RREAF Holdings, DLP Capital, 3650 REIT Snap Up Sunbelt Portfolio for $500M

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There might not be a guaranteed winning hand in commercial real estate during a period of heightened market volatility, but a multifamily portfolio in the Sun Belt region seems like a good bet. 

A partnership between RREAF Holdings, DLP Capital and 3650 REIT has acquired Southeast Multifamily Portfolio III with a total capitalization of $490 million, Commercial Observer can first report. The portfolio includes 10 multifamily properties consisting of over 2,744 units in Arkansas, Georgia, Indiana, Mississippi, North Carolina and South Carolina.

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3650 REIT’s investment came in the form of preferred equity, although the amount couldn’t be ascertained. Financing was provided by Berkadia, with Nathan Stone and Guy Griffith leading the transaction on behalf of the lender. 

The portfolio was purchased from Hamilton Point Investments

“This is the third large portfolio that we’ve done with this partnership,” said Graham Sowden, partner and director of acquisitions at RREAF Holdings. “We enjoy buying in the South and Southeast, especially in the secondary and tertiary markets. We’ve seen tons of migration from both the West Coast and Northeast. Part of our goal is to create improvements to the properties and enhance the lives of our many residents.”

The portfolio that the group purchased for $500 million includes properties in Arkansas, Georgia, Indiana, the Carolinas, Mississippi and Oklahoma, according to a release. They were built between 1998 and 2012, and were 93 percent occupied at the time of the purchase. RREAF led the acquisition from a single seller, per the release. 

“The 10 assets are very well located,” said Jonathan Roth, co-founder and managing partner of 3650 REIT. “These aren’t the fastest-growing communities in the country, but they’re stable. There’s room to increase rents to the extent that projects are upgraded or improved by RREAF. What we love about RREAF is that they want to operate and manage communities where workforce housing and attainable housing are provided, to create better communities for their residents. We will always be supportive of that kind of strategy.”

“Because we have done so much business with all of the parties at the table, we really had a road map in place that we could follow,” added Michael Fleischer, managing director and head of bridge and event-driven originations of 3650 REIT. “And it took a long time to get that road map in place. But today we benefit from having that road map.” 

“It is a mission for us to keep our rents affordable for the local communities,” said Lou Davis, managing director of investments at DLP Capital. “Across our portfolio, we’re absolutely underneath the 30 percent [area median income]. And this portfolio is no different. We are still a for-profit business, but we can make an impact by doing the right things for communities and our investors at the same time, and by keeping our pro forma rents within that threshold. It certainly feels like the right thing to do towards our mission.”

RREAF’s property management company, RREAF Residential, will manage the acquisitions, including upgrades. Those upgrades will include renovations of individual units and shared areas as well as additions of features such as outdoor kitchens, dog runs and pools. 

The acquisition marks the trio’s third portfolio acquisition in less than 12 months. RREAF, 3650 REIT and DLP Capital previously collaborated with TransCoastal 21 and Gulf Coast II portfolios

Update: This story originally misattributed source material. This has been corrected. We apologize for the error.

Emily Fu can be reached at efu@commercialobserver.com.