At CONTI, we approach location as the most important factor in our investment criteria and a factor primarily determined by population and job growth.
Regional Selection: Metro Areas
At a high-level, CONTI targets U.S. metropolitan areas with populations greater than 100,000 and those that possess historical patterns of positive job and population growth. Additionally, CONTI pays close attention to long-term migration patterns within the U.S. when evaluating our potential target markets. Beyond this high-level assessment of population patterns, CONTI also evaluates the availability of multifamily properties within the target market, as well as the relative pricing of properties within those markets. Once the essential components of a metropolitan area’s economic and demographic patterns have been identified, CONTI begins assessing the current and future affordability of the property based on our in-house criteria and third-party data.
Asset Selection: Affordability & Long-Term Strategy
CONTI strives to invest in areas that not only hold promise for stable income growth but attract renters who will not need to dedicate more than 30% of their monthly income to rent. Our Acquisitions Criteria require that all of our investments fall within this range of affordability and that projected incomes can sustain future rent growth. While these rent-to-income thresholds may seem difficult to produce, access to timely household income estimates are widely available and allow easy comparisons. In addition, CONTI also considers Area Median Income (AMI) estimates, produced by the U.S. Census Bureau for metropolitan areas.
By giving affordability ample weight in our investment decision process, we can ensure that we provide places to live and property enhancements that are economically appropriate for the communities in which they are located. In addition, using AMI as a guide allows CONTI to balance our investment decisions and optimize the rent levels of our communities, protecting ourselves and our investors. For example, if a project, once renovated, still has rents that are affordable at or below our AMI thresholds for the immediate area, then CONTI and its investors have an extra margin of safety when executing the business plan for an investment and room to grow rents as necessary.
Asset Selection: Physical & Operational Considerations
As a vertically integrated company, CONTI has an advantage when evaluating the acquisition of a property. CONTI has over 12 years of expertise owning and then operating each property we purchase. While metropolitan area and affordability criteria filter out the vast majority of potential acquisitions, our knowledge of how physical and operational considerations impact the earning potential of a property helps CONTI uncover the hidden value and dangers of each property very early in our acquisition process. Physical components of assets are predictive of long-term operational costs. Our physical targets include assets that: are less than 40 years of age, fall within CONTI’s operationally strategic unit count, and consist of an attractive unit size composition given the asset’s community. For example, an asset with a high concentration of 500 square foot (46 m2) studio apartments is not likely to perform well within a community consisting primarily of families.
CONTI’s Criteria is just one of the critical pieces of a proven acquisitions process. Right from the beginning, we deep-dive into each property, the submarket, and its renter profile and thoroughly filter it against our experience and in-house criteria. This criteria helps position us and our investors for the most success possible by targeting assets that are most likely to achieve operational efficiency, yield the best risk-adjusted returns to our investors, and provide quality, affordable housing for America’s workforce.