Capri Venture Buys 11 Apartments for $325M

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CHICAGO-A joint venture between locally based Capri Capital Partners LLC, Capri Select Income II fund and an undisclosed “large institutional nationwide investor” has acquired a portfolio of 11 garden-style multifamily properties for $325 million, says Louis Hoyes, president and chief investment officer for Capri. The portfolio was acquired from Whiteco Residential, based in Merrillville, IN. A cap rate was not disclosed.

The portfolio has a total of 2,377 units in nine cities. “This was an attractive assemblage of 11 properties in six major markets in five states,” Hoyes says. The portfolio consists of Adobe Ranch in Henderson, NV; Canterra Apartments in Palm Desert, CA; Dominion Town Center in Keller, TX; Lakes of Stone Glen in Keller, TX; Lexington at Champions in Houston; Lost Creek Apartments in Grand Prairie, TX; Middlebrook Farms Apartments in Orlando; Monterey Apartment Homes in Littleton, CO; Stone Castle in Winter Park, FL; Stone Mountain in Northglenn, CO; and Dominion Post Oak in Houston. The portfolio occupancy rate is 95%, Hoyes says. All of the complexes had been constructed since 2000, he says.

Although the properties were constructed recently and have high occupancy rates, there are value-add opportunities to “keep them competitive and keep garnering higher levels of rent growth,” he says. Whiteco “has worked up a plan to upgrade the level of some of the finishes,” such as the “modernization of the kitchens and bathrooms,” he says. The cost of the upgrades is not expected to exceed $2,500 per unit, Hoyes tells GlobeSt.com.

These six metropolitan markets are expected to have strong projected growth in minorities, particularly the Hispanic and Asian populations, in the next 10 years, Hoyes says. “When you have strong forecasted population growth as well as good employment in these markets and not much currently being developed, you have a tightening of the market,” he says, meaning they will “see better than average rental growth.” Hoyes would not give a range for rental rates but said that the properties are “affordable” units. “They are not high-priced, so that is the reason why they are at a 95% or better occupancy,” he says.

The acquisition also included two development sites with the option to acquire a third site which could be developed for an additional 700 units. Hoyes would not disclose the size of the parcels or where they are located except to say that they are adjacent to the apartment properties. “They do land us the opportunity for subsequent phases. But, we are evaluating that and no plans are currently in place,” he says.Whiteco will continue to handle leasing and management of the apartment complexes in the portfolio. The acquired portfolio is the sale of the bulk of Whiteco’s holdings. Whiteco has 16 multifamily properties in operation or development, according to its website. Properties in La Quinta, CA; Danbury, CT; and Mill Creek Apartment Homes in Orlando were not included in the sale, in addition to a 200-unit apartment community scheduled to open next year in Oak Park, IL.

Capri had an existing relationship with Whiteco and the portfolio was “an off-market transaction,” Hoyes says. The joint venture was interested in the portfolio because “we knew the owner/builder, had done business with them in the past and the quality of the produce,” he says. Capri and the Capri Select Income II fund plan to hold the properties for the life of the fund, Hoyes tells GlobeSt.com. Capri announced in March 2005 that it had raised $312.5 million for the fund. The fund is expected to have a term of 10 years, he says. Hoyes tells GlobeSt.com that he believes the institutional investor plans on holding the portfolio long-term, beyond the length of Capri’s fund.