The Great Advantage of Urban Infills

By Adrian Maties, Associate Editor

Baltimore—Last month, Castle Lanterra Properties, a privately held real estate firm founded in 2009, completed the acquisition of its second multifamily property in the Baltimore Metropolitan Area. The New York-based company buys, improves, repositions and manages multifamily properties in major metropolitan areas across the Northeast, Mid-Atlantic and Southern United States. Over the last 12 months, it has acquired $290 million of assets, encompassing more than 1,900 residential units. For the 608-unit Watergate Village apartment community, located in Annapolis, Md., Castle Lanterra paid an impressive $105 million.

Elie Rieder, the founder and CEO of Castle Lanterra Properties, told MHN more about his company and its plans for the Baltimore area.

MHN: Why has your company chosen to expand in Greater Baltimore? Castle Lanterra entered the Baltimore market this year, with the acquisition of the nine-story apartment building at 222 East Saratoga Street, in downtown Baltimore. Do you plan to buy any other properties in the region?

Rieder: We are attracted to certain areas in the Greater Baltimore region, which we believe are poised for growth over the coming years. Downtown Baltimore is one of those areas. We have found that across the nation populations are increasingly gravitating towards urban infill locations and city centers, which offer a live/work/play environment, over the suburban house with a backyard. For the young professional, Inner Harbor with all the attractions, nightlife and employment it has to offer, provides exactly that. It has become a major economic force in Baltimore City over the past decade.

222 Saratoga benefits from its proximity to Inner Harbor and its location in Downtown Baltimore. We believe there is a tremendous amount of value in the property and plan to unlock it through a complete renovation of the ground floor amenity space and unit interiors.

MHN: The purchase price for Watergate Village is huge. What are your future plans for the property?

Rieder: The benefit of Watergate Village is the truly one-of-a-kind location. There is no other rental property in Annapolis with 3,000 feet of private water frontage. In our mind, this property should be leading the Class B market in the area. We plan to spend a lot of money on the property including renovating units, improving the clubhouse and resident amenities, curb appeal and improving the marina. Furthermore, we will be completely gutting and renovating a vacant building that was damaged by a fire a couple years ago to include luxury finishes.

MHN: Can you tell us more about your company’s strategy to acquire underperforming assets and then recapitalize or reposition them to create value?

Rieder: The firm is focused on the acquisition of value-add multifamily assets and turnaround opportunities. Our strategy can differ on a case-by-case basis depending on the opportunities we identify and the properties we purchase. We have a strong team of seasoned real estate professionals and are always looking for ways to utilize our creativity, experience and management practices to create additional value. Another good example is our recently-acquired 222 Saratoga, an underperforming asset where rents are currently significantly lower than the market. Watergate Village is not underperforming its competitive set, but we believe there is no location premium attributed to the property at this point either–something we plan to change drastically as we implement our business plan.

MHN: How much competition do you encounter for these properties?

Rieder: It differs on a case by case basis; we pursue off market and on market deals. Watergate was very widely marketed and was an extremely competitive process. We did not win the bid first time around; we were the runner-up and it fell out of contract. 222 Saratoga was a very lightly marketed deal.

MHN: What are your company’s goals for 2015?

Rieder: We had an exciting start to 2015 with several new acquisitions closing in the first two months of the year. While we are focused on ensuring operational effectiveness for our existing properties and implementing our planned property enhancements at 222 Saratoga, Watergate and our other recent national acquisitions, we plan to continue and intelligently pursue carefully selected acquisition opportunities in our existing markets to leverage our local knowledge and expertise.