August 26, 2019
When I moved to Atlanta in 1983 the sign outside The Darlington showed the population of Metro Atlanta at around 1.8 million. 36 years later the number is around 6 million. Between 2017 and 2018 Atlanta was the 4th fastest growing city in the US according to the Census Bureau.
Last weekend we moved our daughter from Greenville to Nashville to start her first job. I had not visited Nashville in over 10 years and it too is booming! Reminiscent of Atlanta’s size a few decades ago, it now has bumper to bumper traffic and roadworks everywhere. It is one of the fastest growing cities in America with around 100 people moving there each day, now helped by Amazon’s new Operations Center that will add around 5,000 jobs. Nashville overtook Memphis as the largest city in Tennessee a couple of years ago, and now has a population of over 1.8 million.
Nashville’s ailing infrastructure bears many similarities to that of Atlanta and much of it is 80 to 100 years old. Public transportation has not kept pace with development and the overcrowded roads have resulted in commute times doubling in just one year. Perhaps the fact that British Airways added daily nonstop flights to London has helped add to Nashville’s presence. It should come as no surprise that apartment rents have gone through the roof! An average 2-bedroom apartment that rented for $872 per month in 2011 now rents for twice that amount.
As I pondered the bull market in real estate in Nashville and Atlanta, it reminded me of a recent meeting with one of our partners in the apartment business to discuss a pending sale transaction as well as general sentiment for multifamily properties in the Southeast. It appears the Southeast, and in this example Atlanta, has become a “hot spot” for investors and one of the most desired urban markets in the country. Rent growth trends, lower interest rates and associated borrowing costs are helping feed buyer appetite.
Specifically, we reviewed the upcoming sale to an “all cash” buyer willing to pay almost two times the purchase price of 5 years ago! Our long-time professional partner described a “feeding frenzy” buyer mindset. They said almost 200 firms requested information on the sale offering and over 30 firms were invited to a “best and final” offer. 9 of these firms were then asked to “rebid” knowing they were in the final group. The property is located two exits from the Alabama state line on I-20 and, while a nice property, it is by no means an in-town location. All the bidding firms were “syndicators” who had raised substantial pools of someone else’s money that needed to be invested – none were local investors.
As an increasing amount of raised capital chases deals, we take comfort in partnering with seasoned professionals with the depth of knowledge and experience to weather the inevitable storms.