Investcorp buys apartments in $330m bet on suburbs

Investcorp Holdings bought five garden-style apartment properties in the US for $330m, as multifamily assets attract investor interest during a pandemic that has made residential real estate more appealing than offices, hotels and malls.

The properties include more than 1,800 units across the suburbs of Atlanta, Baltimore and Jacksonville, Florida, and are focused on middle-income renters, according to a person familiar with the matter who asked not to be named because the transactions were private.

While affluent exiles from New York and Silicon Valley have grabbed headlines in recent months, investors are focusing bets on demand in the Sunbelt from middle-class workers who can’t afford a down payment on a home.

“We married the upside from migration to the Sunbelt with the steadiness of suburban Maryland,” said Michael O’Brien, co-head of North America real estate at Investcorp. “From our investors’ standpoint, it provides good risk-adjusted returns, particularly with interest rates being low.”

Bahrain-based Investcorp, the biggest private equity and alternative asset manager in the Middle East, confirmed the purchase in a stock market filing. Investcorp’s US multifamily real estate portfolio now comprises more than 14,000 units across about 40 properties, it said.

Investcorp, which oversees $33bn, narrowed its real estate strategy in 2014 to focus on multifamily and industrial properties. That shift has worked out well in a pandemic that has had a disproportionate impact on retail and lodging real estate.

Apartment owners had collected 88.6 per cent of this month’s rent as of January 20, down 2.5 percentage points from the previous year, according to the National Multifamily Housing Council.

Suburban markets have fared better, pushing institutional capital to seek opportunities in single-family rentals and garden apartments.

Investcorp has been a seller as well as a buyer. In November, the firm announced it had sold eight apartment portfolios, spread across Arizona, California, Florida and New York, for more than $900m.