Lauth Group Inc. has re-entered the multi-family sector by buying a large apartment complex in Greenfield—a deal that reflects the company’s new strategy of complementing its traditional development business with acquired properties.
The local commercial real estate developer, one of the largest in the Indianapolis area with 2.1 million square feet under management, is best known for developing Intech Park, Meridian Plaza and Meridian Corporate Plaza, in addition to the Clay Terrace lifestyle center it built with Simon Property Group Inc.
Now, Lauth has bought Bluestone Apartments in the Hancock County community east of Indianapolis. Locally based Paragus Inc. built the 208-unit complex in 2009 and leased and stabilized the property before selling it.
Terms of the Bluestone purchase, which closed Nov. 26, were not disclosed. But industry experts said newly constructed suburban apartment complexes can fetch close to $90,000 a unit, which would work out to about $18 million for Bluestone.
George Tikijian, senior managing director of apartment brokerage Tikijian Associates, which listed Bluestone, said its proximity to growing Greenfield employers makes the property an attractive investment. It’s on North Blue Road near East Main Street and is nearly fully leased.
“There’s a fair amount of white-collar employment in Greenfield due to the Elanco expansion, so they have a lot of professional people living there,” he said. “It’s the nicest apartment property in Greenfield.”
Sales at Elanco, Eli Lilly and Co.’s animal health division, are expected to double from $2 billion to $4 billion in the next five years.
For Lauth, the Bluestone acquisition represents a return to the multi-family industry it abandoned in the mid-1990s following a split with local apartment developer John Hart. The two had teamed to develop Cross Creek Apartments on Georgetown Road, Island Club between Crawfordsville Road and Interstate 74, and The Springs at 86th Street and Township Line Road.
“Strategically, we had looked at acquisitions overall as a part of the real estate business we wanted to pursue,” said Michael Garvey, Lauth’s chief investment officer. “With the Lauth of old, acquisitions were not part of the strategic plan, and now they are.”
An affiliate of the company, Lauth Investment Properties LLC, emerged from bankruptcy reorganization in 2011 and is positioned “very well for the long term,” Garvey said.
The chance to take advantage of deals in the market led Lauth to pursue acquisitions, he said.
“There are opportunities in the acquisition space today that make it very attractive to pursue those,” Garvey said. “It’s primarily driven by asset price. That’s a big driver for us.”
The company in May brought on Daniel Mallon to help lead Lauth’s multi-family and property investment business. Mallon co-founded locally based Vesta Capital Advisors LLC in 2010 and previously was vice president of capital markets for brokerage CBRE’s Chicago area.
As part of its acquisitions effort, Lauth in February 2012 bought The Congressional at 111 Congressional Blvd. in Carmel for $7.1 million. The company moved its own headquarters into the 181,000-square-foot building before selling it to Baldwin & Lyons Inc.
The trucking and auto fleet insurer plans to move from the Landmark Center downtown to The Congressional early next year. Baldwin & Lyons plans to spend $20 million to $30 million to buy the building from Lauth and build out its space.
Darrin Boyd, a Cassidy Turley office broker who listed The Congressional when it sold to Lauth, thinks the company’s plan to mix acquisitions with development makes sense.
“What we’re seeing them do is look at existing properties and use those same skills that they did in development [deals] for decades,” he said. “They’re just using their visionary skills in a different way.”
Lauth also bought the remaining debt on a small retail property in Avon and is eyeing other acquisitions, including more apartment properties.
Meanwhile, Lauth has been revving up its development business. The company built a Gander Mountain store in Lafayette and is constructing others in Plainfield and Greenfield. On Tuesday, it broke ground on a Fresh Thyme specialty grocery store, also in Lafayette. It’s the first Fresh Thyme to be built in Indiana. Another, planned for the south side of Indianapolis, is slated to occupy space left by The Room Place on the south side of U.S. 31. Lauth is not involved in that renovation.
In addition, Lauth is pursuing an industrial development. It hopes to begin that construction next year.