A California-based investor has purchased an 88-unit apartment complex in Brownsburg, his latest in a series of multi-family housing acquisitions in the area.
Michael James of Walnut Creek, Calif.-based James Multi-family Group bought the Dublin Glen apartment building at 510 N. Enderly Ave. near I-74 for $3.4 million. Steve LaMotte, Amy Burmeister and Dane Wilson of CB Richard Ellis brokered the deal.
James plans to spend $200,000 to renovate the existing apartments and about $2 million to build 40 more units on the site. The property is about 97 percent occupied, with rents averaging $575 a month.
“I feel it’s got a lot of growth potential in the next five to 10 years,” he said.
The property is the latest in a string of purchases for James, who has been snapping up multi-family housing in the area with a business partner since 2005.
His firm now owns 14 different apartment complexes in the state, or roughly 1,700 units. The majority of those properties are in the local area, with five in Indianapolis, three in Carmel and Westfield, one in Anderson, and now two near Brownsburg. The remaining buildings are in Lafayette and South Bend.
“We’ve got a slow growth market,” he said of Indianapolis, “but we like the steadiness.”
Such deals were common years ago as California investors looked to score property bargains in Indiana. Yet, as real estate values have dropped nationwide, local brokers say activity has decreased.
Burmeister said California investors previously headed to markets like Indiana to take advantage of 1031 exchange laws, which allow property owners to defer capital gains taxes. Those laws allow people to place proceeds from a property sale with a third party exchange to eventually roll those funds into a new purchase.
“Most of the California buyers had these 1031 exchanges,” Burmeister said. “Property values have decreased there so they don’t have big gains that they’re trying to defer.”
James, she said, is able to do business here because he has a network of private investors to help with property acquisitions.
Typically, James said he looks to purchase “C plus” apartment communities with about 140 to 250 units. With renovations, James said he can turn the sites into “B or B minus” properties to achieve a 12 to 20 percent increase in rent, on average.
He’s hoping to spread that formula to additional properties, particularly those outside the I-465 loop.
He is now in the process of closing deals on two suburban apartment complexes, although he declined to disclose the locations. James said he is also looking to purchase three or four additional properties by year’s end.
Until recently, all of the firm’s apartments were managed by locally based The Buckingham Cos.
But, now, James said his firm, which also owns apartments in California and Arizona, will take over some management tasks.
A College Station, Texas, property management company will provide assistance, although James declined to disclose the name of the firm.
Overall, he said he was happy with Buckingham’s performance.
“There’s no problem there,” he said. “We’re growing a bit, so we’re just moving in a different direction, that’s all there is.”