Steadfast's Sweet On Chicago

Steadfast Income REIT completed almost $1B in deals last year, making it one of the country's most active multifamily buyers. President Ella Shaw Neyland calls Chicago a favorite market (it purchased 1,100 units here last year, including 579-unit Willow Crossing in Elk Grove Village, below). “Chicago’s one of the money centers of the world and it’s centrally located with the dynamics we look for,” she says. While Steadfast has avoided construction-heavy downtown, it likes suburbs like Lake Bluff, Palatine, and Roselle. These areas show strong job and population growth, offering a desirable neighborhood at a great price point, she adds.

Steadfast favors the country’s central corridor to meet its goal of 7% distribution to shareholders, and these “flyover states” have seen tremendous Millennial migration thanks to job creation and better cost of living, Ella tells us. (They can't all fit in Brooklyn.) The new jobs like light manufacturing and personal services fall in the $45k to $75k/year salary range, which gels with the $950/month average rent of Steadfast's $1.5B portfolio across 11 states. It's benefited from slim competition, since institutional capital is still focused on the coasts and urban cores. They also deploy money in big chunks and might not take the time to do one-off deals like Steadfast, she says.

But large institutional central region converts could be candidates as Steadfast, a non-traded REIT, moves toward liquidation of the portfolio. After acquiring two to five apartment communities a month for the past two years (we barely visited the laundry room once a month, let alone bought the entire building), the company has a bit more capital to deploy before turning its focus to operations and asset management. One challenge this year could be Fannie and Freddie's uncertain future, she says, but in good times and bad, people will always need moderate income apartments, the best inflation hedge.