TOP LINE:
24 UNIT APARTMENT BUILDING “VALUE ADD”
PROJECT IRR – 40%
PROJECT EQUITY MULTIPLE – 2.43X
TOTAL PROFITS – $1,413,000
EQUITY RAISE:
$1 MILLION
LOCATION:
GALLATIN, TN (NASHVILLE MSA)
THE OPPORTUNITY
Fairview Commons is a 24-unit apartment complex located in Gallatin, Tennessee, just Northeast of Nashville.
Built in 1995, the property features a superb unit mix of two-and-three bedroom floor plans ranging from 1,000-1,200 SF.
The purchase price of $2,550,000 ($106,250 per unit), and the all-in cost, including closing costs and capital improvements, of $2,900,000 ($120,833 per unit) represents a significant discount to replacement cost and compares very favorably with similar properties currently trading in the Nashville market.
While well maintained, this asset offered a prime “Value Add” opportunity to capitalize on our investment objective: to convert a C+/B- asset located in an A area into a B+ asset.
Upon acquisition of the property we immediately began a strategic improvement program and, over the first twenty-four months, will complete fully modern interior and exterior renovations, and cure all deferred maintenance.
By repositioning the property, we anticipate 25% or more upside in rents.
BEFORE RENOVATIONS
Fairview Commons is in a prime position to benefit from Nashville’s impressive economic and population growth that continues to drive significant rent increases across the metro as new residents compete for limited workforce housing stock.
THE OUTCOME
Capitalizing on generational market conditions we vastly outperformed our ten year business plan projections for the asset in just two and a half years. By adding tremendous value to the property through painting the property exterior, putting on a new roof, and upgrading the exterior lighting, the property’s curb appeal was dramatically improved, transforming what looked like a low-end working class building into a modern neighborhood community.
AFTER RENOVATIONS
In addition, we completely remodeled fourteen units with new hardwood floors, stainless appliances, two tone paint, refinished counter tops, updated kitchen and bath hardware, re-glazed bath tubs, and modern lighting fixtures.
As a result we improved the properties rent collections by 48% per month during our ownership period. Further, including difficult operating times during the pandemic, the property regularly experienced incredibly low vacancy well below industry averages.
In the end we exited the deal at a sale price of $4,800,000 ($200,000 per unit). We delivered on all quarterly dividend payments and returned an equity multiple to LP investors of 2.43x while achieving an IRR of 40%.