Class-B Multi-Family Opportunities

Aii believes an opportunity exists to achieve attractive risk adjusted returns through intelligent and careful acquisition of underperforming Class B assets where occupancy and rental rates can be improved.

Investments will be in the top regional markets with diverse economies, job growth, and high occupancies. In these areas rents are increasing at steady, sustainable 2%-4% rates as our target properties display the highest renter demand and affordability.

Cap rates remain in the 6%-8% range on these properties, as opposed to the trophy gateway properties where attractive yields are harder to find. The Class B apartments in quality locations will remain in high demand throughout the decade according to national market research firms REIS, Urban Land Institute, Cassidy Turley, and Marcus and Millichap.

“Demand for apartment homes should be strong for the rest of the decade and beyond - provided the economy remains on track!”

Source: National Multifamily housing council, January 2014

Source: Cassidy Turley Research

The current real estate cycle, market demographics, and economic environment has homeownership at its lowest level in years and apartment occupancies at record highs. These market fundamentals are attracting huge amounts of capital from major institutional investors into the multifamily sector in major “gateway” markets such as Los Angeles, San Francisco, New York, and Washington DC. They invest strictly in newer construction, large scale, Class A properties and only in major markets.

This has created a significant opportunity to purchase underutilized properties, well below their potential value, on the periphery of size and location of those targeted by most institutional organizations. These are typically mid-size, Class B properties from $2mm to $40mm, in primary and secondary markets.

The Fund will seek out these underperforming properties where an experienced operator can manage them to their full value by doing light renovations, improving operations, increase current cash flows, and then deliver a targeted 18-22% annual return after disposition.

US Multi-Family Market
Average Asking Cap Rates

Rental Demand is Surging!

59% of the 22 million new households that will form by 2030 will rent according to The Housing Finance Policy Center in Washington DC.
Class B apartments nationwide are currently at 95% occupancy.

  • Home ownership is at its lowest level in two decades while apartment occupancies are at record highs
  • New construction not keeping up with demand
  • Rents increasing 2-4% annually

We invest in the top 25 markets with diverse economies, and projected population and job growth.

Target properties display the highest renter demand and affordability.

These Strong fundamentals attracting billions in institutional capital to apartments.

  • Institutions have favored investing in Class A
  • Few Institutions investing in secondary markets
  • Class B rents and occupancy are less affected during downturns Predictable, less volatile returns in Class B