In 2018, CREC acquired Carmel Woods Apartments, a 314-unit, Class-B multifamily community located in the north-Indianapolis suburb of Carmel, Indiana.
Carmel, arguably the most desirable suburb within the Indianapolis metropolitan area, continues to receive accolades from various publications, websites, pollsters, etc. In 2018, Money Magazine ranked Carmel as the third-best place to live in the nation. Carmel has added approximately 50,000 residents over the past twenty years and has transformed from a low-density community into a high-density city with a well-defined city center and an abundance of amenities and attractions.
Carmel Woods is strategically located less than a mile north from Carmel’s City Center and within half a mile south of Clay Terrace, Indiana’s first outdoor lifestyle center that is home to over 80 stores and 20 dining/entertainment establishments. Carmel Woods is situated on over 30 acres of land with a natural setting including treescapes and greenery, providing residents with a secluded environment. The community has direct access to major highways and is less than a mile away from over one million square feet of Class-A mixed-use space. The property also offers residents a wide assortment of amenities, such as volleyball, tennis and a community garden. Carmel Woods has direct access to the Monon trail, a paved biking, walking and running pathway that is one of the most popular outdoor amenities in central Indiana.
Carmel Woods was purchased for $34.0 million, or $108k per apartment. Based on this purchase price, the entry capitalization rate (the yield over a one-year time horizon assuming the property is purchased without debt) was 6.0% in a market where similar properties were trading in the 5.25-5.75% range, according to CBRE. Post-acquisition, a “value-add” renovation program was implemented at the property with the goal, post-repositioning, to charge rental rates just below competitor renovated properties and to continue to target a working-class renter who desires to live at a high-quality community in close proximity to schools, jobs, retail and entertainment. By the end of the third quarter of 2020, a total of 185 units (60% of total units) had been renovated since acquisition as part of the $1.8 million capital expenditure plan, with an average rent premium of $180 per month.
The city of Carmel has continued to thrive, with RealPage reporting a 23% effective rent increase from April 2020 through April 2022, and Money.com ranking the city second highest on their list of “50 Best Places to Live in the United States” in 2021. A refinance took place through Sun Life Financial with a fixed interest rate of 4.37% and interest only for the first three years of the ten-year term. Refinance proceeds allowed CREC to provide $2.6 million for additional higher-end capital improvements and return 20.5% of investor capital. As of September 30, 2022, Carmel Woods was achieving $272 average increases on the first 28 leases signed over the last year, while maintaining over 95% occupancy.
- Asset Location: Carmel, IN (Indianapolis, IN)
- 314-unit multifamily apartment community
- Investment Date: December 2018
- CREC Total Investment: $13.1 Million
- Investment Type: Multifamily acquisition
- JV Partner: CREC affiliates own 100% of the property