About Criterion Holdings, LLC
Criterion Holdings was founded to serve the interests of family offices and qualified individual investors in gaining access to real estate investment opportunities on the same general terms as larger institutional equity partners. Partnering with best-in-class local operating partners, whose execution advantage takes the form of either specialized operating expertise (student housing, value-add multifamily, and senior housing) or local knowledge (commercial income property), Criterion brings decades of experience, sponsor co-investment capital, and extensive institutional capital relationships to the investment process.
Capital partners include / have included C.V. Starr, Injazzat KSC (Kuwait), Abrams Capital Management, Investcorp, The Family Office, ZAIS / San Bernardino County Employees’ Retirement Association, and Equity Resources.
Criterion focuses on multifamily investment and, to avoid “style drift”, does not currently pursue investments in retail, self-storage, industrial, office or hospitality.
In addition to senior housing, Criterion’s investment platforms have a combined current market value in excess of $325 million and include:
Purpose-Built Student Housing
Purpose-Built Student Housing, leased “by the bed”, provides a highly attractive multifamily investment option, generally at higher rates of return than market rate rental apartments of comparable quality and at somewhat lower volatility due to the favorable demand characteristics of the property type. The resulting risk-adjusted returns reflect the combined benefits of favorable population demographics and attractive financing options, which often include both long term fixed rates, and extended interest-only periods. Generally, student housing has only a modest value-add component. Since 2014, Criterion has acquired nearly 3,000 beds in partnership with The Preiss Company, its sole student housing operating partner. Total net annualized returns range from 14-16% with 50% or more of this coming from current cash flow. Cost segregation analyses are used to accelerate depreciation in order to minimize taxable ordinary income to investors.
Adaptive Re-Use is a multifamily strategy currently limited to Washington, D.C. in partnership with Urban Investment Partners. Under this strategy, existing office buildings adjacent to American University have been acquired for conversion to “market rate housing, attractive to students”. Mr. Riordan pursued this strategy extensively while with Lubert-Adler Partners. As a development-oriented strategy, total net annualized returns are expected to exceed 25%, with the majority of this coming from capital appreciation.
Value-Add Market Rate Multifamily
Value-Add Market Rate Multifamily investments provide for enhanced total returns as a result of capital improvement-driven increases to net operating income. Typically Class B / C suburban garden apartments, these properties are rented at rates below the competitive set at the time of acquisition, providing an opportunity to increase revenues through kitchen, bath and common area renovations. Often occupied by renters “for life”, rather than renters “by choice”, these properties exhibit less volatility in response to changes in the economic cycle than newly-constructed Class A properties, and are somewhat immunized from new market supply additions since new construction generally tends to be Class A by definition (i.e., no one builds Class B/C). Due to the significant cap rate compression in this category over the past several years, no acquisitions have been pursued since 2016.
Commercial Income Properties
Commercial Income Properties are a (minor) subset of the firm’s overall investment activities and generally pursued only in those instances where the existing property offers either the potential for appreciation through tenant credit up-trend (and resulting cap rate compression), or a “covered land play” providing attractive levels of current cash flow as part of a longer term repositioning or redevelopment strategy. Total net annualized returns of 15% or greater are required, with at least two thirds of this amount coming from current distributable cash flow. As with Criterion’s other multifamily strategies, cost segregation analyses are used to accelerate depreciation in order to minimize taxable ordinary income to investors.
In addition to Messrs. Riordan and Price, Criterion partners include Peter “PK” Knights (Investor Relations), Brad Lamont (Construction Management) and Larry Mohr (Senior Housing).
Financial reporting and tax are outsourced to FD Fund Administration, an affiliate of Atlanta, GA accounting firm, Frazier Deeter. Risk management services are provided by USI.
Our Senior Living strategy is focused on those communities offering a “continuum of care”, incorporating independent living (IL), assisted living (AL), and memory care (MC) in a single location so that residents and their families may enjoy the comfort of knowing that aging in place is possible. From an investment perspective, in addition to the well-publicized, highly favorable demographics tied to the aging of the Baby Boomer cohort, senior living also benefits from attractive GSE agency financing, providing great flexibility, including long term fixed rates and extended interest-only periods. As with student housing, senior living is currently characterized by an attractive yield premium versus market rate multifamily; this is a result of the significant operating expertise required, a key differentiating factor which serves, currently, to limit competition. Ownership of senior living communities continues to be somewhat fragmented, with a significant number of properties owned and operated by private individuals lacking the economies of scale and management expertise which our operating partner network provides. Criterion Senior Living serves as an aggregation platform, bringing institutional scale and efficiency to the ownership and operation of quality senior communities.