Contrary to common responses to the COVID-19 pandemic, sectors of the real estate industry have been booming over the past 14 months. As investors became filled with fear amid the changing dynamics of the U.S. economy, they turned to real estate for a secure investment. However, with such a heightened sense of awareness of the real estate market, it has been challenging for investors to leverage their position and improve their bottom line. Only those with a strategic approach - one that understands and adapts to the U.S. economic platform - have been able to thrive in such a chaotic environment.
Real estate mogul Michael Patrick Carroll, founder and CEO of CARROLL, is one investor who has proven that opportunity exists everywhere, as long as you know where to look.
CARROLL is a privately held real estate company headquartered in Atlanta, GA. Founded in 2004, the firm focuses on multifamily communities, including acquisitions, property and asset management services, and fund management. Since its inception, CARROLL has raised more than $2.7 billion of equity through company-sponsored funds and joint ventures; it has successfully purchased, developed, or sold more than $12 billion of real estate; and it has overseen more than $250 million of construction management for both its owned and fee partners. It currently manages more than 28,000 multifamily units across seven states throughout the country.
In a recent report, M. Patrick Carroll delved into the success of CARROLL's Q1 activity in 2021.
"We are pleased to announce our strong entrée into 2021 within every division of our company," he said. "We have dedicated significant resources to initiatives that [create] additional value for our stakeholders and maintain our progressive position in the multifamily investment and management sector, further providing great returns for our investors and partners."
Numerous factors have contributed to the company's profitable first quarter. Here's a glimpse into what the company's CEO attributes this success to.
CARROLL Expanded Its Executive Team
As unemployment rates have hit an all-time high, CARROLL has focused on growth. The company leveraged its position, which required the addition of new members to the executive team.
Two industry veterans, Brett Richards and Melanie Johns, both joined the firm. Richards now serves as vice president of investments, bringing 17 years of direct investment and portfolio management experience focusing on multifamily portfolios. Johns now serves as chief financial officer, bringing 20 years of real estate world experience with her, including working on CARROLL's financial team.
M. Patrick Carroll Executed Four Notable Transactions
Transaction velocity has suffered since the beginning of the pandemic. Only those with an in-depth understanding of market trends have found success in closing deals. CARROLL has executed four transactions since the start of the year.
The first transaction was the firm's acquisition of the rebranded Tortuga Pointe by Arium, acquired through Carroll Multifamily Venture VI, LP. This 295-unit multifamily community, located in St. Petersburg, FL, was an opportunity for the firm to acquire a high-quality asset at an attractive cap rate. The firm plans to renovate the interior of the building and its units, as well as the exterior.
Reflecting on the acquisition, CEO M. Patrick Carroll recalled, "The Tampa-St. Petersburg MSA [metropolitan statistical area] has performed exceptionally well throughout the pandemic and is poised to continue its position as one of the nation's leaders in both population and job growth." He continued, "Tortuga Pointe's central and highly visible location on Gandy Boulevard provides residents with convenient access to all of the metro's largest employment, retail, and entertainment centers. We are thrilled to add another great asset to our portfolio in the dynamic Tampa market."
In addition to the Tortuga Pointe acquisition, CARROLL executed the disposition of three of its multifamily properties - ARIUM Pinnacle Ridge in Raleigh, NC; ARIUM Towne Lake in Houston, TX; and The Marin by ARIUM in Fort Lauderdale, FL. Each sale directly aligned with the firm's investment model, and it was able to leverage the COVD-19 real estate environment to meet its investment goals.
ARIUM Pinnacle Ridge, a 350-unit community, and The Marin by ARIUM (previously known as Grove East in Plantation), a 223-multifamily apartment, were both purchased as value-add assets.
Since the acquisitions, CARROLL has completed both interior and exterior renovations on both properties, repositioning the assets for the sale. Renovations have included updating the pool deck, fitness center, and playground area; repainting the property; adding amenities such as a dog park and sports facilities; and renovating all units with stainless steel appliances, fresh paint, faux wood plank flooring, new lighting, and more (varied by asset).
Regarding the sale of The Marin by ARIUM, CARROLL founder Michael Patrick Carroll reported, "The Marin presented an excellent opportunity to expand our South Florida portfolio based on its highly visible and central location with value-add potential." He continued, "We were able to acquire the property for an attractive basis at a meaningful discount to replacement cost. We elevated the community through strategic enhancements to amenities and unit interiors, bridging the discount in the property's rents relative to nearby competitive properties - ultimately creating value for our investors."
ARIUM Towne Lake, a 366-unit property, was purchased in 2013 as a long-term hold project. Following a refinance in 2018, the firm was able to reduce its cost basis in the deal and return partial capital to investors. Selling at such an optimal time, the property was able to achieve solid returns for its investors.
Historically, CARROLL has successfully exited 92 assets valued at more than $4.4 billion, producing an average internal rate of return (IRR) and multiple of 26% and 1.7x, respectively. The most recent assets sold were valued at more than $170 million combined, bringing to the firm new opportunities for its future portfolio.
Third Party-Platform Services
CARROLL actively provides property management services. In addition to the recent acquisitions and dispositions, M. Patrick Carroll's team, via CARROLL's ARIUM Living brand, took over the management of and rebranded La Rosa on Richmond by ARIUM, an apartment community in Houston, TX. Its focus on resident-driven management, advanced marketing strategies and innovative technology will help the company reduce costs and improve residents' experience. This addition to the portfolio now brings the firm's current third-party pipeline to more than 2,000 units.
Meeting Market Trends
Contributing to the 2021 success of CARROLL has been the CEO's ability to recognize market trends and adopt an appropriate business model. The COVID-19 pandemic has introduced a new work-from-home concept that industries must adapt to in order to ensure future success. Michael Patrick Carroll and the CARROLL team foresaw this shift and redirected its efforts to support the influx of remote residents. The experienced CEO recognized that investors must provide the following amenities to meet consumer demand: built-in wi-fi, strong cell reception, dedicated workspace, smaller units designed for single renters, designated parking, pet-friendly communities, and lease flexibility.
Embracing Diversity and Continuing the Commitment to Positive Company Culture
Success in today's environment requires diversity and positive company culture - two facets that entrepreneur M. Patrick Carroll has incorporated into his company's core values. He continues to promote these efforts in 2021 with notable actions such as signing the CEO Action Pledge to Further Diversity & Inclusion and participating in company recognition awards.
Signing the pledge was an additional effort by CARROLL's Diversity & Inclusion Council. In taking the CEO Pledge, Michael Patrick Carroll has committed to making the CARROLL workplace a trusting environment; implementing and expanding unconscious bias education; creating, sharing, and evolving strategic inclusion and diversity plans with management teams; and creating accountability systems within the company to track progress and share updates with other pledge members to catalog effective programs and policies.
CARROLL also hosted its virtual Leadership Summit in Q1, where CEO Michael Patrick Carroll honored his employees' hard work. Teams participated in daily programming activities, and the event recognized the CARROLL Circle of Excellence winners for 2020. The week also marked the launch of the CARROLL Community Impact initiative, a philanthropic charge for each property to focus on making a connection and impact within a 5-mile radius. Following the event, the firm's ARIUM brand also launched its spring campaign, Together We LIVE, intended to drive one simple message of hope during these trying times: We've experienced all of this together as a collective.
Thriving Through the Pandemic
CARROLL's Q1 multifamily portfolio performance saw an average physical occupancy rate of 94.7%, with annualized revenue growth of more than 4%. Its several hundred-thousand square feet of retail remained 98.4% leased - impressive stats considering the pandemic. After a productive Q1, the firm is well-positioned to head into a successful second quarter. It will continue to focus on its current initiatives, as well as seek investment opportunities within its desired market.
