BALTIMORE-At the end of 2011, Continental Realty Corp., a local commercial real estate and multifamily company, began raising capital for a new fund called CRC Fund III LP, with the goal of securing $100 million. Nine months later, the finish line is in sight, with the company having closed on approximately $78.6 million in private equity. It has also acquired three assets for the fund.
The fund’s leverage will be about 65%, which means it will likely buy 10 to 20 assets all together, J.M. Schapiro, CEO of Continental, tells GlobeSt.com. The investment period is three years. The fund’s focus is on value-add multifamily and retail properties or notes in the Mid-Atlantic and Southeast.
Certainly Continental is not alone in its pursuit of such assets, but Schapiro says he is seeing more potential deal flow now than he did three or four years ago. “Over the course of our 52 years in business," he says, "we've developed a lot of contacts, and more often than not we're being approached by lenders with properties they're getting ready to foreclose on.”
The first asset the company bought for this fund was a foreclosure, he says. The Shops at Verandah is a 73,000-square-foot neighborhood shopping center in Fort Myers, FL. It is anchored by a Publix Super Market and is currently 91% leased. Continental acquired the note at a discount from the lender for $13.5 million. The fund's other Florida holding is a 30,500-square foot shopping center in Royal Palm Beach fully leased by Office Depot and Mattress Firm. It traded for $5.05 million.
The third asset, in Northern Virginia, is Parkwood Court, a 189-unit apartment community located in the Alexandria submarket. It traded for $23 million or $121,000 per unit. The fund acquired this asset about eight months ago and since then has brought the occupancy rate to more than 96%, from 84% at the time of the acquisition.
The investors thus far have been a mix of high net-worth individuals, investment advisors, institutional investors, foundations and endowments from around the country. Meanwhile, Continental is vetting hundreds of other opportunities in its target regions.
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
