ATLANTA, GA - CARROLL, in partnership with PGIM Real Estate, the $209.3 billion real estate investment and financing business of Prudential Financial, announced the sale of 12 multifamily communities representing 3,564 total units across Florida, North Carolina, and Tennessee for a sale price of $885.5 million. The 12 communities were part of a 2017 acquisition of a 28-community portfolio purchased as the first joint venture transaction between PGIM Real Estate's U.S. core-plus equity strategy and CARROLL.
Included in the sale were: three Wilmington, N.C., communities (Cape Harbor by ARIUM, Clear Run by ARIUM, Mill Creek by ARIUM); three Charlotte communities (Mallard Creek by ARIUM, Northlake by ARIUM, Harris Pond by ARIUM); two Tennessee communities (Williamsburg by ARIUM, Hendersonville, Tenn., and The Club by ARIUM, Antioch, Tenn.); and four Florida communities (Heron Lake by ARIUM and The Vinyards by ARIUM in Kissimmee, Fla.; Lake Pointe by ARIUM in Melbourne, Fla.; Bay Cove by ARIUM in Clearwater, Fla.).
Purchased in 2017 as part of a 28-community workforce housing portfolio - the largest single transaction in the Firm's history to date - these assets represented an opportunity for CARROLL and PGIM Real Estate to provide housing access to an underserved segment of the multifamily market. Strategically located within major growth MSAs, these communities were well-positioned to deliver housing opportunities in increasingly congested and expensive markets. At the time of sale, each of the communities were operating with strong occupancy and healthy growth metrics, paralleling CARROLL's overall portfolio performance.
During its four-year hold, CARROLL and PGIM Real Estate undertook numerous sustainability initiatives to add overall value to the asset. These initiatives included investments in LED lighting to reduce energy consumption by up to 75%; and an investment in water saving devices (aerators, low-flow toilets, and eco-friendly irrigation systems) that equates to savings of more than 50 million gallons each year; and trash diversion and recycling efforts diverting tons of trash from landfills. The savings delivered by these measures was passed along to residents and has been inspiration for additional ESG-related initiatives throughout the portfolio.
The operating philosophy for the assets took advantage of the strong in-place cash flow and implemented light value-add improvements, including the addition of plank flooring on ground floor units and the installation of washers/dryers in all units with connections in addition to performing deferred maintenance programs to further preserve the life of the assets.
Across Portfolio metros, Class B apartments are outperforming all other classes. Many newly constructed and higher-rent alternatives are reaching affordability limits. Moderate-income renters provide a stable revenue base, as they are less likely to move and purchase single-family homes, while having the ability to afford market rent growth. High barriers to entry exist for Class B in suburban locations due to zoning restrictions, land availability, and unattractive economics for new development (i.e. rents do not justify construction costs). At the same time, many of the new jobs being added to the Portfolio's local economies produce moderate income. In the Portfolio's metros, the employment growth rate has been 3.75x higher on average than the inventory growth rate for Class B properties.
"Closing out this portfolio is a major milestone for CARROLL and our investors," said M. Patrick Carroll, Founder and CEO of CARROLL. "These properties were directly aligned with our investment strategy as part of our workforce housing platform that included an early focus on the Sun Belt region and were integral assets in the diversity of our portfolio. We were proud to partner with PGIM to deliver quality housing while maintaining our goal of improving resident life to all of these markets throughout our hold."
"We are pleased with the value that CARROLL and PGIM Real Estate were able to add to the portfolio to improve the quality of living for the residents, while delivering an excellent outcome for our investors," said Darin Bright, senior portfolio manager for PGIM Real Estate's U.S. core plus strategy. "We will continue to pursue investment opportunities in the Sunbelt market where there is a clear demand for affordable housing."