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Wednesday, Feb 8, 2023

Apartment Investor Passco Cos. Nearing $2B in ’22 Deals

Louisiana Push Includes $120M Downtown Buy

Irvine investor Passco Cos. doesn’t count any Orange County assets in its expansive real estate portfolio, but a string of recent transactions has prompted the company to grow its local worker base by north of 40% over the past two years.

“Last year was our busiest ever with $1.7 billion in transactional volume,” Vice President of Corporate Marketing Stacy Stemen told the Business Journal. “We needed to boost our team in a big way.”

The firm added 20 new employees over the past 18 months, bringing its total staff to 65.
That employee count is only expected to grow this year, as the firm aims to surpass last year’s sales volume.

“We are aiming for $1.2 billion to $1.3 billion in acquisitions alone, with total transactional volume of $1.7 billion to $1.9 billion,” Stemen said.

HQ Expansion

Passco recently renewed its lease for its headquarters at 2050 Main St. for another five years, and may add to its nearly 16,000-square-foot footprint at the Irvine Concourse tower near John Wayne Airport.

“We’re looking into expanding into the suite across the way,” Stemen said.

The company has $3.7 billion assets under management, with a focus on secondary and tertiary markets in the Southeast.

Louisiana Luxury

Passco’s focus is primarily on multifamily; all of its purchases last year, save one industrial acquisition, were apartments.

It counts nearly 14,500 units in its portfolio.

Most recently, Passco acquired two upscale Louisiana apartment projects totaling 602 units, bringing its total holdings in the state to 1,690 units across six properties.

In the larger of the two deals, Passco acquired a 330-unit mid-rise apartment property, Canal 1535, in downtown New Orleans, the firm’s first asset in the city. Local reports pegged the price to be $120 million, or nearly $364,000 per unit.

Canal 1535 “is a one-of-a-kind property in an irreplaceable location, situated within a market that rarely sees apartment trade activity,” Senior Vice President of Acquisitions Colin Gillis said in a statement. “We were able to take advantage of a truly once-in-a-generation opportunity to acquire a property of this caliber for a basis far below today’s replacement cost.”

Passco also purchased Sawgrass Point, a 272-unit gated community in Baton Rouge, marking the company’s third multifamily asset in the Gonzales submarket.

“We’ve identified greater Baton Rouge as a market with solid fundamentals that is poised for significant long-term growth,” Gillis said. “This asset is situated within one of the best submarkets, Ascension Parish, which has the highest per capita income in Louisiana and ranks No. 1 in the state for population growth.”

Hot Multifamily Market

Passco’s apartment portfolio is about 96% occupied on average.

“The market is frothy for apartments,” Stemen said. “I think multifamily will still be the hottest asset class out there in five years.”

U.S. multifamily rents are up nearly 17% year-over-year, according to a first quarter Marcus & Millichap report.

Passco is most attracted to markets seeing strong population growth from renters, like Georgia, Texas and Florida.

“We love Florida right now,” Stemen said.

Landsea in Florida

Passco isn’t the only Orange County real estate firm looking to Florida.

Newport Beach-based Landsea Homes Corp. (Nasdaq: LSEA) closed on 149 homesites in Sanford, Fla., at the end of May for a new community called Kentucky Square.

Homes at Kentucky Square will range from 1,700 to 3,300 square feet, on 55-foot lots. Development is expected to begin later this year.

The deal comes as Landsea closes sales for Celery Oaks, a 103-home community also in Sanford.

Landsea counts 22 active communities in Florida, with more on the way this year and next, company officials tell the Business Journal.

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