Cortland, Carroll Organization Get Infusion Of Institutional Capital

Two Atlanta-based apartment landlords are getting an institutional capital boost to buy more apartments in the Southeast and beyond.

The Carroll Organization and Cortland have each received an infusion of capital from well-heeled global investment firms, PGIM and Round Hill Capital, respectively. Carroll is looking to buy workforce housing properties in the Southeast.

“These investments are based on our thesis that quality workforce housing is currently an underserved segment of the multifamily market, which has created a supply/demand imbalance when homeownership or new-supply rents in desirable locations may not be attainable for most Americans,” Carroll CEO Patrick Carroll stated in a press release.

To that end, Carroll and PGIM, the asset management arm of Prudential Financial, purchased a sprawling portfolio of apartments in Raleigh-Durham, North Carolina, Point Vedra Beach, Florida, and Charleston, South Carolina, encompassing more than 4,000 units and $600M. This is the fifth joint venture acquisition they have made since the end of 2017. In all, the partnership owns 45 properties and 15,000 units from Florida to South Carolina and from Tennessee to Texas.

Carroll President Josh Champion said the partnership is shopping for suburban apartments in close proximity to major employers, and those with rents that are appealing to households earning 80% to 100% of an area's median income. In other words, apartments that are home to school teachers, police officers, firefighters and government employees, Champion said.

Carroll will then infuse capital into the property to improve amenities and apartment interiors.

“The outlook for multifamily performance in the Raleigh-Durham, Jacksonville and Charleston markets remains strong going forward due to their diverse economies, business-friendly governments, job and population growth, and overall quality of life,” Carroll said.

Cortland is bringing Round Hill's U.K. capital into the U.S. to invest in higher-end, stabilized properties throughout the U.S. Its debut came this month with the acquisition of The Exchange at North Haven, a 411-unit Class-A apartment complex in Brookhaven, an affluent bedroom community just north of Atlanta's tony Buckhead submarket.

This is part of Cortland's larger shift in acquisition strategy that lies beyond the traditional idea of value-add. The firm is acquiring properties that are in strong demographic locations where Cortland can achieve growth by infusing the property with its customer experience-focused programming.

Instead of buying a property and pumping in tens of thousands of dollars per unit in upgrades, Cortland is buying apartments that already have the premium interiors, instead focusing on community programs like wellness and fitness classes and other residential perks, Cortland Senior Managing Partner Bruce Cohen said.

Round Hill is among many institutional investors in Cortland's pool. Cohen said he expects the firm will purchase upward of $2B in properties in 2019, similar to what Cortland has done this year, including its recent banner acquisition of the Home at The Battery Atlanta, a string of luxury apartments encased in the mixed-use development of the Atlanta Braves' SunTrust Park.

“It's about delighting customers. If we give them a beautiful but affordable environment and an enhanced lifestyle experience, the returns will come naturally,” Cohen said. “We think we can generate value if we focus intently on the residents.”

That has become Cortland's focus in recent years under the leadership of Steven DeFrancis. Earlier this year, DeFrancis hired Mike Gomes as the firm's first-ever chief experience officer, a position that oversees a team that focuses on the resident's total experience living in a Cortland apartment, from marketing and communications to the interior design and amenity packages.

Gomes spent 20 years with Walt Disney Parks and Resorts as well as being a former executive with AMB Sports and Entertainment, the organization controlled by Arthur Blank that owns the Atlanta Falcons, the Atlanta United Major League Soccer team and Mercedes-Benz Stadium.

This is part of an effort by Cortland to position itself as a recognizable and desirable brand among the general public, one that conveys the expectation of an experience similar to how many people think and feel about Starbucks, Cohen said.

“When you walk into a Starbucks, no matter where that Starbucks is, you get the same experience. We're building that at Cortland,” he said. “If we delight the customer in every possible respect in how they live, in where they live and their lifestyle experience, we think that's what it will be that builds the brand.”