Investment Snapshot
Property Information
Property Type
Apartments
Size
148 Units
Year Built
1969
Market
Sacramento, CA
Sourcing
Off-Market
Acquisition
Acquisition Date
September 2020
Purchase Price
$23,560,000
Invested Equity
$9,874,650
Debt (%LTC)
68%
Type of Debt
Bridge financing from a regional bank with term of 3-years plus two, one-year extension options, financing included $1.5 million of future funding for cap ex plan
Going in Cap Rate
4.5%
In-Place Rent
35% below post-renovation rent
Disposition
Hold Period
14 months
Disposition Date
November 2021
Sale Price
$38,050,000
Exit Cap Rate
2.9%
Realized Gross IRR
91%
Realized Equity Multiple
2.14x
Investment Overview
Deal Sourcing
Broker relationship and acquisitions of other assets by the same seller
Property Type
148-unit apartment
Year Built
1969
Occupancy at Acquisition
96%
Location
Located seven miles south of Downtown Sacramento in the Pocket/Greenhaven submarket, the property has a lakeside location with 1,000 feet of frontage with its own private dock and is located on a lake that provides a serene setting.
Attractive Opportunity
Average in-place rents were 35% below market. The property was operated by a family for over 20 years and had been mismanaged.
Value-Add Strategy
CapEx Requirements
For the exterior, capex included painting, landscape upgrades, new windows, lakeside BBQs with pergola, new pool furniture, office/clubhouse remodel, asphalt repairs, new property signage and EV charging stations
For the interior, improvements included new dual pane windows, removal of popcorn ceilings, LPV flooring, hardware, lighting, quartz countertops and stainless-steel appliances.
Anticipated Hold/Actual Hold
5 year anticipated hold, 14 month actual hold period
Additional Revenue Sources
Increased revenue with RUBS plus renovated 36 units with an added charge of $250 per unit and added lake view amenity charges of $100-$200 per unit
Rent Strategy
Average rent at acquisition was $1,225 per month with the most recently renovated unit leasing for $1,825 per month (50% increase)
ESG Opportunities
Installation of EV chargers along with installation of lakeside BBQs with pergola to encourage activation of common areas for tenants and upgrades to pool furniture and the office/clubhouse remodel, energy efficient appliances, LED lighting and low VOC paint and flooring
Exit Information
We underwrote a 5% exit cap rate and ultimately achieved a cap rate in the high 2% range. Initial sale price estimates were in the $34,000,000 to $36,000,000 range but after a competitive bidding process, with over 80 qualified buyers and 15 initial offers, we were able to sell the property for $38,050,000 to a private equity real estate firm based in San Francisco.
Achieved Returns
Acquisition Price $23,560,000 ($159,000 per unit)
Sale Price $38,050,000 ($257,000 per unit)
Gross IRR 91% / Net IRR 61%
Gross MOIC 2.14x / Net MOIC 1.82x
