Source: REAL ESTATE ALERT: September 23, 2020
Muti-family investment shop Redwood Capital has tapped a former CA Ventures executive to lead an effort to double the firm’s assets – in part by shifting its focus from value-added to core-plus plays.
Bob Flannery joined Redwood this month in the newly created position of Executive Vice President and Chief Operating Officer. In that role, Flannery will focus on raising the profile of the Chicago firm among institutional investors while also accelerating a shift in Redwood’s investment strategy away from a traditional emphasis on suburban workforce housing.
Flannery spent the past five years at CA – most recently as president of its multi-family unit. At Redwood, he’s tasked with implementing a five-year plan aimed at roughly doubling the firm’s assets to $3 billion. He’s also been given responsibility for Redwood’s property-management arm, Redwood Residential, which Flannery predicts will double its portfolio to 10,000 units in two years.
“This [Redwood] is already a best-in-class organization, and I have tremendous respect for the history and existing culture of the firm,” Flannery said.
Since it was founded in 2007 by David Carlson and Mark Isaacson, Redwood mainly has invested in workforce housing in suburban markets. To date, it has acquired more than 70 properties totaling 23,000 units – mostly older stock requiring substantial renovations and repositioning. Redwood’s current portfolio consists of about 9,000 units in the South and Midwest.
Amid the economic uncertainty brought on by the pan- demic, however, Redwood is setting its sights on higher-qual- ity properties in eight markets with strong population and employment trends: Atlanta, Austin, Dallas, Denver, Minne- apolis, Phoenix, Raleigh-Durham and Washington/Northern
Virginia. The goal is to position its portfolio to better with- stand recessionary headwinds.
“In the past, we were buying 1980s vintage products and implementing value-add programs to the tune of anywhere from $10,000 to $20,000 per unit and trying to achieve $150 to $250 rent bumps,” Carlson said. “Now, our total expendi- ture will be closer to $2,000 to $7,000 per unit and very lim- ited rent bumps.”
Carlson said he remains bullish on the apartment sector for the long term.
“There is no doubt that there is quite a bit of turmoil and strife as a result of the pandemic and the economy,” he said. “However, the fundamentals of the multi-family sector over the mid- to long-term are extremely strong and well-fortified. We see an enormous demand for suburban apartment com- munities, which is where our focus will be.”
He said that while Redwood isn’t abandoning its work- force-housing strategy, “the lion’s share of our focus will be on higher-quality, newer, suburban core-plus products.”
Carlson added: “If I went out right now and bought a 1980s-vintage deal and tried to do a major, value-add pro- gram, there is a significant amount of risk associated with do- ing that given the current state of the economy.”
Over the years, Redwood has invested nearly $1 billion of equity on behalf of institutional clients including Blackstone, Goldman Sachs, Investcorp, Oaktree Capital and Netherlands – based Rubens Capital.*
Flannery joined CA Ventures in late 2015 as Chief Operating Officer. Later, as President of CA Residential, he embarked on a five-year plan to triple the firm’s multi-family development portfolio to more than $3 billion — similar to the mandate he now has at Redwood.
See the complete Real Estate Alert announcement below.
*Additional clients include State Street Global Advisors, MetLife, Invesco, Heitman and Lubert Adler.