Apartment transactions in the U.S. continued their torrid pace in February, posting a 5% year-over-year increase as $13 billion changed hands, according to data provided to Multifamily Dive by Real Capital Analytics (RCA).

As a result of this increased competition, apartment prices rose 23.2% year-over-year in February, according to RCA. The increased trades and higher prices have put pressure on owners chasing properties. Some still can find assets in the face of competition from large investment firms, while others are re-evaluating strategy.

"The deals are bigger," said Bob Hart, president and CEO of Los Angeles-based owner TruAmerica. "There are more of them and there is a lot of capital chasing apartments."

Overall, apartment trades represented one-third of all activity in the commercial real estate sector in February. 

However, not all deal types saw increases. Large trades, including sales of portfolios and entire companies, dropped 32% year over year. But there is a strong pipeline of these deals on the way in the coming months, according to RCA. One-off apartment transactions continued to drive the market in February, with volume increasing 19%.

Investors flocked to garden apartments, which claimed 71% of all deal volume. For instance, a joint venture between Intercontinental Real Estate Corp. and MG Properties acquired Stone Cliff Apartments (pictured above), a 394-unit garden-style multifamily community in the Denver submarket of Aurora, Colorado, for $143 million in February.

However, volume fell 1% year-over-year in the garden-style category. Although they constituted 29% of the market, mid- and high-rise apartments, which are often more expensive, saw volume increase 25%.

For buyers, it's difficult finding deals in this frothy market. Major players like Starwood and Blackstone are seeking to add multifamily properties to their portfolios. 

"The big aggregators of capital are all out there," said Hart. "There is a lot of money in the system looking for apartments — a lot of regional players. It's coming from everywhere. I think everyone has a healthy allocation for apartments."

Different strategies

Another firm, Monarch Investment and Management Group, the ninth-largest apartment owner in the country, has been active the last few months because it redeployed money from property sales into new assets. But things could be more challenging in the coming months, according to Monarch CFO Andy Newell.

"When you're pricing new deals, it feels like they are just pricing the entire value add into the price," Newell said. "Candidly, I don't know if we're going to be in that space going forward."

However, Monarch does self-manage, giving it an additional income stream. 

"A lot of these guys that are waltzing in with big dollars don't self-manage, which means they're just not going to be able to operate as efficiently as we can," Newell said. "So that will help us in terms of getting the kind of yields we want versus the kind of yields the other guys are willing to accept."

Others also see some opportunity in the market. TruAmerica, the No. 35 owner in the country, bought almost $4 billion worth of apartments last year and Hart anticipates adding another $1 billion in 2022.

"There are always times-up situations [when an owner is forced to sell], partnerships disputes and reasons why people sell," Hart said. "And that creates opportunity and there always will be [opportunity]."

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