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CHICAGO-David Carlson and Mark Isaacson have teamed up to form Redwood Capital Partners. The firm plans to acquire $300 million in multifamily properties next year, Carlson tells GlobeSt.com.

Last week, Redwood Capital closed on the 730-unit Woodlands of Crest Hill at 1615 Arbor Lane, in Crest Hill, IL from Chicago-based Laramar Group. Sources say it the sale was approximately $49 million. The firm also recently acquired the 228-unit Edgewater at 514 That Way, Lake Jackson, TX from Chicago-based Alliance Holdings LLC, Carlson says. Sources say that price was approximately $19.1 million. The pro forma cap rate is 7.75% and the in place cap rate is 7.25% for Edgewater and, for the Woodlands of Crest Hill, the pro forma cap rate is 6.9% and the in-place cap rate is 6.15%, Carlson tells GlobeSt.com.

The firm will focus on multifamily properties with approximately 80% of the portfolio being value-add properties and the other 20% being tenant-in-common properties, Carlson says. Demand for apartments has been increasing and, "the last few years, have outperformed all other property types and all other asset prices," he says. "In addition, given the turmoil in the residential home market, we saw a slide back from homeowners to apartments."

Redwood Capital plans to have a hold period of between three and five years for the value-add properties and a hold period of about ten years for the tenant in common properties. New York City-based MetLife's real estate investment arm has committed $45 million toward value-add properties and has made an additional commitment for an undisclosed amount, Carlson says. The firm has also raised $5 million from a group of individual investors, he says. The firm will initially focus on urban and suburban markets in the Midwest, Southeast and Sunbelt states. Westdale, based in Dallas, will manage the properties.

Carlson and Isaacson formed the company for a couple of reasons, Carlson says. Carlson had been a VP in acquisitions with Chicago-based Equity Residential and Isaacson had been the EVP and CFO of Alliance Holdings LLC and had previously been the EVP and CFO of Laramar Group. "The two of us have spent a lot of time in larger corporate environments, and felt we could leverage off of that experience and follow something new," he says. "We felt there was opportunity to exploit certain parts of the market that were not being exploited."

Edgewater, which was constructed in 2006, was acquired with 30 tenant-in-common investors. The property has an occupancy rate in the "higher 90s," Carlson says. The average unit size is 950 sf and an average rental rate of $965.

Woodlands of Crest Hill was constructed in 1972 and was acquired as part of the firm's value-add portfolio. The average unit size is 637 sf with rents ranging from $600 to $950. The complex has an occupancy rate of 94%, Carlson says. Redwood Capital plans on spending between $4,000 and $4,500 per unit on renovating the interiors of the units with new cabinets, countertops and appliances in the kitchens and new vanities and tile in the bathrooms, in addition to six-panel doors and lighting packages, Carlson tells GlobeSt.com.

The firm is expected to close in late January on a 384-unit property in Lake County, Carlson tells GlobeSt.com. "It is located near a very large redevelopment of an older retail center," he says, that now has big box retailers like Wal-Mart, an LA Fitness and a Starbuck's, as well as a Holiday Inn. Redwood Capital also is planning on acquiring three properties in Denver and one in Atlanta for its value-add portfolio and properties in Indianapolis, Lexington, KY and Warner Robbins, GA for its tenant-in-common portfolio, Carlson tells GlobeSt.com.

Instant Insights /

New Redwood Capital Firm Has $300M Buy Goal

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