Multifamily Executive: The New Old Money -- Pritzker Realty Group Rebuilding Apartment Portfolio
June 02, 2011
Additional joint-venture funds could be forthcoming from Chicago-based high net-worth investors.
With two joint-venture funds currently deploying equity into multifamily investments across the Eastern United States, Chicago-based Pritzker Realty Group could be adding similar JVs in the West as the company borne from the Pritzker family that founded Hyatt International in 1922 looks to rebuild its apartment portfolio after selling off the bulk of its multifamily assets between 2005 and 2007.
In the South, Pritzker Realty Group has teamed with Atlanta-based Tribridge Residential on a $75 million fund that has made three of a likely dozen or so acquisitions in multifamily opportunities from North Carolina to Florida to Texas.
“We launched the partnership in fall of 2010 and have closed three student deals, including two properties in Austin near the University of Texas and one property near Orlando near the University of Central Florida,” says Tribridge director of market research Katherine Mosley. “We’re not exclusively looking at student, however. Our platform is comprised of 18,000 units of Class A and Class B assets, and I think this fund is generally focused on markets with great fundamentals: the larger metropolitan areas and, within them, key midtown and downtown submarkets close to universities, hospitals, and job-growth engines.”
In the Mid-Atlantic, Pritzker has established a similar $75 million joint venture with Greenbelt, Md.-based Bozzuto Group, although Bozzuto development group president Toby Bozzuto says investment targets for that fund are dominated by ground-up construction opportunities. “We have looked and will continue to look at acquisition opportunities, but the yields on development are far more appealing to us than what the few trades are showing in the greater D.C. market,” Bozzuto says.
Formed in 1991 by Penny Pritzker to oversee the non-hotel investments of the Pritzker family, Pritzker Realty Group built a $5 billion portfolio of apartment, office, and industrial assets before divesting in the early 2000s. Industry sources maintain that additional joint ventures could be in the offing as the firm looks to re-establish a national real estate platform, particularly in multifamily.
While Pritzker representatives were not immediately available to comment, past JV partners indicated that the firm seems to be following a similar growth trajectory fueled by opportunistic investment in quality assets during and immediately after a market downturn. “I think they have great timing,” says Chicago-based Waterton Residential co-founder and managing member David Schwartz, who partnered with Pritzker to launch Waterton’s first equity fund in 1995 and also purchased the Presidential Towers from Pritzker Realty in 2007. “They got in the business and ramped it up in a fairly significant way and then sold it all. They are very deliberate and focused and are some of the smartest buyers out there, and now they are getting back in a meaningful way.”
Joint-venture partners credit Pritzker with a hybrid investment culture that embraces the entrepreneurial decision making of high-net-worth investors while maintaining an institutional investor’s level of sophistication in terms of reporting, underwriting, and investment tactics. “Our platform with them is an institutional level of capital with an entrepreneurial spirit,” says Bozzuto. “They are able to make decisions very quickly, and they are able to offer suggestions on strategy and direction. It has been a great partnership.”
Both Bozzuto and Mosley were quick to clarify that their funds were not tailored specifically for student housing or even market-rate multifamily co-located with major universities. Despite that, the firms feel that investments made thus far—which will also see Bozzuto and Pritzker team up with Abco Development on a 500-apartment, 100,000-square-foot retail build-out near Catholic University in Washington, D.C.—epitomize the future of Class A apartment stock that incoming renters are looking for.
“We are trying to design our product to cater to the young professional,” says Bozzuto, “and what is resonating with them is a highly amenitized building, perhaps with units a little bit on the smaller side, but there is definitely a focus on place-making.”