Mesa Capital Partners
 
 

Apartment market drives Mesa Capital’s growth

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Tom Bell: “You used to buy your first house at 26. Now it’s more like 36.”

Douglas Sams

Commercial Real Estate Editor-Atlanta Business Chronicle

Three years ago, and his fellow principals at Mesa Capital Partners knew they had a chance to time the apartment market right. But, they may have never expected they’d work on $1 billion of new developments and acquisitions over that span. That’s how busy the firm has been since 2011. Expect the deals to keep coming.

Mesa Capital has three properties on the market, two under contract and four in development. It just raised another $75 million for more acquisitions and development across the Southeast. Its portfolio now exceeds 5,300 units.

Mesa Capital has raised a total of $215 million for the ongoing expansion. As other Atlanta-based real estate companies focused on apartments also grow — Cortland Partners, Pollack Shores — Mesa Capital has found its niche.

“We are fairly opportunistic,” Bell said.

About 70 percent of the latest round of funding Mesa Capital Partners has raised will be spent on acquisitions, the rest on development.

Mesa Capital will remain active in Atlanta, where rents and occupancy continue to soar in pockets of the metro region, including the central Perimeter. Some estimates put rent growth there at close to 4 percent.

Job growth has also picked up in Atlanta over the past year, particularly in the professional services sector and among technology companies.

But Mesa Capital is also drawn to cities such as Jacksonville, Fla., where the Mayo Clinic has been expanding. The University of North Florida has also become an economic engine for the region.

An apartment project Mesa Capital Partners acquired in Jacksonville increased its occupancy from 22 percent to 95 percent. Rents rose 13 percent.

Much the same is happening across many of the markets where Mesa Capital is active, including Greenville, S.C., and Asheville, N.C.

While the big institutional funds are pouring money into trophy projects in Atlanta — and paying prices close to or even higher than pre-recession values — it’s created an opportunity for Mesa Capital in the Southeast’s second-tier markets.

“Institutional capital hasn’t been going into Asheville, or Destin, or Jacksonville or Charleston,” Bell said.

Jeff Tucker, a managing partner with Mesa Capital, said, “Most of those markets are seeing great job growth.”

Rent growth is also reaching new highs in cities such as Atlanta and Jacksonville, said Zach Schaumburg, another principal with Mesa Capital. There’s more behind the resurgence of the apartment sector, though. And it starts with a cultural shift toward more of a rentership society.

Homeownership has reached a 19-year low, according to the U.S. Census Bureau. In contrast, national apartment occupancy reached 95 percent in May. It’s the first time that’s happened since 2008.

Another sign of the times: About 44 percent of all renters used to be homeowners.

Much of the demand for apartments is coming from millennials, or people in their 20s and 30s who make up the largest generation of Americans. Many are waiting longer to get married. Consider in 1983 about half of people between 18 years old and 34 years old were married. Today, it’s closer to 30 percent, according to estimates.

Homeownership for Americans under the age of 35 is at its lowest level on record.

“You used to buy your first house at 26,” Bell said. “Now it’s more like 36.”

In 2011, two years after leaving Cousins Properties Inc. as its CEO, Bell jumped back into the real estate business — his first love.

Bell and five other partners formed Mesa Capital, initially raising $40 million to acquire distressed apartment properties.

The partners included former Georgia-Pacific CEO Pete Correll and former Cousins Properties director John Mack, who also served as CEO of Morgan Stanley until 2009.