‘Healthy demand’ buoys Northwest Arkansas’ multifamily segment

by Paul Gatling ([email protected]) 1,645 views 

Northwest Arkansas’ multifamily investment market has slowed in 2022 compared to last year. Still, considering the economic factors and heightened market volatility, it’s not a bad follow-up to 2021, when apartment investors poured more than half a billion dollars into the market.

Through the first 10 months of the year, there have been 32 multifamily trades in the region totaling $280 million. The average price is $139,742 per unit, an all-time high.

The data comes from CoStar Group, a commercial real estate data and analytics business.

“We’re seeing a slower volume than what we saw last year, but it’s still a solid sales growth compared to what we saw before the pandemic,” said Bill Kitchens, a CoStar analyst.

Two of this year’s most significant transactions occurred in September in a portfolio sale. Lone Star Funds, a Dallas-based investor, acquired more than 9,200 units in 17 Sunbelt markets from affiliates of Dallas’ Transcontinental Realty Investors and Australia’s Macquarie Capital.

The deal included two Benton County properties for a combined $78.7 million — the 250-unit Parc at Rogers ($45.5 million) and the 216-unit Parc at Bentonville ($33.2 million). Both properties were fully leased when they sold.

Another bulk sale included The Glen at Polo Park in Bentonville, a 356-unit development that sold for $51 million. A partnership between RREAF Holdings, DLP Capital and 3650 REIT acquired the portfolio, including 10 multifamily properties and 2,744 units. The buyers’ group purchased the portfolio from Hamilton Point Investments.

Kitchens said investors emerged from the pandemic searching for stability. They found it in secondary and even tertiary markets across the southeastern U.S. Kitchens said several motivators — a booming economy, strong population growth and rising rent growth — enticed investors into Northwest Arkansas. That led to apartment properties hitting prices never seen before, fueled by huge demand and minuscule interest rates.

In 2021, multifamily sales in the region totaled $520.6 million among 49 separate trades. That was almost as much as three previous years combined ($573 million.)

The year’s largest trade was the 396-unit Palisades at Pleasant Crossing development in Rogers. An affiliate of Dallas real estate firm Lurin paid Engage Management $72 million for the fully leased property in December, which equals $181,200 per unit.

A 389-unit Fayetteville duplex development, Valencia, was another notable deal last year. New York-based Olive Tree Holdings paid CMC Asset Management $39 million for the fully leased property, an average of $100,300 per unit. With four properties and 915 units, Olive Tree is the fourth-largest owner in the market in terms of units. Lindsey & Associates of Fayetteville is easily the largest operator with 38 properties and 10,647 units followed by Block Real Estate Services of Kansas City, Mo., (seven; 1,490) and Canyon View Capital (eight; 1,262) of Santa Cruz, Calif.

Kitchens said rent growth in 2022 is expected to eclipse 2021 performances and begin to soften in 2023.

“The rising cost of debt and interest rates have shifted the dynamics [in 2022] and taken the wind out of the sails of many investors,” he said. “We’re still seeing healthy demand in the multifamily segment in Northwest Arkansas, bucking a trend nationally where many markets are reporting softer demand and pace of rent growth slowing.”