May 18, 2016 | Investors Still Like The Look of Multifamily | By Brian J. Rogal | GlobeSt.com
CHICAGO—Redwood Capital Group, LLC, a Chicago-based multifamily investment firm, closed eight multifamily investment transactions during the first quarter of 2016 with a total value of more than $404 million. The transactions include both acquisitions and dispositions, and company officials say all this activity shows there is opportunity for both buyers and sellers of value-add multifamily properties.
“We are tactically taking advantage of certain circumstances when we sell assets,” Redwood partner Dave Carlson tells GlobeSt.com. For one thing, “there is a lot of interest in value-add properties,” the sector Redwood focuses on, and in some markets the company has been able to secure healthy premiums which justify selling. But there is also a lot of potential in buying other, quite similar properties, most of which were built in the 1980s and 1990s.
“These are not urban lifestyle properties,” he adds. “We’re focused on people that really need a home.” And the renter-by-need market for has benefitted tremendously from the steady wage and job growth that is occurring in many regions of the US. Furthermore, the decline in home ownership rates indicates that the country will continue to have more than enough renters to occupy existing units.
Headed by Carlson and partner Mark Isaacson, Redwood owns and operates 32 properties totaling almost 10,000 units in multiple markets throughout the Midwest, Southeast and Southwest. In addition, during the second quarter the firm plans to acquire three properties with a total of 620 units for a total of more than $77 million, and market two more assets for sale covering a total of 646 units.
Whether Redwood buys or sells depends on the state of the local market and the different needs of their various capital partners. Carlson says the company is more inclined to sell off properties in metro areas, such as Raleigh-Durham, where headwinds have begun to blow. But when it comes to places like Atlanta, Tampa and Minneapolis, all of which have “very significant employment growth and wage growth,” Redwood looks to buy.
What makes Carlson especially hopeful about the multifamily sector is that many of today’s renters don’t plan on buying homes any time soon. But they do want to see owners make an effort and give residents “a real sense of home.” Redwood plans to add amenities such as outdoor kitchens and internet cafes to their acquisitions, so “people feel like we are creating a community for them,” and not just a place to rent.
Redwood’s first-quarter dispositions include:
- Woodlands of Crest Hill, a 730-unit apartment property located at 1615 Arbor Ln. in Crest Hill, lL.
- Fountains at Stone Crest, a 400-unit apartment property located at 1 Fountainhead Dr. in Westmont, IL.
- Lakes at Fountain Square, a 384-unit property at 500 Lakehurst Rd. in Waukegan, IL.
The Redwood team overseeing the above three transactions included Tammy Kelly, senior vice president, asset management, and Courtney Crowder, senior associate. Redwood was represented in all three transactions by the HFF team of Sean P. Fogarty, managing director and Marty F. O’Connell, managing director.
- Sloan’s Lake, a 192-unit apartment property located at 6792 W. 19th Pl. in Lakewood, CO. The Redwood team of Tammy Kelly and Courtney Crowder was represented by the CBRE team of Dan Woodward, senior vice president and David Potarf, senior vice president.
- Lenox at Patterson Place, a 292-unit property located at 100 Rose Garden Ln. in Durham, NC. The Redwood team of Tammy Kelly and Courtney was represented by the CBRE team of Phil Brosseau, executive vice president, and Kevin Kempf, senior associate.
Redwood’s multifamily acquisitions in the first quarter include:
- Clairmont on the Green, a 228-unit property located at 600 Starkey Rd. in Largo, FL, was acquired in a joint venture between Redwood and an institutional investor. The Redwood team of Kristina Lynn, assistant vice president, acquisitions and Courtney Crowder handled the transaction, which was an off-market deal that involved no brokers.
- Southwind Village, a 320-unit property located at 15001 Greenhaven Dr. in Burnsville, MN, was acquired in a joint venture between Redwood and an institutional investor. The Redwood team of Bill McDougall, vice president, acquisitions, Kristina Grants, assistant vice president, asset management and Courtney Crowder was represented by the CBRE team of Keith Collins, senior vice president, and Abe Appert, senior vice president.
- Hampshire Hill, a 534-unit apartment property located at 10660 Hampshire Ave S. in Bloomington, MN, was acquired in a recapitalization that was also a joint venture between Redwood and an institutional investor. The Redwood and CBRE teams on the Hampshire Hill deal were the same as for Southwind Village.
Although Redwood will launch renovations at its new properties, Carlson cautions that these changes can’t be followed by $300 per month boosts in rent. The population in such properties is willing, however, to pay a modest premium for upgrades. “We have to be very diligent on how we approach our acquisitions.”