Inside Mill Creek’s evolution to a full-service investment management firm

Property: Alister Sunset Valley
Buyer: Mill Creek Residential

Seller: CPF River Oaks Austin LLC
Property type: Garden style
Units: 290
Location: Austin, Texas

Purchase price: Withheld

With DNA that traces back to long-time Dallas-based apartment builder Trammell Crow Residential, Mill Creek Residential has made its mark as an apartment developer over the last decade and a half.

The Boca Raton, Florida-based firm is traditionally among the National Multifamily Housing Council’s Top 25 developers, slotting in at No. 2 this year with 8,022 starts in 2023.

But over the past 14 years, Mill Creek has also been acquiring properties — just at a much slower clip than it had been building them — primarily through one-off joint ventures. The firm does have a discretionary value-add fund, which it has used to buy four properties, according to Kel Frazier, president of acquisitions at Mill Creek.

Mill Creek is about to launch its second value-add fund, representing a strategic shift toward ramping up the firm’s investment management business. “Acquisitions are a big part of the go-forward strategy,” Frazier said. “We’d like it to be somewhere in the neighborhood of 25% to 35% of the overall business going forward, whereas historically, it’s been maybe 5%.”

Now that Mill Creek is in the institutional fund business, it plans to scale “pretty dramatically” and ultimately add structured products, including preferred equity and mezzanine debt, according to Frazier.

“The plan is to really expand into a full-service investment management firm, not just the development firm that sometimes does acquisitions,” Frazier said. “We want to be able to deliver a full suite of products as a kind of one-stop shop for all things U.S. housing.”

Construction can provide a springboard as it expands. With more than 20 development offices across the country, Mill Creek has the boots on the ground to understand its local markets and the potential for new, competing supply.

“They understand what it takes to get deals entitled and zoning in certain jurisdictions, certain sub-markets and micro-markets,” Frazier said. 

Austin value-add

In June, Mill Creek announced the acquisition of the 290-unit Alister Sunset Valley, a three-story, garden-style apartment community in South Austin, Texas. The previous owner was listed as CPF River Oaks Austin LLC.

Frazier credits Mill Creek’s local development team, which pointed out hurdles to starting new apartments in the area, with a huge assist on the Alister Sunset Valley deal. With that knowledge, Mill Creek could confidently bid on the property.

“Maybe our competitors on the value-add fund series side don’t necessarily have that ability to tap into that resource,” Frazier said. “So we feel like we had an edge, particularly on a deal like that.”

Mill Creek officially took over the community, formerly known as The Park on Brodie Lane and built in 1997, on June 14. Alister Sunset Valley, with one-, two- and three-bedroom homes, is within a 15-minute drive of downtown Austin and 20 minutes of Austin-Bergstrom International Airport. 

“Austin still screens really well from an investment perspective,” Frazier said. “There’s going to be a lot of supply, but there are still pockets of Austin that are pretty well insulated from supply. And this happens to be one of them.”

Alister Sunset Valley’s amenities include a resort-style pool/spa with sundeck and lounge seating, an outdoor courtyard with a grilling area and fire pit, lounge areas, a large clubhouse with a demonstration kitchen, co-working spaces, a pet park and a fitness studio with cardio equipment and free weights. 

The property’s interiors include wood plank-style flooring, built-in bookshelves, in-home washers and dryers, walk-in closets, ceiling fans and soaking tubs. Mill Creek plans to update its kitchens, bathrooms and select amenities.

“This has had a long chain of institutional ownership,” Frazier said. “The owners took really good care of the asset. So there’s not a lot of deferred maintenance. We just think there’s a strategy to increase the curb appeal, increase the appeal of the interiors of the units and get a modest return for doing so.”

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