Deal Of The Week

300+ Units: Deal of the Week 3-11-21

Eric Wilson
March 15, 2021

Highlights:  

This project is a 300+unit apartment community located on a 42-acre tropical tract in the Sarasota-Bradenton MSA.  The community features an appealing mix of one-, two-, and three-bedroom units averaging 900square feet. Each unit has washer/dryer connections, stainless appliances, and granite counters, as well as high end fixtures. The complex features resort style amenities such as paved walking trails around a private lake, large pool and spa area and a state-of-the-art fitness center. Additionally, residents benefit in its proximity to Sarasota’s largest employers, highly rated schools, and a variety of preferred retailers.  Premium beach access is available within a twenty-five-minute drive.  These factors combine to make this area on of the most desirable residential areas in the Gulf Coast region.

The property was built in 2008 and all units received upgrades in 2018.  

Repositioning:  

The project will be acquired for $42,250,000.  

A review of the financials show that the property is currently being operated a 48% expense to income ratio.  A careful analysis revealed that management was over staffed putting the management salaries at nearly twice the national average.  Additionally, contract services are excessive and should easily be reduced by 50% by having these items handled by the current onsite maintenance team.  The installation of our professional management team will allow us to bring our expense ratio well below 40% within year one.  There is also the opportunity to capture increased rental income since the only other comparable property in a 5- mile radius averages $100 per month more per unit and rental demand is at an all time high.  The increase in income combined with the reduction in expenses will dramatically improving NOI enhancing the valuation and improving cashflow.

The Numbers:

Targeted Returns

Average Cash On Cash:   12.25%

IRR:  22.08%

Equity Multiple: 1.8x