In 2018, CREC partnered with Barratt Asset Management (“BAM”) to acquire 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.
CREC and BAM commenced the execution of a “value-add” program 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.
CREC and BAM purchased Carmel Woods for $34.0 million, or $108k per unit. 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. As part of this transaction, CREC and BAM assumed the in-place Fannie Mae loan, which accounted for 56.3% of the capital structure and involved a fixed 4.37% interest rate over the remaining 11 years of term. The Carmel Woods transaction involved both a cap rate that was above what industry experts consider “market” and an interest rate that was below what we could have achieved if we were to place new long-term fixed rate debt on the property at the time.
- 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: Barratt Asset Management (“BAM”)