New JV Targeting $1B In Multifamily Aims To Be 'Early Movers Into This Next Cycle'

Michael Betancourt sees a wave of multifamily deal volume on the horizon, and his firm has assembled a new joint venture with major investors to get in front of it. 

His firm, New York-based Aion Partners, this week announced plans to buy $1B in value-add multifamily properties through a partnership with a Goldman Sachs subsidiary and another unnamed global institutional investor.

The JV is set to close its first acquisition in Columbus, Ohio, next quarter and ramp up its activity from there, as it expects the markets to open back up, Betancourt told Bisnow in an interview this week. 

“We're getting to a point where investors are going to start allocating capital again,” he said. “I just think that the buyers and sellers will match up getting into the next year or so. So we're constructive on deploying capital, and that really speaks to the timing of the trade. We hope to be early movers into this next cycle.”

The joint venture plans to acquire 4,000 to 6,000 units over the next few years across the Midwest and mid-Atlantic.  

The JV is 51% owned by Aion's third discretionary fund, Aion Value Add III LP, in which Vintage Strategies at Goldman Sachs Alternatives is an investor, while the other 49% is owned by the unnamed investor. The JV plans to deploy $300M of equity into the deals and obtain debt for the remainder. 

Aion's third fund is expected to close at the end of the year. Betancourt said demand for the fund has been “surprisingly robust” from institutional investors, while he said family offices and retail investors have been slower to invest, in preparation for the next cycle. 

“What we’re seeing is institutional investors move first,” he said. 

The volume of U.S. commercial property sales through the first three quarters of this year was the lowest since 2011, according to an Altus Group report, which found the multifamily market has remained especially slow. Nationwide multifamily sales volume in the third quarter was down 5.4% from the prior quarter and 21.3% from Q3 2023, the sharpest year-over-year drop of any property type.  

Betancourt attributed the multifamily market's malaise to disagreements between buyers and sellers on where prices should fall, but he expects that to change early next year. Sellers are getting closer to acknowledging that prices have dropped between 10% and 20% from the 2022 peak and will start putting more assets on the market, he said. 

“We are optimistic that deal velocity will become more robust over the next couple years,” he said. “We sense there's a lot of pent-up demand to deploy, like these institutional partners, but also sellers that have been waiting to see where values are going to come back from where they were in 2022, what the new market is.”

Along with the new $1B investment strategy, Aion announced this week that it closed a $700M recapitalization deal for a nearly 4,000-unit portfolio of 12 properties in New Jersey, Pennsylvania, Delaware, Maryland and Virginia. Goldman Sachs Alternatives and the unnamed global institutional investor partnered with Aion to invest $248M in the deal, including $70M for value-add renovations over the next five to seven years. 

Aion has been on the workforce housing train since 2011 and is bullish on its thesis of investing in and renovating Class-B and C properties in slower growth markets, assets where institutional investors are less active.

The thesis is based on the country’s affordable housing crisis making people stay renters for longer, Betancourt said. But it is particularly focused on properties in the Midwest and mid-Atlantic, where the supply-demand imbalance is most dire and rent growth is high. 

The company owns and manages properties across Indiana, Ohio, Pennsylvania, New Jersey, Maryland, Delaware and Virginia, and it is looking to continue buying in those regions through its new joint venture.

“The supply in these markets is extremely tight,” Betancourt said. “You're seeing a lot of supply in high-growth markets in Texas and Arizona and Florida and the like.”

But a lack of new supply in the Midwest and mid-Atlantic has led to rent growth. Northern Virginia, a region that saw rents grow 4.5% year-over-year through the first nine months of 2024, has become an especially hot market for multifamily investment in recent months, brokers told Bisnow last month. 

Aion’s first two discretionary funds, which launched in 2019 and 2021, are now fully allocated, and those portfolios are performing well, Betancourt said. 

While Aion is now focused on workforce housing, that wasn’t always the case.

Founded in 2001, the company initially focused on office and retail assets but began selling those off after the Global Financial Crisis — the same time it started investing in the workforce housing space.

Its partnerships sold a pair of D.C. and New York assets for more than $280M in late 2018 and early 2019, deals that appear prescient now that office valuations have plunged following the pandemic. 

“I think about it all the time,” Betancourt said of the firm's decision to exit the office market.

He said multifamily has many benefits over the office sector, including the lower cost to retain tenants and the presence of dedicated government-backed lenders Fannie Mae and Freddie Mac. 

“So in many respects, residential housing has an unfair advantage,” he said. “And that's why it's what, the largest asset class in commercial real estate and has some of the highest returns.”