Borrower profile: TruAmerica sees liquid markets for multifamily focused investors

Atop its standard strategy, the firm is looking to potentially invest in the rescue capital space later this year. 

TruAmerica Multifamily is anticipating a return to steadier transaction activity later this year, with the Los Angeles-based manager expecting to continue to see ample liquidity from the government-sponsored agencies and other lenders for its Class B-focused multifamily strategy.

The firm typically transacts on about $1.5 billion each year but saw a slowdown late in 2022 along with the rest of the market as interest rates rose more rapidly than expected, said Bob Hart, founder, chief executive and president of TruAmerica.

“Last year was the first time in 10 years that we have seen a real slowdown,” Hart said. “This started between the second and the third quarter and while we had a good year last year, we saw a very pronounced slowdown that started at the end of September.

“I think there was also a sense that growth was slowing slightly in markets that had had a lot of momentum in previous years,” Hart said, citing the example of Las Vegas, Phoenix and, to a lesser extent, Atlanta.

As a multifamily investor, the firm has always benefited from being able to work with Fannie Mae and Freddie Mac. “The GSEs have been here through this process. And for us, the availability of debt is not the issue. The bigger issue is more about the requirements of the debt, including very expensive interest rate caps. There is still bank debt out there, particularly from the money center banks, and there is insurance company debt. It is the underwriting of the debt that is the issue.”

Investment strategy

The company has grown to the point where it now manages more than 60,000 units across 30 US metropolitan state areas. “Our strategy is one of vertical integration and regionalization,” Hart said. “We have strong teams on construction management, asset management and acquisitions and offices in a number of different regions like Los Angeles, Seattle, Dallas, Miami and Arlington.”

TruAmerica continues to see value in the Southeastern US. “We see steady and continuous growth,” Hart said. “Smaller states like Tennessee and the Carolinas, followed by Florida and Georgia, have seen growth opportunities. The challenge, particularly in Florida, is the availability of fairly priced insurance, which has gone up a lot due to climate conditions. That said, Florida has been a big market for us and will continue to be.”

The firm also likes the greater Boston area, where it has four deals, due to the education industry. “It is growing, as is healthcare and technology. And while we love Seattle, it is hard to buy there right now, although it has similar traits to Boston.”

Ideally, the firm looks for buildings with around 200 to 300 units. “We like scalable real estate, and we obviously want to be either in one of our already designated targeted markets. We look for deals that have been undermanaged and there has been some loss to the lease roll. And our secret sauce has been to do value-added rehab at a little higher level than some of our competitors might do for our target markets,” Hart said.