Australian Investor, After Post-Recession Land-Buying Success, Hungry For ATL Parcels

A group of investors who hit it big with a contrarian bet on buying residential land during the housing crash is now gambling that Atlanta's urbanization is only just beginning.

Drapac Capital Partners has been gobbling up land in Atlanta for a couple of years now, most recently picking up the parking lot that was set to house 50 Ivan Allen Plaza. The lot sits in the shadow of the Ivan Allen office complex that overlooks the Interstate 85/75 interchange and could see more than 1M SF rise to the skyline.

“We feel that Atlanta, the urbanization story in Atlanta, is quite immature. It's in its early days,” Drapac Chief Operating Officer Sebastian Drapac told Bisnow. “Atlanta has been off the radar” with international real estate investors, he added, “but that's changing."

Drapac, which started in Australia, began its love affair for U.S. real estate in 2011, during the depths of the Great Recession. Drapac left CBRE to join his father, Michael Drapac, who raised capital to buy distressed residential land in the U.S. Drapac's bet was that the U.S. housing market would return. That bet has been paying off ever since, according to the Financial Review.

Drapac said the firm has a portfolio of some $400M in residential lots, the majority of which are in the Southeast. The firm has been selling off those lots to developers in recent years as the housing market recovered.

“Our bet wasn't radical or risky in our opinion,” he said. "Our bet was the U.S. housing market would return to normal. And that's what's happening."

Drapac's second act is beefing up its pipeline of urban properties in high-growth markets, again, predominately in the Southeast, Drapac said. The firm already owns 7 acres in the city that could accommodate future high-rise development, including 323 Spring St., 245 Auburn Ave. in the Sweet Auburn historic district and 505 Courtland St., an undeveloped tract on the border of Atlanta's hot Old Fourth Ward neighborhood.

Drapac said his firm is betting on Metro Atlanta's continued growth, especially in the city. He also said he expects Atlanta will continue to draw in new businesses, even if Amazon's much-vaunted second headquarters — for which Metro Atlanta is a finalist — goes elsewhere.

“It's cheap to do business here. There's a reason why these big groups are coming to Atlanta,” he said. “I think it's a culturally significant town. And arguably it has greater upside than those other markets.”

Atlanta has had a population boom in recent years. The metro area tallies nearly 6 million residents, with 90,000 new residents alone last year. At that pace, the metro region is expected to supplant Philadelphia for the eighth-most-populous metro area in the U.S. by 2022, according to the Atlanta Journal-Constitution. The city of Atlanta alone saw 36 new residents each day between 2016 and 2017, the AJC reported.

That has led to a multifamily development renaissance in the city during this real estate cycle. But Drapac said he does not see the firm transforming any of its parcels into actual developments for at least the next 12 months.

Drapac Capital Partners continues to shop for sites not only in Atlanta, but also in Denver and Philadelphia, Drapac said.

“We'll look to spend probably $60M to $70M this year. That's just on land,” he said. “It's really an urbanization play. We think all three markets have significant potential for growth.”