Dive Brief: 

• The RMR Group announced Monday that it has entered into an agreement to acquire 100% of the equity interests in MPC Partnership Holdings LLC, doing business as Carroll, for $80 million. Atlanta-based Carroll provides asset and property management services to 81 multifamily properties with more than 28,000 units primarily across the Sun Belt. 
• The purchase gives the Newton, Massachusetts-based alternative asset management company an opportunity to enter the only major commercial real estate sector in which it does not have a significant presence, according to a press release.
• The transaction further advances RMR’s strategic focus on growing its private capital business, adding approximately $7 billion in assets under management and over 20 institutional partner relationships.

Dive Insight:

With approximately 700 employees, Carroll’s platform combines operations with market knowledge in capital raising, property acquisitions, asset management and property management through its in-house brand, Arium Living. 

Since its founding in 2004, Carroll has executed more than $12 billion in real estate acquisitions and currently has the potential to make multifamily investments in excess of $3 billion in its current general partner fund series. Carroll also brings an advanced technology infrastructure and digital marketing capabilities that RMR said it plans to leverage.

“The Carroll platform is uniquely positioned to continue benefitting from favorable demographic tailwinds in high-growth Sun Belt markets,” said RMR CEO Adam Portnoy in the release. “Additionally, this acquisition will advance RMR’s private capital growth strategy with high-quality global institutional investors and drive continued growth across the combined platform with the potential to make in excess of $3 billion of additional multifamily investments.”

Jim Costello, chief economist for real assets for MSCI, noted that the Carroll aqusition gives RMR exposure to Sun Belt multifamily, as well as diviersification. 

“I wonder if the acquisition fits with a pattern in sector rotation elsewhere in the industry — away from offices to lower capex sectors like apartments and industrial,” he told Multifamily Dive.

Though a number of companies, like Atlanta-based RADCO, have expressed interest in acquiring apartment management firms, transactions have been limited this year.

In January 2022, tech-driven hospitality startup The Guild acquired CREA Management, the property management division of Cypress Real Estate Advisors, which operates 5,000 units in four major markets. Then, in March 2022, proptech provider Alfred reeled in Charlotte, North Carolina–based RKW Residential and its 30,000 units across nine markets in the Southeast. In September, Cupertino, California-based Poplar Homes acquired Chicago-based 33 Realty’s property management, maintenance and leasing division.

Looking ahead

Founded in 1986, RMR’s more than 30 offices nationwide manage over $37 billion in assets under management. 

The transaction is expected to be funded entirely with cash on hand, and the transaction price, excluding contingent earnout consideration, reflects an implied valuation of 11.4x to 13.3x of Carroll’s recurring 2024 EBITDA and 6.2x to 7.3x of Carroll’s recurring 2024 EBITDA adjusted for potential efficiencies.

In the first full year of operations post closing, RMR expects the Carroll platform to generate more than $35 million in recurring fees and approximately $11 million to $13 million of adjusted EBITDA, including $5 million to $6 million of synergies. Post transaction, RMR expects to have no debt and approximately $200 million of cash on hand for further growth.

The transaction, which was unanimously approved by RMR’s board of directors, is expected to close in the fall, subject to customary conditions, primarily obtaining limited partner, joint venture partner and lender consents.