As the rental market took off over the last decade, many multifamily firms have been launched to syndicate money and buy properties.
Allen & Rocks isn’t one of these companies.
The family-owned and operated Vienna, Virginia-based firm has been around for 75 years and operates primarily in the Virginia, Maryland, Washington, D.C., and Delaware areas. Its ownership and management holdings span the commercial real estate spectrum, including shopping centers, office buildings, hotels and roughly 2,200 units of class A-minus and B-plus garden-style apartment communities.
Even with a mature portfolio, the executives at Allen & Rocks sought out new opportunities in single-family rentals in 2020. That year, it bought 140 homes from home builder and developer Brookfield at the Heritage Shore community in Bridgeville, Delaware. It has another 40 homes at another project with the Canadian investment giant — the Lakeside Run at Trappe in Trappe, Maryland — currently under development.
Here, Bob Turner, vice president of residential properties with Allen & Rocks, talks with Multifamily Dive about the attraction of single-family rentals, slowing rent growth and virtual leasing.
This interview has been edited for brevity and clarity.
MULTIFAMILY DIVE: What attracted you to the single-family rental business?
BOB TURNER: Brookfield has been developing and selling the Heritage Shore community since around 2005. It was only a for-sale product until the summer of 2020. We were meeting with them and because of our background in apartments and leasing, we wondered if there was an opportunity to build a single-family home product for lease for a 55-and-older demographic. So we started there and it took off like wildfire.
Then, we had been long-term holders of land in Trappe, Maryland. And we decided to partner with Brookfield on this community as well to develop a for-sale and leasing community there.
You’ve managed apartments for a long time. Was there any learning curve in operating single-family rentals?
They're similar, but they’re certainly different because they are single-family homes and they come with different structure types. Of course, every home has a yard, every home has a driveway and every home has a garage. Marketing wise it's also different.
The introduction of a leased property to a 55-and-older demographic is certainly different. These are people that typically come from owning a home for decades. They are selling homes and relocating to different areas. That's a new concept to the market. This community, in particular, has a host of amenities that appeal to the retired person and the active adult.
Have rents started to level off in your portfolio?
It's not unrealistic that apartments will see some sort of regression at some point. Renting has remained strong, but I believe the rents are starting to plateau.
And in some jurisdictions, the authorities have slowed rent increases down to some extent. Certain counties have capped rent increases at 3%.
Are you facing other challenges on the operational front?
We all know expenses are outpacing anything that we can get in net income at this point. Taxes continue to rise. The cost of labor is rising. Vendors’ costs are rising. Expenses are generally continuing to climb despite the plateauing of rents. Utilities are rising for sure.
We started — like everybody else during the pandemic — doing some level of virtual leasing and we've continued to lease virtually even though the pandemic is over.
Has virtual leasing become popular among your prospects and resident base?
We are seeing more leases than ever coming from remote sources when they're not seeing the apartment or house first.
Does absorption vary by age group?
It's a little bit of a complicated question for me. You would think that the younger renter is more apt to do that. But with the 55-and-over community, we have had an awful lot of people rent remotely because they're coming from out of state. Some have trusted but verified. But we have had numerous ones that have rented sight unseen, meaning not physically seen in person.
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