The RMR Group Announces Acquisition of a Denver Multifamily Property

Rhea-AI Summary

The RMR Group (Nasdaq: RMR) has acquired The Ridge at Lowry, a 240-unit apartment community in Denver, Colorado, for $70.0 million. The property will be rebranded as ARIUM at Lowry and undergo extensive renovations. This acquisition expands RMR's Denver residential presence to nearly 800 units. The purchase was funded with a $46.5 million mortgage loan at a 5.34% fixed interest rate and cash on hand.

RMR aims to capitalize on favorable demographics and strong rent growth in Denver. The company plans to deliver attainable living options in the Lowry neighborhood, situated between downtown Denver and Cherry Creek/Centennial sub-markets. With new supply in the surrounding area, RMR believes this investment will contribute to the community's growth and prosperity.

Positive

• Expansion of RMR's Denver residential portfolio to nearly 800 units
• Acquisition in a market with favorable demographics and strong rent growth
• Plans for extensive renovations to potentially increase property value
• Strategic location between highly coveted sub-markets
• new supply in the surrounding area, potentially reducing competition

Negative

• Significant debt taken on with $46.5 million mortgage loan
• Renovation costs may impact short-term profitability
• Potential integration challenges in expanding residential portfolio

Insights

Financial Analyst

The RMR Group's acquisition of The Ridge at Lowry for $70.0 million marks a significant strategic move into the residential real estate sector. This transaction expands RMR's Denver residential portfolio to nearly 800 units, positioning them to capitalize on the city's favorable demographics and strong rent growth trends.

Key financial aspects to consider:

• The acquisition was partially funded with a $46.5 million mortgage loan at a 5.34% fixed interest rate, with an interest-only five-year term. This financing structure allows RMR to maintain liquidity while leveraging low-cost debt in the current interest rate environment.
• The planned renovations, while not explicitly quantified, suggest additional capital expenditure that could enhance the property's value and rental income potential.
• RMR's total assets under management in the residential sector now stand at approximately $5.3 billion, indicating a substantial commitment to this asset class.

From an investor's perspective, this move diversifies RMR's portfolio and potentially provides a hedge against inflation, as residential rents typically adjust more quickly than commercial leases. However, the success of this investment will largely depend on the execution of the renovation plan and the ability to increase rental rates in line with or above market growth.

The value-add strategy employed here is a common approach in real estate investment, aiming to boost returns through property improvements and subsequent rent increases. Investors should monitor the progress of renovations and occupancy rates post-improvement to gauge the success of this strategy.

Real Estate Market Analyst

RMR's acquisition of The Ridge at Lowry, soon to be rebranded as ARIUM at Lowry, is a strategic play in the Denver multifamily market. Let's break down the key market factors at play:

• Location Advantage: Situated between downtown Denver and the Cherry Creek/Centennial sub-markets, the property benefits from proximity to high-demand areas, potentially commanding premium rents.
• Supply Dynamics: The new supply within a two-mile radius creates a favorable environment for the property, potentially leading to stronger occupancy rates and rent growth.
• Market Trends: Denver's multifamily market has shown resilience, with strong demographic trends supporting demand. The city's population growth and job market have been driving factors in the apartment sector's performance.
• Value-Add Opportunity: The planned extensive renovations align with market preferences for updated, amenity-rich living spaces, potentially allowing RMR to capture higher rents and improve NOI.

The garden-style apartment format of the community aligns with current renter preferences for more spacious, less dense living environments - a trend accelerated by the pandemic. This could provide a competitive edge in attracting and retaining tenants.

Investors should watch for the execution of the renovation strategy and its impact on occupancy and rental rates. The success of this investment will largely depend on RMR's ability to effectively reposition the property in a competitive market while maintaining operational efficiency.

Investment Strategist

RMR's acquisition of The Ridge at Lowry represents a strategic pivot that warrants investor attention. Here's why this move is significant:

• Portfolio Diversification: This marks RMR's initial foray into residential investments, diversifying their portfolio beyond their traditional focus areas. Such diversification can potentially reduce overall portfolio risk and open new avenues for growth.
• Market Positioning: By entering the Denver market with a substantial 240-unit property, RMR is making a bold statement about their confidence in the area's growth prospects. Denver's strong economic fundamentals and population growth make it an attractive market for multifamily investments.
• Value-Add Strategy: The planned renovations and rebranding to ARIUM at Lowry indicate a clear value-add strategy. This approach, if executed well, can lead to higher returns through increased rents and property appreciation.
• Scalability: With this acquisition, RMR expands its Denver presence to nearly 800 units. This scale can lead to operational efficiencies and stronger market presence, potentially paving the way for further acquisitions in the area.

From an investment perspective, this move signals RMR's adaptability to market trends and willingness to explore new growth avenues. The success of this strategy will depend on several factors, including the execution of the renovation plan, market reception of the rebranded property and overall management efficiency.

Investors should monitor key performance indicators such as occupancy rates, rental growth and NOI improvements post-renovation. Additionally, keep an eye on RMR's future moves in the residential sector, as this acquisition could be the first of many, potentially reshaping the company's long-term growth strategy.

Transaction Represents Initial Residential Investment by RMR

NEWTON, Mass.--(BUSINESS WIRE)-- The RMR Group (Nasdaq: RMR) today announced that it has acquired The Ridge at Lowry, a 240-unit garden-style apartment community located at 10000 E. Alameda Avenue in Denver, Colorado, for a purchase price of $70.0 million. The property will be rebranded as ARIUM at Lowry under RMR’s consumer-focused brand, ARIUM, and will undergo extensive interior and exterior renovations.

RMR has a nationwide residential investment and operating platform with approximately $5.3 billion of assets under management. With this acquisition, RMR expands its Denver residential presence to nearly 800 units in a market that continues to feature favorable demographics and strong rent growth.

Rob Lester, a Senior Vice President of RMR who heads RMR’s multifamily acquisition team, made the following statement:

“We have strong conviction in the long-term trends favoring the U.S. housing sector. We believe that our micro-market data analysis and high performing operating platform enable us to identify unique value add opportunities. Located in Denver’s Lowry neighborhood and situated between the highly coveted downtown Denver and Cherry Creek/Centennial sub-markets, we believe ARIUM at Lowry will offer superior access to public amenities and an improved, tenant-centric living environment. With limited new supply within the surrounding two-mile radius, RMR plans to deliver attainable living options in Lowry and contribute to the community’s growth and prosperity.”

The acquisition was funded with proceeds from a $46.5 million mortgage loan with a 5.34% fixed interest rate and an interest-only five-year term and cash on hand.

About The RMR Group

The RMR Group is a leading U.S. alternative asset management company, unique for its focus on commercial real estate (CRE) and related businesses. RMR’s vertical integration is supported by nearly 1,100 real estate professionals in more than 35 offices nationwide who manage over $41 billion in assets under management and leverage more than 35 years of institutional experience in buying, selling, financing and operating CRE. RMR benefits from a scalable platform, a deep and experienced management team and a diversity of direct real estate strategies across its clients. RMR is headquartered in Newton, MA and was founded in 1986. For more information, please visit rmrgroup.com

WARNING REGARDING FORWARD-LOOKING STATEMENTS

This press release includes forward-looking statements that are within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws that are subject to risks and uncertainties. These statements may include words such as “believe,” “could,” “driving,” “estimate,” “expect,” “goal,” “intend,” “may,” “plan,” “project,” “seek,” “should,” “will,” “would,” “considering,” and negative or derivatives of these or similar expressions. Forward-looking statements include, without limitation, statements regarding our business strategy and related benefits, our performance, plans, expectations and objectives and our ability to capitalize on additional growth opportunities. Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties and are cautioned not to place undue reliance on these forward-looking statements. Actual results may differ materially from those currently anticipated due to a number of risks and uncertainties. For example, there can be no assurance that this acquisition will provide a successful value opportunity for RMR Residential or that RMR Residential will successfully renovate and operate ARIUM at Lowry, successfully deploy equity capital, execute on additional residential acquisition opportunities or create significant value for investors. These factors should not be construed as exhaustive and should be read in conjunction with other cautionary statements that are included in RMR’s periodic filings. The information contained in RMR’s filings with the Securities and Exchange Commission (“SEC”), including under the caption “Risk Factors” in its periodic reports, or incorporated therein, identifies important factors that could cause differences from the forward-looking statements in this press release. RMR’s filings with the SEC are available on its website and at www.sec.gov. You should not place undue reliance on forward-looking statements. Except as required by law, RMR undertakes no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240801352089/en/

Christopher Ranjitkar

Vice President, Marketing & Corporate Communications

(617) 219-1473

Source: The RMR Group Inc.

FAQ

What property did The RMR Group (RMR) acquire in Denver?

The RMR Group acquired The Ridge at Lowry, a 240-unit garden-style apartment community located at 10000 E. Alameda Avenue in Denver, Colorado.

How much did RMR pay for the Denver multifamily property?

The RMR Group paid $70.0 million for the acquisition of The Ridge at Lowry apartment community in Denver.

What is the new name of the acquired property?

The property will be rebranded as ARIUM at Lowry under RMR's consumer-focused brand, ARIUM.

How did The RMR Group finance the acquisition of ARIUM at Lowry?

The acquisition was funded with a $46.5 million mortgage loan with a 5.34% fixed interest rate and an interest-only five-year term, along with cash on hand.

What are RMR's plans for the newly acquired Denver property?

RMR plans to undergo extensive interior and exterior renovations and deliver attainable living options in the Lowry neighborhood, contributing to the community's growth and prosperity.