Mike Campbell, associate vice president of acquisitions for Northland Investment Corporation, says Lake Tahoe is his favorite vacation destination.

Ski trips to Tahoe with some longtime Bay Area buddies are part of the reason the Boston-based executive was familiar with Reno.

“Tahoe is my favorite place to go on vacation, hands-down,” Campbell said in a recent NNBW interview. “I have spent time around Reno, and it’s a dynamic city with a lot of good things going for it.”

After several misses, Northland Investment Corporation, which owns and operates a nationwide portfolio of more than 26,000 multifamily apartment units, closed a deal in February to acquire the 330-unit Lumina at Spanish Springs property on Rolling Meadows Drive.

According to Washoe County Assessor records, Northland acquired the property, which finished construction in 2019, from Sunroad Enterprises for $100 million.

Lumina is the company’s first investment in the Northern Nevada multifamily market, but it likely won’t be its last, Campbell said.

“When we started looking at cities, (we look at) basic metrics like affordability, lifestyle and job opportunities — inward job migration is always huge — and Reno checks those boxes,” Campbell said. “Reno has been on our radar for a few years. We swung and missed on a couple of deals, but we were able to plant our flag with Lumina.

“Ideally, this is our anchor,” he added. “We will use this (purchase) to hopefully find some more opportunities to grow the portfolio and continue to expand our operations (in Reno-Sparks). Strategically, we are first and foremost an owner/operator, so with our long-term investment horizon, we typically try to find economies of scale by building a larger footprint.”

Resources aside, it could prove difficult for Northland to deploy additional capital in Northern Nevada. The company joins a crowded playing field with dozens of other private and institutional investors seeking to deploy investment capital in multifamily properties in Greater Reno-Sparks, two longtime regional investment brokers say.

Solid multifamily market fundamentals — high and stable occupancy and regular rental appreciation — have created fierce competition for investment opportunities, said Ted Stoever II, executive vice president of investments with Kidder Mathews in Reno.

According to Kidder Mathews’ first-quarter multifamily market report, average rents across all property types and sizes rose 3.16% to $1,424 per unit, with overall market vacancy dipping just south of 2%. The numerous large Class A apartment projects coming online on seemingly every formerly vacant lot in the region are leasing almost as fast as units are completed, Stoever said.

“We dropped almost an entire point on vacancy despite delivering units as fast as we can,” he said. “All these new high-end properties are stabilizing very quickly. As for investments, there are billions of dollars that need to be deployed out of California and into Nevada for tax reasons. The trick is finding the inventory to meet that demand.”

Billions of dollars of institutional investment money, low interest rates and unparalleled demand to deploy capital out of California and into Nevada has created a perfect storm for owners of multifamily apartment complexes.

Ben Nelson, first vice president of investments with Kidder Mathews, said numerous potential investors are 1031 exchange buyers — investors who sold multifamily properties elsewhere and need to invest sale proceeds into “like-kind” assets in order to avoid paying stiff capital gains taxes to the IRS.

Reno-Sparks, with its rapid growth, incredibly low multifamily vacancy rates and steep rental rates, is on many institutional and 1031 exchange buyers’ radar. Northland’s Campbell says his firm has noticed quite a few new faces in early bidding rounds.

The competition for investment properties is so aggressive that investors and brokers alike are relying on their networks of connections to make offers on properties before they are marketed. Finding deals that make sense for Northland has been challenging, Campbell admitted.

“Competition is very fierce and active,” he said. “There is a lot of capital flooding into the multifamily space. For us, it is about fostering good relationships and finding parties we have transacted with in the past or look forward to transacting with in the future to find ways to get deals done together.

“Those sorts of relationships are really driving some of our larger target sales.”

Stoever said 99% of the time, large multifamily property sales are off-market investment opportunities.

“Any investment broker worth their druthers has a Rolodex of institutional and syndicated investors who are ready, willing and able to jump in immediately with very short due diligence timeframes and have the cash to close,” he said. “It is motivating Ben and I to be creative and talk to developers and owners of newer projects to show them where the value is today and be creative on deploying their gains.

“We are working with existing owners and new developers and showing them where the market is right now — which is incredible — and showing them the upside of selling in a market this hot.”

Nelson said competition for investment opportunities is equally brisk with smaller multifamily complexes of 10 to 100 units. Potential investors often want to dip their toes in the investment pool by buying value-add opportunities — slightly older complexes that could benefit from a change of management or some modest renovations to reposition the assets.

Northland’s Campbell said that although his company prefers newer Class A properties — which make up about 85% of the company’s portfolio — it also considers assets that could benefit from strong management and renovation capital.

“We are looking for ‘cleaner’ assets for the most part, but we can pivot when needed to find something that maybe has had an absentee owner and maintenance has fallen by the wayside,” he said. “We are flexible enough to jump in and overcome those issues to make the residence base happy and bring more life to the property.”

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The investor enters the market with the purchase of Lumina at Spanish Springs, a 330-unit apartment complex in the Reno-Sparks area.

Northland Investment Corp. has entered the Nevada market. The investor has acquired Lumina at Spanish Springs, a 330-unit apartment complex in the Reno-Sparks area after tracking the market for several years. The property is a new-construction garden-style community that had a healthy leasing activity through the pandemic.

“We have been tracking the Nevada market for several years now. Most major cities in Nevada are very tax-friendly and it has a low cost of living, so we have seen a lot of inward migration,” Mike Campbell, associate VP of investments at Northland, tells GlobeSt.com. “We identified Nevada several years ago as target market. We have had some swings and misses, but this was an opportunity for us to get a foothold with brand new class-A garden product that really checks all of the boxes for us.”

Lumina at Spanish Springs is a typical investment for the firm, which targets strong suburban locations in the Sunbelt region. Currently, 50% of the firm’s portfolio is located in the Sunbelt region. “It really fit our strengths and competencies as well as our future goals to continue in this space,” adds Campbell.

While Nevada—including Reno and Las Vegas—have been considered target investment markers for the last several years, the state was also hit hard by the loss of tourism and gaming revenue during the pandemic. However, Campbell says the market also showed resiliency over the last year. “The local gaming industry was greatly impacted, but over the last five years, the local market has diversified away from that industry as the primary source of employment in the area,” he says. “We have seen that with the development of the TRI Center and a lot of Bay Area companies that are starting to expand operations as secondary offices. Over the last 12 months, we have seen a lot of growth and there has been a lot of people that have fled to secondary locations for a better quality of life with lower costs. So, overall, we have seen positive trends.”

The purchase will likely be a catalyst for more growth in the region. “We consider ourselves to be broadly opportunistic. Now that we have a flag planted in the market, we will look broadly at more garden opportunities, mid-rise, high-rise and development plays,” says Campbell. “For us, it is a matter of having that first flag planted and then finding opportunities to grow. Given our nature and the ability to look at more complex deals, it is really a luxury that we found something that we consider our bread-and-butter, and now we can look at the more opportunistic deals that will help us grow.”

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