Real Estate Finance & Investment | June 20, 2016 | By Samantha Rowan
Redwood Capital believes there are strong opportunities to provide apartments for Millennial and Baby Boomer renters and is seeking value-added opportunities throughout the U.S. “It’s harder than ever to buy a single-family home,” said David Carlson, co-founder. “Millennials are a massive cohort [and] many…are plagued with school debt, or don’t have money saved up for a down payment. And Baby Boomers are downsizing in massive amounts.”
The company closed on eight transactions during the first quarter of 2016 with a value of about $404m. Three of these transactions are acquisitions, one is a refinancing, and the remainder are dispositions. Recent deals are located in markets that include Atlanta, San Antonio, Chicago, Tampa, and Denver. “We are optimistic that we will get control of a portfolio within the next week,” Carlson added. “The acquisitions highlight our view that barring any significant shock, the runway for multifamily has a long way to go. We are approaching with cautious optimism.”
Redwood is targeting renters-by-need. “We create an enhanced sense of living for people who can’t afford to have or improve their own homes,” said Carlson. Redwood aims to complete modest renovations to its communities that will allow it to charge modest premiums for rent. “The demographic cohort is very accepting of premiums because of the overall improvement in community they’ll experience,” he said. “A pride of ownership makes renters amiable to a moderate increase in rents.”
Renovations include adding amenities such as enhanced fitness facilities, clubhouses, and co-work spaces for residents who work from home. An apartment renovation takes anywhere from three days to two weeks if fully gutted, then the unit is put back onto the market with rents increased by about $50-$125 per month. Rents start at $800 to $1,000 per month.