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Sunbelt Cities Market Analysis Update

Sunbelt Fund II Updates > Sunbelt Cities Market Analysis Update

Sunbelt Cities


Ballast Rock funds invest in quality workforce housing in Sunbelt states because these states feature strong demographic growth while still offering attractive cap rate yields, relative to the rest of the nation. Within the Southeast we focus our investing in small- to medium-sized cities with specific consistent economic features, markets where the demand and supply imbalance is most pronounced.   ​
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Market Analysis

As is clear in the table below, our cities have relatively high wage and rent growth (even if often from a lower base) and little to no new apartment development.  In the major primary markets in the Southeast we believe that despite the population growth, the relatively stagnant wage growth and substantial new supply met with low yields offers a less attractive risk/reward. Learn more about demand growth, apartment construction supply, and yield indicators in Southeastern markets. ​​
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  • Looking first at the growth indicators, we can see that annual rent growth and median household income growth in primary Sunbelt markets sit below 2%. While in most cases these numbers are in line with or above the national average, they are dwarfed by the growth rates of Sunbelt Fund I (“SB1”) existing markets and Sunbelt Multifamily Fund II (“SB2”) target markets. The growth numbers in these secondary and tertiary markets indicate increasing renter demand, that in most cases is still outpaced by wage growth. 
  • In addition to the strong growth indicators in SB1 existing and SB2 target markets, these markets feature low under construction as a % of inventory rates. This statistic measures how supply will increase in the near future. SB1 existing markets have less than 1% of the existing supply under construction while SB2 target markets feature increasing supply that is below the national average. These low increases in supply are especially enticing when compared to primary Sunbelt markets (i.e. the larger cities in the region), where there is a chance that there will be an oversupply in the near-term leading to increased vacancy and/or the potential for reduced rent. 
  • Finally, looking at market cap rates, we can see that SB1 existing and SB2 target markets feature cap rates that are roughly 50-150 basis points (0.50-1.50%) wider than primary Sunbelt markets and the national average. The combination of strong growth indicators, a shortage of new supply in the near-term, and attractive cap rates illustrate part of our investment rationale for secondary and tertiary markets across the Sunbelt.   ​

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If you would like to learn more about the team, the Sunbelt strategy, and investing in a Ballast Rock fund, please contact us via email by clicking the button below or IR@ballastrock.com.
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The information contained on the Ballastrock.com web site has been prepared by Ballast Rock Holdings LLC (“Ballast Rock”) without reference to any particular user’s investment requirements or financial situation. Potential investors are encouraged to consult with professional tax, legal, and financial advisors before making any investment into a private offering of securities.  An investment in private securities would be speculative and would involve a high degree of risk. Investors must be prepared to bear the economic risk of such an investment for an indefinite period of time and be able to withstand a total loss of their investment. Please consider carefully the investment objectives, risks, transaction costs, and other expenses related to an investment prior to deciding to invest.  All private placements of securities and other broker dealer activities are currently offered through a partnership with Independent Brokerage Solutions LLC MEMBER: FINRA / SIPC (“IndeBrokers”), which is located at 485 Madison Avenue 15th Floor New York, NY 10022. (212) 751-4424. Ballast Rock Holdings LLC and its affiliates are independent and unaffiliated with IndeBrokers. Any securities transactions or related activities offered by Ballast Rock associated persons are conducted in their capacities as registered representatives of IndeBrokers. To check the background of IndeBrokers and its representatives, visit FINRA’s BrokerCheck. Please see our Form CRS.
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