Despite the specter of house sales being at their lowest level for more than a decade, one sector of the property market is holding strong – the rental market.
And that’s exactly what private equity real estate firm Carmel Partners has focused on in the acquisition of more than $100 million (€66 million) of investments in California and Hawaii, totaling 826 rental properties.
The San Francisco-based firm has just announced the latest investments to its Carmel Partners Investment Fund II, which closed in May 2005 on $400 million.
The properties are located in strong rental markets including San Francisco’s Nob Hill, Hawaii’s Chinatown and near the southern edge of the UCLA campus in Los Angeles and are exactly where Carmel chief investment officer Chris Beda said he “like[d] to be.
“Despite the recent turmoil in the housing and capital markets, we have continued to find investment opportunities with rock solid fundamentals,” he said in a statement.
The acquisitions included the $40.8 million purchase of the four-property Westwood Collection, a 153-unit of student housing on the edge of the UCLA campus and the acquisition of the $71.7 million affordable housing complex at Kukui Gardens in downtown Hawaii. Both deals were closed in December 2007.
Carmel also closed on the 19-story Grosvenor Suites in San Francisco’s Nob Hill in January 2008 in a joint venture with the current owners. The value of the transaction was not revealed. Redevelopment work at the three properties will take between 12 and 24 months.
Talking to PERE, Beda said the Kukui Gardens deal was one where the company had worked closely with state officials and tenants – to ensure half the development remained affordable.
Originally contracted to purchase all 857-units in the development, Carmel finally acquired 468-units, with the remaining properties being sold to a nonprofit organization representing the tenants.
Carmel said the coalition of public and private interests should serve as a model for future affordable housing projects across the US. “One of the main political objectives in the state of Hawaii is how to preserve affordable housing and it’s one of the state’s main initiatives as it relates to housing. It was a known part of their objective and we set out to put together a deal that preserved affordable housing,” he said, adding that Hawaii was one area where demand for large luxury condos had priced many people out of the market.
“Most available multifamily land has gone to build higher-end owner-occupied condominiums so because of the way economic constraints work it’s very difficult to build even market-rate apartment buildings.”
Carmel, founded in 1992 by Ron Zeff, focuses on investments in the multifamily sector in Washington DC, Denver, Seattle, California and Hawaii.