywhere else. Connect Phoenix Multifamily & Single-Family Build-to-Rent on April 18 at the Westin Kierland Resort & Spa.  

While some of the tax-deferred “goodies” offered by Opportunity Zone investments have long expired, the interest in these vehicles has not. According to a report by Novogradac, Qualified Opportunity Funds (QOFs) tracked by the company raised $3.53 billion in equity during 2023. This increased the total amount of Qualified Opportunity Zone (QOZ) equity raised to $37.6 billion.

Because Novogradac’s figures don’t include private funds owned and operated by their principal investors, the actual QOZ investment is likely higher than the Novogradac total.

Novogradac reported that during Q4 2023, QOFs raised $414 million in equity, which followed strong second and third quarters. But the annual amount raised was lower than the totals of the three previous years, which surpassed $9 billion.

“At least part of the reason for the slowdown was the general state of the economy, specifically a decrease in multifamily housing construction, which ended December 2023 with the lowest annualized figure for permits since 2017,” the report noted.

QOFs are the investment vehicle used by taxpayers to defer capital gains. Novogradic obtains numbers on a rolling basis from QOFs that provide information and data from public sources, including Security and Exchange Commission filings and press releases.

Approximately 80% of known QOF investment is focused on developments that include multifamily housing. In quoting RealPage, Novogradac said the number of apartments built in QOZs tripled from 2016 through 2022, then doubled again in 2023. The RealPage data also indicated that 20% of all delivered apartments in 2023 were in a QOZ. However, Novogradac anticipated the slowdown in multifamily permits in 2023 will be felt in late 2024 or 2025.

Novogradac also reported that:

• QOFs with at least some focus on housing raised $30.93 billion, $8.10 billion of that focused solely on residential property

• QOFs with some focus on commercial investment raised $24.93 billion; $2.20 billion was raised by funds focused only on commercial activity