US-based Radco sells US$315m of apartments; setting aside funds for deals

New York

THE Radco Cos, an owner and operator of multifamily buildings in the US, has now pared more than half of the apartments it bought since the last recession as it builds a cash pile for opportunities it sees coming next year.

The company sold six buildings this week in the Atlanta suburbs and one in Charlotte, North Carolina for a combined US$315.6 million, Norman Radow, chief executive officer of the firm, said in an interview. That leaves Radco with 28 of the 59 apartment properties it had purchased since 2011.

And it is looking to sell more: Radco is currently marketing 18 more rental communities, with some of those deals to close in the next 60 days, Mr Radow said.

"We want to have the cash and capital available and be ready to take advantage of a new and interesting cycle that will be coming next year," Mr Radow said.

Sales of apartment buildings have plummeted in the months since Covid-19 locked down the US economy, sent unemployment soaring and left landlords worried about tenants' ability to make monthly payments.

A NEWSLETTER FOR YOU

Tuesday, 12 pm

Property Insights

Get an exclusive analysis of real estate and property news in Singapore and beyond.

Sign Up

So far, owners of properties with any type of distress, such as lower occupancies or rent collection, have not been in a rush to sell at a discount to cash-rich investors looking for a bargain. Mr Radow said that will change next year, and he wants to be ready to buy.

Owners who are already struggling to make mortgage and property tax payments could face further stress from a new nationwide eviction moratorium that bans, till Dec 31, the removal of any tenant for non-payment of rent. For now, only the best buildings are selling, and discounts are small or non-existent.

Cap rates - a measure of investment yields on buildings that falls as prices rise - averaged 5.1 per cent for US apartments in the second quarter, the lowest since at least 2014, according to Real Clear Analytics.

Radco began marketing these properties before the pandemic, then put the efforts on hold while the public health crisis unfolded. By June, interest had picked up - but some buyers were gone, Mr Radow said.

"In February - the old days - we would get as many as 50 offers. We'd look at the top bidders and say 'Who are these guys?'," he said. "Now you're just seeing the very big equity groups and the very large funds."

Greystar bought three of Radco's properties in the Atlanta area for a combined US$138.8 million this week. StoneBridge Investments, Advenir Real Estate and Lion Real Estate Group also acquired buildings from the company. BLOOMBERG