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Q&A with Daniel Eller, President & CEO of Eller Capital Partners

27 Mar 2015, 11:27 pm

by Adriana Pop, Associate Editor

Eller Capital Partners is a multifamily investment, development and property management company based in Chapel Hill. The company, founded in 2011, is committed to offering apartment units with modern, upscale finishes at an accessible price. This spring, Eller Capital has also launched an incentive program for public employees.

Daniel Eller, President & CEO of Eller Capital Partners

Q: Could you tell us more about your company’s new housing incentive program for public employees?

Eller Capital Partners recently announced a new housing incentive program for Town of Chapel Hill, Town of Carrboro, Orange County and State of North Carolina public employees, including individuals who work for the University of North Carolina. Eller is offering generous discounts on rent and is waiving certain fees for public employees who sign 12-month leases at our newly-renovated apartment communities, 86 North Apartment Homes and The Apartments at Midtown 501. Lessees can expect to save between $2,000 and $3,050 on rent in the first year.

Eller’s program has the support of the Superintendent of Chapel Hill-Carrboro City Schools, the Chapel Hill Police Chief, the Chapel Hill-Carrboro Chamber of Commerce, Chapel Hill Mayor Mark Kleinschmidt and Carrboro Mayor Lydia Lavelle.

Until now, most people who have great jobs serving the Chapel Hill community and the University have been forced to choose between two extremes: newer, luxury apartments that cost too much and older, more affordable apartments that lack the modern finishes and amenities that renters today expect and desire. Eller’s decision to redevelop existing properties, instead of tearing them down and rebuilding from the ground up, has provided Chapel Hill and Carrboro residents with the modern apartments that they demand but haven’t previously had access to in Chapel Hill.

Q: What’s your forecast for the Chapel Hill market and what kind of long-term results do you expect?

Eller believes that Chapel Hill is a market that continues to have an enormous demand for quality housing, despite a limited amount of quality supply. Currently, just 6 percent of the conventional multifamily housing market in the Chapel Hill-Carrboro School District is less than 10 years old. More than 80 percent is more than 25 years old, and over 55 percent is more than 35 years old. The 6 percent of the conventional multifamily housing market that has been delivered in the last 10 years includes four assets totaling just 430 units. The entire conventional Chapel Hill apartment market (within the school district) totals just over 7,000 multifamily units. Only 22 percent of the people who work in Chapel Hill also live in Chapel Hill.

Eller Capital feels strongly that both the top and the middle of the market are currently underserved. Chapel Hill experienced a development boom in the 1970s and a smaller one in the mid-1980s. Very little multifamily product was built in Chapel Hill in the 1990s and 2000s. With only 430 multifamily units built in the last decade, this has created a market situation in which many of the people who work in Chapel Hill and have great jobs are not able to find the quality of housing that meets their demands.

Eller believes there is significantly more demand at the very top of the market than just 430 units, and we believe that the market strongly supports the current pipeline of new supply. There are a few development projects currently underway and several others that have been proposed. Barriers to entry in Chapel Hill, including the scarcity and high cost of land and a very lengthy and expensive entitlement process, have discouraged many developers from proposing new projects.

Eller Capital Partners, recognizing the imbalance of the multifamily market in Chapel Hill, began to pursue major renovations of older multifamily assets with the goal of offering a product that has new, luxury finishes at a price in the middle of the older, less desirable assets and those assets that are desirable and have been built within the last 10 years (but may be more expensive than what most people who work in Chapel Hill are willing to pay).

Q: Is there any particular product you are focused on? What types of demographics do you target?

Eller Capital Partners is focused exclusively on multifamily housing. We prefer assets that are well-located in their respective markets and submarkets, are in high-traffic locations with close proximity to major employment centers and are either walkable or in very close proximity to high-quality retail. We really focus on acquiring assets that are close to Walgreens, Starbucks, Whole Foods or other similar retailers – all who spend much more time and money than we would be able to on demographic research and analysis.

In Chapel Hill, Eller Capital has focused on major renovations of older but extremely well-located communities. We have combined major exterior architectural changes with luxury interior finishes including granite countertops, plank flooring, stainless steel appliances and all new plumbing and electrical fixtures to create brand new apartment communities out of older, existing ones. Simultaneously, we have made major improvements to the energy efficiency of the apartment units and created state-of-the-art amenity centers that are unrivaled in the local market. Eller is also developing a 109-unit addition to one of its Chapel Hill assets and is pursuing other new development opportunities.

Outside of Chapel Hill, Eller Capital is focused on the acquisition of newer assets with modern architecture that are in great locations and offer the ability to make improvements to amenities and interior finishes, ultimately with the objective of decreasing the effective age of the asset and making it more competitive in its marketplace.

4. What are your priorities and what challenges do you foresee?

Our priorities over the next year are to continue to work towards the execution of our existing renovation and new development projects, to continue to find creative ways to solve problems and take advantage of market opportunities, and to continue to expand the company in an aggressive but deliberate manner over the next 18-24 months.

Some of the larger challenges we anticipate include continuing to battle fierce competition from other multifamily investors for acquisitions, the likelihood that interest rates will start to increase and the impact that the delivery and absorption of newly-constructed apartment communities will have in some of our markets.

5. Are you optimistic about finding lenders to finance multi-family acquisitions in this region?

There is currently a tremendous amount of both debt and equity capital that is aggressively pursuing multifamily lending and investing opportunities in this region. Eller is very optimistic about finding lenders to finance multifamily acquisitions in 2015. However, we are also cautious and aware of the fact that 18-24 months from now the capital markets may look very different.

6. Do you have plans to expand to other parts of the country?

Eller Capital Partners owns or has owned assets in North Carolina, South Carolina and Tennessee. We are currently pursuing opportunities throughout the Southeast and beyond. Eller is targeting more than $500,000,000 in multifamily acquisitions during the next 18-24 months and expects to acquire assets both within and outside of its existing footprint.

For more information on Eller’s apartment communities, please visit www.LivingChapelHill.com.

Armada Hoffler Sells Newly Built Multifamily Property in Durham for $35.6M

27 Mar 2015, 11:16 pm

by Adriana Pop, Associate Editor

Armada Hoffler Properties is selling the Whetstone Apartments community in Durham for $35.6 million to an undisclosed buyer.

The 203-unit apartment complex at 501 Willard St. is situated in the city’s downtown area near Duke University. The company delivered the property’s first units in the third quarter of 2014.

The community offers a mix of studio, one- and two- bedroom apartments with monthly rents ranging from $1,040 to $1,600. Amenities include a resort-style swimming pool, a garden courtyard with fireplace, a fitness center, an entertaining community room, elevator access to all floors, as well as covered parking and controlled access. Leasing and management duties are being provided by Grubb Properties.

According to Lou Haddad, president and CEO of Armada Hoffler, the company expects to record a profit of more than 20 percent from the disposition of the property, despite the fact that the asset is still in lease-up phase.

“We are delighted to continue our long-standing strategy of selling non-core assets from time to time and monetizing the wholesale-to-retail spread on our development projects,” Lou Haddad added. “Whetstone is our third disposition in six months and we will redeploy the capital in a way that best creates value for our shareholders.”

The transaction will be completed in the second quarter of 2015 and is subject to the satisfaction of certain closing conditions.

Photo credits: whetstoneapartments.com

21c Museum Hotel in Durham Welcomes First Guests

19 Mar 2015, 4:23 pm

by Adriana Pop, Associate Editor

The 21c Museum Hotel in the heart of downtown Durham is now open.

Company and local officials recently held a ribbon-cutting ceremony for the new 125-room, $48 million property at 111 N. Corcoran St., which employs a staff of 150 people.

Formerly known as the Hill Building, the hotel offers 125 guest rooms that range in price from about $230 per night for a standard double queen or king room to about $1,500 per night for the penthouse suite on its 15th and top floor. According to the NewsObserver, the 21c company has owned the property since 2013, when it purchased it from Greenfire Development, a local company that remains a partner in the hotel.

Besides a wide range of amenities, including a business center, fitness center and plenty of meeting space, the hotel features seven site-specific art installations in and around the building, as well as rotating exhibitions on its first and second floors. Guests and visitors alike may currently view the property’s debut exhibition called “Pop Stars! Popular Culture and Contemporary Art.” It consists of more than 100 multimedia works and is on display through August.

21c Museum Hotels is a luxury hotel chain based in Louisville, Ky., that combines the hotel experience with contemporary art exhibitions. Similar properties are located in Cincinnati, Ohio, Bentonville, Ark. and Indianapolis, Ind.

The new Durham hotel is the first of five new lodging facilities scheduled to open in and around the city in the next 12 months. These include:

  • The 54-room boutique Hotel Durham at 315 E. Chapel Hill St. expected to open in May;
  • The 134-room Aloft Durham Downtown hotel slated to open in June;
  • The 75-room Jack Tar at 212 N. Corcoran St. expected to open during the first quarter of 2016;
  • The 125-room Residence Inn by Marriott at 1108 W. Main St. scheduled to open in June.

Photo credits: www.21cmuseumhotels.com

JHM Hotels Buys Embassy Suites in Raleigh, N.C. for $22M

13 Mar 2015, 7:58 pm

by Adriana Pop, Associate Editor

The 225-key Embassy Suites Hotel near Crabtree Valley Mall in Raleigh, N.C. has a new owner.

According to the Triangle Business Journal, JHM Hotels of Greenville, S.C., paid $22 million to acquire the property from hotel owner and operator FelCor Lodging Trust. HREC Investment Advisors represented the seller.

Built in 1987, the Embassy Suites hotel at 4700 Creedmoor Road offers air-conditioned rooms with refrigerators and LCD televisions, along with a variety of amenities, including an indoor pool, a spa tub and a fitness center. Guests also have access to a business center, conference space, restaurant and bar/lounge.

The Texas-based company is planning to use the proceeds from this transaction, as well as those from the sale of the 536-room Westin-Dallas Park Central property, to repay outstanding debt. FelCor has also agreed to sell the 261-room Embassy Suites Hotel near the San Antonio airport for $29.5 million.

These transactions are in line with the company’s multi-year strategy to sell its “non-strategic” hotels from its portfolio. Since 2010, FelCor has divested 34 such properties for aggregate gross proceeds of $764 million. To date, there are six remaining non-strategic hotels to be sold.

JHM Hotels currently has 37 lodging facilities in its portfolio, including three Westin-branded hotels in Florida, Virginia and Maryland and two Fairfield Inn properties in Charlotte.

Photo credits: embassysuites3.hilton.com

Eller Capital Partners Acquires Value-Add Opportunity in Chapel Hill for $3.6M

10 Mar 2015, 4:18 pm

by Adriana Pop, Associate Editor

Eller Capital Partners has recently acquired the Colonial Arms Apartments on Hillsborough Street in Chapel Hill. The company paid $3.6 million for the 41-unit townhouse-style community, which it rebranded as 612 Hillsborough.

The property is Eller’s fourth acquisition in the city in the past 16 months, as well as its first asset within a short walking distance to the University of North Carolina at Chapel Hill campus.

“All of our communities offer walkability to area retail and amenities, but to be in such close proximity to the university and the abundance of restaurants and shops in downtown Chapel Hill makes this the ideal location for anyone who wants to live close to where they work and play,” Daniel Eller, the company’s president and CEO, said in a news release.

The Triangle Business Journal reports that last spring, Eller paid $18.25 million for the 198-unit Timber Hollow Apartments across from the future Carolina North campus. Earlier in 2013, the company acquired the 248-unit Foxcroft Apartments for $22.32 million, now rebranded as The Apartments at Midtown 501, and the 144-unit Timberlyne Village for $8.7 million, now rebranded as The 86 North Apartments. Eller’s overall investment into the purchase and refurbishment of the three properties into luxurious but affordable homes amounts to $65 million.

“Eller Capital Partners is committed to making its Chapel Hill communities desirable, convenient and comfortable places to live,” Eller added. “We want to offer apartment units with modern, upscale finishes at a price that nearly anyone who works in Chapel Hill can afford.”

Founded in 2011, Eller Capital Partners is a multifamily investment, development and property management firm based in Chapel Hill. The company currently focuses on the expansion of its portfolio throughout the southeast region of the United States.

Photo credits: Eller Capital Partners

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