Cortland Grabs $1B D.C. Multifamily Portfolio
The investor closed on two acquisitions in Arlington, Va., with two additional properties trading soon. The full portfolio includes more than 1,500 units.Better Financing Starts with More Options$1.2M offered by a Bank at 6.0%$2M offered by an Agency at 5.6%$1M offered by a Credit Union at 5.1%Click Here to Get Quotes
Cortland Rosslyn. Image courtesy of Cortland.
Cortland, an Atlanta-based multifamily real estate investment, development, and management company, has acquired two Arlington, Va., properties and plans to purchase two more in a 1,500-plus unit transaction valued at $1 billion. The investment marks Cortland’s reentry to the Washington, D.C. metro.
The two multifamily assets which have already transacted include the 331-unit Aubrey — now rebranded as Cortland Rosslyn — and the 534-unit Aura Pentagon City, now known as Cortland Pentagon City. Cortland expects to close on the other two properties shortly.
Penzance developed the Rosslyn asset as a luxury renter-focused, LEED Gold-certified community. The property’s unit mix includes studios to three-bedroom floorplans, including penthouses and two-level townhomes. Cortland Rosslyn sports a rooftop pool and sky lounge overlooking the Potomac River, and is located in the heart of the Rosslyn neighborhood. The community’s location has earned it a Walk Score of 93, due to its proximity to everyday necessities and access to transport throughout the wider metro.
D.C.’s Changing Landscape
Cortland Pentagon City is a mixed-use urban community located right across the street from Amazon’s HQ2 in National Landing. The surrounding neighborhood offers a dynamic assortment of restaurants, cultural venues, walking trails, offices, parks and more. Cortland plans to invest in capital improvements to elevate the community to be in line with other high-end projects that are underway throughout the submarket.
Once the remaining two properties change hands, Cortland plans to take action to eventually double its footprint within the D.C. metro. Apart from Northern Virginia, the vertically integrated investor-developer is active primarily in the Sun Belt region, with assets in Charlotte, Dallas, Houston, and Orlando, among others. The company also operates a build-to-rent platform in the United Kingdom.
What are the benefits of investing in a multifamily portfolio?
Investing in a multifamily portfolio can provide a number of benefits. The most obvious benefit is the potential for high investment returns. While multifamily properties are generally more expensive than single-family homes, they provide solid, strong returns — even during recessions in all but a handful of cases. Additionally, investing in multifamily properties early can help you take advantage of compounding returns. Over time, small amounts of money invested into multifamily properties can grow exponentially due to the power of compounding returns. This means that the earlier you start investing in multifamily, the more wealth you’ll have in the long run.
Another benefit of investing in a multifamily portfolio is the guarantee of reliable monthly cash flow from renters. Since multifamily properties are rented out to multiple individuals or families, there’s a reduced risk of vacancies — even if a tenant moves out, you can anticipate rental income from the remaining occupied units. Additionally, in a strong rental market, you will be able to fill vacancies fast, getting back to the initial, higher cash flow.
Finally, investing in multifamily properties can help you diversify your investment portfolio. One of the main benefits of apartment investing is how relatively low risk the asset class is. If the market crashes, that may well wipe out your 401(k) — but odds are, your apartment buildings will be doing just fine.
For more information on multifamily investing, please visit The Pros of Investing in Apartments Early and The Pros and Cons of Multifamily Investing.
What are the risks associated with investing in a multifamily portfolio?
The risks associated with investing in a multifamily portfolio include expensive entry costs, competition, and the potential for vacancy. Buying multifamily properties is significantly more expensive than buying single-family homes, therefore, it is usually hard to enter the market as a first-time real estate investor. While banks are usually eager to provide loans, buyers should be able to come with around a 20% downpayment, depending on the real estate market or the size of the property. Additionally, thanks to the benefits it provides, multifamily is an attractive asset type to most commercial real estate investors, even if it’s not their primary investment focus. Owing to its recession-resistant nature, investors often add multifamily financing to their portfolios as a risk-mitigation strategy. However, the competition in the sector often creates high barriers to entry in some markets, especially for first-time investors. Lastly, there is always the potential for vacancy, which can lead to a decrease in rental income.
What are the advantages of financing a multifamily portfolio?
The advantages of financing a multifamily portfolio include better interest rates, longer terms, flexible terms, and higher leverage.
Due to lower risk in the multifamily property sector, loans typically come with lower interest rates than similarly valued properties in other commercial real estate sectors. Banks also offer longer terms, with some financing types, like HUD loans, offering fully amortizing, long-term options. Additionally, due to the wide range of options available, borrowers can often find the terms they’re looking for by shopping around. Multifamily financing also typically allows for higher LTV ratios than loans for other commercial real estate assets, like office and industrial buildings.
What are the challenges of financing a multifamily portfolio?
The challenges of financing a multifamily portfolio depend on the size of the portfolio and the type of loan product you are looking for. Generally, the larger the portfolio, the more difficult it is to secure financing. Additionally, the loan-to-value ratio and debt service coverage ratio are key considerations when financing a multifamily portfolio. These ratios limit the amount of the loan and can be difficult to meet depending on the size of the portfolio. It is important to research the different loan products available and find the one that best fits your needs.
For more information, please visit Multifamily Financing: Your Comprehensive Guide.
What are the current trends in multifamily financing?
According to Freddie Mac®’s predictions, multifamily origination volume is estimated to expand to $317 billion in 2019, a nearly 4% increase from the approximate $305 billion of multifamily financing originated in 2018. Factors that can be attributed to this trend include consistent investor demand for apartment properties, as well as other market forces, including a strong economy, reasonable job growth, and low interest rates.
It's unsurprising that the majority of respondents — more than 60% — pointed to rising interest rates. After all, the current federal funds rate of 4.25% to 4.5% is in stark contrast to the same time last year, when rates ranged between 0.0% and 0.25%.
Tighter underwriting standards are also a factor, which involves the standards lenders set for debt service coverage ratios, loan-to-value ratios, and more.
What are the best strategies for financing a multifamily portfolio?
The best strategies for financing a multifamily portfolio depend on the size of the portfolio and the investor's financial situation. Generally, the most common ways to finance a multifamily property include conventional loans, FHA loans, and private money loans. Conventional loans are typically the most popular option for larger portfolios, as they offer the lowest interest rates and the most flexible terms. FHA loans are a great option for smaller portfolios, as they offer lower down payments and more lenient credit requirements. Private money loans are a great option for investors who need to close quickly, as they offer fast funding and more flexible terms. For more information, you can check out this article and this article for more information.