{"id":8011,"date":"2022-06-22T05:01:54","date_gmt":"2022-06-22T05:01:54","guid":{"rendered":"https:\/\/ios.alterraproperty.com\/?p=8011"},"modified":"2024-11-18T10:36:34","modified_gmt":"2024-11-18T10:36:34","slug":"how-multifamily-developer-alterra-property-group-became-a-big-player-in-a-niche-industrial-property-type","status":"publish","type":"post","link":"https:\/\/ios.alterraproperty.com\/?p=8011","title":{"rendered":"How Multifamily Developer Alterra Property Group Became A Big Player In A Niche Industrial Property Type"},"content":{"rendered":"

Source Article<\/a><\/p>\n

By Bisnow.com<\/a><\/p>\n

How Multifamily Developer Alterra Property Group Became A Big Player In A Niche Industrial Property Type<\/h1>\n

Plenty of commercial real estate companies operate in multiple asset classes, but few have a portfolio like\u00a0Alterra Property Group<\/a>.<\/h4>\n

The Philadelphia-based company, founded by managing partner and CEO\u00a0Leo Addimando<\/a>, had over a decade of experience developing multifamily buildings exclusively in Philadelphia when it entered the realm of\u00a0industrial outdoor storage<\/a>\u00a0in 2016. Six years later, it has\u00a0a\u00a0national, institutionally backed portfolio<\/a>\u00a0of IOS properties, but is still a Philly-focused multifamily developer.<\/p>\n

The catalyst for Alterra\u2019s expansion was when Addimando\u2019s friend Frank Bardonaro called\u00a0on behalf of his company, Maxim Crane Works. Maxim was being forced to vacate a lot in Boston and Bardonaro was having no luck finding a new place to store cranes after a year of searching.<\/p>\n

\u201cAfter several failed attempts with some large national companies, I remembered that Leo spent a lot of time in the Boston area while attending Harvard, so I asked him for some help,\u201d Bardonaro told\u00a0Bisnow<\/em><\/i>\u00a0in an email. \u201cHe quickly responded, put us with some local contacts and we had multiple options within a month.\u201d<\/p>\n

Today, Addimando admits he knew little about Boston as a real estate market and even less about a little-known niche of industrial property. But Alterra\u2019s\u00a0acquisition of the site\u00a0for leasing to Maxim led Bardonaro to realize the benefit of focusing more capital expenditure on his company\u2019s vehicle fleet. In 2018, Alterra acquired 17 properties from Maxim across 12 cities in a sale-leaseback deal at the portfolio level.<\/p>\n

\u201cWe didn\u2019t really know what the endgame was at the time, but once we closed on that sale-leaseback portfolio transaction, we knew it wasn\u2019t going to be just a single-tenant business,\u201d Addimando said. \u201cSo we started searching for data on how big the market was and tried to create an investment thesis for it.\u201d<\/p>\n

At first, Alterra leaned on friends and family to help finance its acquisitions, eventually getting an investment from a family investment office.\u00a0By December 2019, Alterra had formed a $300M joint venture backed by\u00a0JPMorgan Chase<\/a>\u00a0to acquire IOS properties. Six months later, it secured a $100M credit facility with\u00a0Morgan Stanley<\/a>\u00a0for the same purpose. Late last year, Alterra launched its first discretionary fund in partnership with New York-based Park Madison Partners. By mid-March, the\u00a0fund had closed<\/a>\u00a0after raising $524M, well\u00a0above its goal of $400M.<\/p>\n

\"\"<\/p>\n

A Nashville, Tennessee industrial outdoor storage facility owned by Alterra Property Group and leased to Maxim Crane Works<\/p>\n

Over that time period, industrial outdoor storage exploded in popularity as an investment target, enjoying both the relentless demand for logistics space in general and\u00a0advantages specific to the property type<\/a>.<\/p>\n

\u201cSupply of IOS is constrained for a few reasons,\u201d said Matt Pfeiffer, Addimando\u2019s fellow managing partner who runs the day-to-day operations of the IOS business. \u201cThere are the zoning restrictions, and traditional industrial investors have converted a number of IOS properties. Municipalities aren\u2019t creating more outdoor storage, but every MSA needs it for its supply chain infrastructure.\u201d<\/p>\n

But Alterra\u2019s multifamily business didn\u2019t just tread water. Addimando remains deeply involved in the company\u2019s strategy in the sector, and he served as president of the\u00a0Building Industry Association<\/a>\u2018s Philadelphia chapter last year.<\/p>\n

\u201cI know where to be pushing rents\u00a0and where concessions are needed\u201d across Alterra\u2019s properties, he said. \u201cWe\u2019re evaluating development opportunities in other markets right now, taking the modular development approach we\u2019ve honed in Philadelphia. So far, we haven\u2019t felt like conditions are right to expand into a new market; we\u2019ve been sort of waiting for a correction on that front.\u201d<\/p>\n

In addition to helping him assess the viability of growing the multifamily business, Addimando\u2019s exposure to so many other markets\u00a0gave him perspective on what is possible and sensible in Philadelphia.<\/p>\n

\u201cNecessity is the mother of invention,\u201d Addimando said. \u201cIn the Southeast and the Southwest, there\u2019s such population growth that\u00a0rents are skyrocketing<\/a>, so they pay what they need to pay in order to get new things built. Without the same rent growth up here, that equation is very challenged.\u201d<\/p>\n

Alterra Property Group developed one of the largest multifamily buildings in the U.S. in West Philly, selling it for $88M earlier this year.<\/p>\n

Noting that the staggering amount of capital looking to invest in\u00a0value-add multifamily<\/a>\u00a0has all but erased the possibility of getting a satisfactory return, Alterra has committed to modular development as a way to control and reduce construction costs, betting that when it stabilizes and sells a property, investors won\u2019t care how it was built. In March, Alterra\u00a0sold a 250K SF building<\/a>\u00a0in West Philly, one of the largest modular apartment projects in the country, for $88M.<\/p>\n

\u201cIn developing\u00a0and managing properties hyperlocally like we\u2019re doing in Philadelphia and Greater\u00a0Center City<\/a>, you can take for granted that you know the local laws and players,\u201d Addimando told\u00a0Bisnow<\/em><\/i>.\u00a0\u201cWhen you try to scale in a different asset class nationally, it\u2019s almost like you\u2019re starting over, with different capital providers, different people doing deals.\u201d<\/p>\n

Only a handful of Alterra employees have duties across both verticals, while around 50 focus exclusively on multifamily and 15 or so do the same with industrial outdoor storage. Though Pfeiffer leads the day-to-day of the IOS operation, Addimando himself was forced to evolve how he worked in order to keep both ventures successful.<\/p>\n

\u201cAm I spending five fewer hours a week than I used to on the minutiae of multifamily?\u201d Addimando said.\u00a0\u201cYeah, but it\u2019s five hours that I shouldn\u2019t have been spending there to begin with.\u201d<\/p>\n

Alterra focused on hiring and elevating \u201chigh-ceiling individuals\u201d to handle elements of both multifamily and industrial outdoor storage that Addimando might have previously done himself, he said. Based on Alterra\u2019s continued success in fundraising for IOS and executing multifamily projects in Philly, its best return has come from the investments it made in talent.<\/p>\n

\u201cOnce you learn that you are dealing with people that always find a way to get it done and do it the right way, I think you can rely on them to expand into more regions or areas of expertise,\u201d Bardonaro said. \u201cClearly, they not only succeeded in Boston, but ultimately handled projects for us on a coast-to-coast basis.\u201d<\/p>\n

CORRECTION, APRIL 14, 10:15 A.M. ET:\u00a0<\/strong><\/b>A previous version of this article misstated the nature of its first deal with Maxim, what year Alterra acquired Maxim\u2019s portfolio of industrial outdoor storage properties and the total value of its most recent fund. This article has been updated.<\/em><\/i><\/p>\n

Contact Matthew Rothstein at\u00a0matt.rothstein@bisnow.com<\/a><\/p>\n<\/div><\/div><\/div><\/div><\/div>\n","protected":false},"excerpt":{"rendered":"","protected":false},"author":1,"featured_media":8013,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-8011","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-ios-new"],"yoast_head":"\nHow Multifamily Developer Alterra Property Group Became A Big Player In A Niche Industrial Property Type - Alterra IOS<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/ios.alterraproperty.com\/?p=8011\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"How Multifamily Developer Alterra Property Group Became A Big Player In A Niche Industrial Property Type - 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