In December 2017

By David Dykes

Steve Bell, left, handed off the chief executive title at Bell Partners to his son, Jon, in 2016, which marked the 40th anniversary of the apartment development company. Lili Dunn joined in 2010 as chief investment officer and was named president last year. Photo by Bell Partners

Few, if any, North Carolinians have owned more apartments over the last 40 years than Steve Bell. Now, with apartment living enjoying near unprecedented popularity, the Greensboro investor’s company has the capacity to buy more than $1.7 billion in rental properties. That involves leveraging a $600 million fund completed in June, marking the company’s sixth such pool.

All of the institutional investors involved in the previous Bell Partners fund, and more than 80% of participating high net-worth individuals, agreed to put money into the latest round, says Lili Dunn, the company’s president. A willingness to reinvest is typically a sign of satisfaction. “Along with them, we added five new institutional investors into the fund,” she says. “So we are thrilled with the successful finish for [the fund] and we are working hard to deploy it carefully and successfully.”

Investors salivate about apartments for good reason: A decade after the housing bust, more U.S. households are headed by renters than at any time since at least 1965, according to the Pew Research Center. While the number of households in the U.S. grew by 7.6 million from 2006-16, homeownership remained relatively flat. About 65% of households headed by people under 35 were rentals, up from 57% in 2006.

That’s sweet music for Bell, 72, who started his business in 1976 with eight small apartment complexes and shopping centers. Privately held Bell Partners is now among the 15 largest U.S. apartment operators with more than 60,000 units across 13 states and the District of Columbia. While it renovates many apartments, it doesn’t develop or build new complexes. It now has 1,500 employees.

“I knew as a college kid that I wanted to go into the investment real-estate business,” says Bell, a UNC Chapel Hill graduate whose father was a Raleigh oral surgeon. After serving in the Army Reserve, Bell took a mortgage banking job and later sold investment properties for a small Greensboro firm.

Bell initially approached doctor and lawyer friends of his father — “my friends didn’t have a lot of money”— and convinced 10 to 15 to put up a combined $2 million to buy older apartment properties with fewer than 100 units in smaller towns such as Elkin, Hickory, Lenoir and Fort Valley, Ga. He also put his own money in each deal.

Over the years, the company branched out to buy shopping centers, including Charlotte’s Cotswold Village, which it owned between 2002 and 2009. It also developed and bought several senior-living facilities in Florida and the Carolinas. Among his first real-estate mentors, Bell says, was the late McKibben Lane, a president of a Greensboro yarn manufacturing company who later worked in commercial and industrial brokerage.

Bell gradually bought bigger, more prominent complexes, and the company’s average acquisition is now about $70 million compared with $4 million in 1976. Bell had completed $645 million in multifamily purchases this year through October, including a 300-unit community in Annapolis, Md.

Bell credits his son, Jon, 45, with recognizing the need to narrow the company’s focus to strictly apartments. He joined his father in 2001 after working at New York-based Lend Lease Real Estate Investments and Charlotte-based Faison Associates. In 2009, Steven D. Bell & Co. became Bell Partners, and a year later fortified its leadership team by hiring Dunn. She had spent 20 years in the industry, most recently with AvalonBay Communities, a publicly traded apartment real-estate investment trust. Jon’s brother, Durant, 38, is the company’s executive vice president focusing on new business development.

The company has sold its senior-housing holdings and most of the legacy commercial assets, preferring to focus on its multifamily industry expertise, Dunn says. Its investor pool includes pension funds, insurance companies and endowments based in the U.S., Canada and Europe. More than 800 individuals also have invested with Bell.

In September 2016, Bell created a separate partnership with a German investment company, Hansainvest, which wants to buy U.S. residential properties. In its first year, the venture has spent $112 million for projects in Atlanta and Denver with plans to invest another $200 million next year. High prices for properties have slowed the group’s pace because “it is challenging to find investment opportunities that meet our return objectives,” Jon Bell says.

Indeed, boom times don’t last forever, and Jon Bell expects annual revenue growth in the apartment sector of 2% to 4%, down from the 5% to 7% pace of recent years. Investors are likely to earn 11% to 12% returns in the next few years, lower than the high double-digit gains of the last few years but still impressive. “The fundamentals and demographics still look really good long term for the apartment sector.”

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