Like a lot of apartment investors, Chris Herrlinger thinks the housing fundamentals in North Carolina are great. But the director of asset management for Manhattan Beach, California-based Magma Equities went a step further. He decided to move his family there.
“It’s an area that people want to be in,” Herrlinger told Multifamily Dive. “The climate is great. Charlotte, North Carolina, is a very family-oriented city. It's a place where more people want to be and companies are following suit. The job growth here is fantastic and it's a driver of a lot of multifamily product.”
Magma has been an active buyer of the multifamily product on the market — over the past five years, it has purchased 20 properties in the state. This year alone, it corralled five assets, including the recent $17.5-million purchase of a 111-unit garden-style multifamily community in the Charlotte metro submarket of Lincolnton, North Carolina, in a joint venture with Chapel Hill-based North Carolina Prudent Growth Partners.
But Magma isn’t just focused on North Carolina — the firm has also deployed dollars in places like South Carolina, Texas and Tennessee. Here, Herrlinger talks with Multifamily Dive about the attraction of North Carolina, the competition for assets and rising interest rates.
This interview has been edited for brevity and clarity.
MULTIFAMILY DIVE: How long have you been interested in North Carolina?
CHRIS HERRLINGER: North Carolina has been an area that Magma has been really focused on from the beginning. Probably four or five years ago is when we really started to push into the state — more specifically the Raleigh and Research Triangle area. It’s a market that our founder Ryan Hall really dove head-first into out of the gate and it has continued to evolve from there.
Now, it seems like everyone wants to be in Charlotte, Raleigh and these areas. The pandemic accelerated a lot of that growth as people have been able to relocate and work remotely.
Are you still seeing intense competition for assets? Or has it slowed?
On a transaction basis, things have probably slowed down a little bit. It has become a little bit more challenging to make deals pencil, but we’re comfortable with the position we're in given the markets that we’re most focused on. We feel very strongly about the long-term prospects of Raleigh, Charlotte and Dallas.
In markets like Raleigh, we are very well connected, we see a lot of opportunities and we are able to unearth deals that might not be available to others.
How are you finding those acquisition opportunities?
In the Triangle, we are one of the most active multifamily owners in the market. We are quite connected there. As we continue to expand into some of these other markets in North Carolina, it certainly helps to have boots on the ground. That's why it's important for me to be down here — living in this market and making more connections to continue to expand the business.
Are you generally seeking value-add deals?
Traditionally, we've been more value add. We add value at the properties through renovations and capital projects. That's historically been really what we’ve focused on. More recently, we've started to add more core product into the portfolio. It's a good way for us to diversify. The core stuff just creates cash flow for us.
With interest rates rising, are you reevaluating hold times and overall strategy?
Our business plan has not changed. We're not accelerating any asset sales. If the opportunity presents itself, we will exit. But, if not, we're more than happy to continue to renovate or continue to hold more of our core assets.
Are you seeing any price sensitivity about rent increases among residents?
Rent growth continues to be strong, but we are obviously monitoring our delinquencies to see if there's any uptick in that. There hasn’t been, as of yet. But it's something that we continue to watch closely. The markets that we are in are supported by strong fundamentals and we feel like the growth is sustainable.
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