WILMINGTON — A financial watchdog group found private equity firms are buying a growing share of multifamily units, including thousands of units in Wilmington. This comes six years after United Nations experts criticized private equity’s investment model for contributing to the affordable housing crisis.
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Private Equity Stakeholder Project released a report earlier this month illuminating private equity firms own at least 10% of the country’s apartment units, with higher percentages in metropolitan areas and some states, including North Carolina. PESP argues the firms have exacerbated the housing affordability crisis with large rent hikes, aggressive eviction practices, hidden fees, and poor maintenance
“In recent years, private equity firms have significantly increased their presence in the housing market, reshaping the landscape of homeownership and rental housing,” PESP wrote in its report. “These investment companies have capitalized on rising housing demand and limited supply by purchasing large volumes of single-family homes, apartment complexes, and manufactured housing communities.”
Private equity firms use loans and pooled capital from investors to buy up companies, real estate, and other assets before selling them to make a profit. The firms’ ownership is private, meaning it isn’t listed on the stock exchange.
“In real estate, the business model employed by many private equity firms is simple,” PESP’s report indicated. “They buy an apartment building, increase the rent, and charge additional fees to tenants in order to increase the cash flow at the property and thus increase the building’s value, and then often sell it within a few years for a profit.”
An October 2024, CBRE report found Wilmington had a total of 18,648 multifamily units, in addition to 6,291 prospective units, 2,216 planned units, and 1,141 under construction. PESP identified 3,798 Wilmington multifamily units owned by private equity. A PESP spokesperson told Port City Daily the report relied on limited data from Yardi Matrix and LexisNexis and noted the total number in Wilmington is likely significantly higher. The group plans to regularly update its report.
Almost all local private equity-backed acquisitions in the report took place within the last five years, including Clarion Partners’ 2022 purchase of the 360-unit Cape Harbor, 364-unit Mill Creek, and 288-unit Clear Run for over $100 million.
The United Nations has criticized major private equity firms in recent years for contributing to the global housing crisis. UN experts wrote a 2019 letter to Blackstone expressing concerns it and other investment firms violated international human rights laws in the process of converting homes into financial instruments at a global scale.
“Properties that are deemed ‘undervalued,’ which generally means affordable to those living there, are being purchased en masse, renovated, and then offered at a higher rental rate, pricing tenants out of their own homes and communities,” UN experts wrote. “Landlords have become faceless corporations wreaking havoc with tenants’ right to security and contributing to the global housing crisis.”
Blackstone is one of six property management firms included in the Department of Justice’s national antitrust suit against real estate software firm RealPage. Attorney General Jeff Jackson and nine other states’ attorneys general allege the companies coordinated with each other to artificially raise rents.
Blackstone owns The Helmsman, a 262-unit luxury complex in Wilmington. Private equity-backed Greystar — also named in the DOJ suit — manages over 3,000 units in the tri-county area.
Starwood Capital — which PESP lists as the third-largest apartment owner in the U.S. — owns at least 555 units in Wilmington, including Cypress Pointe, The Quad, and One Midtown. PESP’s report cites a 2023 Washington Post investigation that found Starwood Capital increased rent at some properties throughout the country by more than 30% annually.
Brookfield, the sixth largest PE apartment owner, has the 273 unit Flats on Front complex and manages Riverlights, a master-planned community expected to have more than 3,000 units at buildout. Brookfield is named as a co-defendant in RealPage class action suits and included in three Senators’ probe of 13 corporate landlords’ use of its software in September. The company also owns Independence Mall.
The eighth largest private equity multi-family unit owner, Monarch Investment and Management Group, owns 458 units in Wilmington, including the Creek at Forest Hills.
Tips or comments? Email journalist Peter Castagno at peter@localdailymedia.com.
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