Empira, the Zug, Switzerland-headquartered real estate investor, is aiming to raise capital from third-party investors for $600 mln (€565 mln) worth of residential investments in the major Sun Belt cities and neighbouring metropolises in Arizona, Texas, and Florida.
The €7 bn AUM European company has a US subsidiary in addition to its Zug and Luxembourg operation, and branch offices in Germany, Austria, Sweden, the UK, and Dubai.
Its new EMPIRA Residential Invest US fund has been launched in accordance with Article 8 of the EU’s Sustainable Finance Disclosure Regulation aimed at institutional investors.
Investments are expected to make an annual internal rate of return of 13.5%.
Europe comparison
Lahcen Knapp, chairman of the Empira Group board of directors, compared returns possible from its selected US markets and strategy with that of residential investment in Europe.
‘The new ERI US fund provides our investors with attractive investment opportunities at significantly higher returns than multifamily properties in Europe and Germany. At the same time, the risk profile is lower due to positive fundamental growth factors in the US,’ he said.
The fund follows a develop-and-hold strategy. Ready-to-build sites are acquired for the construction of residential properties, and the completed units are held in the portfolio for the long term. Empira said this allowed the fund to generate ‘attractive returns and regular distributions’ during the holding phase. All real estate projects will be certified in accordance with LEED standards.
Forecasts indicate a favourable trend in US population growth. In terms of both economy and population, the southern states are seeing significantly higher growth rates than other US regions. For instance, since the pandemic began, California has lost 367,000 residents while Florida has gained 221,000. ‘These trends are driving strong, sustained demand for real estate,’ said Knapp.
Empira currently has a pipeline of investment options comprising over 5,000 residential units at various locations in the Sun Belt.
The Sun Belt is home to all ten of the fastest growing metropolitan regions in the US. Among these are major cities like Miami, Orlando, Tampa, Phoenix and Austin. All through the Sun Belt, job and population growth have fuelled a sustained surge in rents, even exceeding 20%. compared to the previous year in most of Empira’s target markets.
The decision of companies such as Tesla, CBRE and Oracle to move their headquarters to the Sun Belt indicates the region’s long-term appeal, the company noted. Taxes and the cost of living are lower in the south, and these states are known for their business friendliness and warm climates.
Knapp said there had been a ‘clear trend’ towards rental apartments in the US for years now.
The company noted the US multifamily sector had generated ‘strong returns in recent years’ and ‘shown itself to be robust even through economic downturns like during the coronavirus pandemic'. There is a severe shortage of apartments coupled with steadily rising demand for residential housing, according to the real estate firm.
Empira stated the US was currently short of some four to five million homes, while over 10 million new households are likely to be formed over the next decade. Due to insufficient funds for buying single family homes, which have become quite expensive, millennials are opting to rent apartments in multifamily buildings.’
Moreover, the baby boomer generation is increasingly choosing to part with their own houses in order to adopt an urban lifestyle, to which rental apartments in multi-family units are better suited.
‘We can expect to continue seeing low vacancy rates and rising rents in the years to come,’ concluded Knapp.
