Sunbelt Fund I Updates > College Park Apartments Sale
College Park ApartmentsWe are excited to announce the sale of College Park Apartments in Macon, GA, our fourth disposition in Sunbelt Multifamily Fund I (“SB1”). Ballast Rock acquired the property in October 2019, our sixth acquisition, out of nine total, in SB1. College Park Apartments has 219 units and was sold to an institutional real estate investment firm through a fully marketed process, with pricing negotiated prior significant rate movements.
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More on the College Park Sale
Our acquisition team was first shown College Park as part of an off-market 3-property portfolio. The previous owner had acquired all three properties between 2008-2010 and completed extensive renovations and exterior capital spend at the time of each acquisition. Despite being offered as a portfolio, two of the three properties were overpriced and required unattractive loan assumptions. College Park, however, was marketed free and clear. Our team took a closer look at College Park and immediately recognized the immense value of the owner’s 2008 preventative maintenance initiative. Without a large infusion of capital, many 1970s builds require tens of thousands of dollars each year to repair roofs, plumbing systems, and HVACs. In contrast, College Park arrived to us with 11-year-old roofs, plumbing systems, and HVACs.
Given (i) the need for significant loss-to-lease burn-off for College Park’s classic units, and (ii) the lack of market-supported comparable properties showing renovated rental premiums were attainable, our asset management team chose to perform only a limited systematic renovation program. Instead, our in-house property management team improved the quality of the property’s resident base (i.e. operational value-add). When Ballast Rock purchased the property in October 2019, 32% of College Park’s residents were supported by Section 8 rental assistance. As of today’s closing, only 12% of tenants needed any form of rental assistance.
In part due to the improved tenant base, Ballast Rock decreased loss-to-lease by 50.4%, increased average market rents by $61 (8.8%) and grew average monthly rents by $85 per month (13.2%). As a result, we increased the property’s trailing 3-month annualized revenue from the time of acquisition to the time of closing by 30.8%. Simultaneously, our asset management and Sunbelt Properties team reduced property-wide expenses 1.7% despite being in a high-inflation environment which put upward pressure on maintenance, staffing, insurance and technology costs.
Over the last two years, our team ran two separate in-house processes to pursue a potential sale. In early 2020, Central Georgia Technical College (CGTC), a small school adjacent to College Park, approached us due to their need for additional student housing. After exploring both a direct sale to CGTC and a potential master lease, we decided to hold off on selling as we felt we could get both a better sale price further down the road and better rents from non-student tenants. In late 2021, we ran an internal off-market sale process where we directly reached out to buyers who had inquired about College Park or one of our other properties over the past couple of years. We put our internal underwriting and financials in front of 15+ groups and ultimately decided to list the property through a fully marketed process to secure the highest price and best surety of close.
In early 2021, we had a fire in four units at College Park. With the insurance proceeds, we renovated these units to a higher finish than our typical renovation program – new shaker-style cabinetry, faux granite countertops, stainless steel appliances, vinyl flooring, and many more cosmetic upgrades. These four units came online in early 2022 and proved out $175 (or 24%) monthly premiums in advance of the sale. With these premiums, we gave our investment sales broker the ammunition they needed to take the property to market. Through using Cushman & Wakefield, the Southeast’s largest multifamily sales broker by market share, we received five separate bids – all above our initial 2021 off-market asking price of $18mm. We opted to take the third highest bid (at a ~1% discount to the highest bidder), as they had the best track record of closing on deals of this type and offered significant hard money day-1.
The sale of College Park will net SB1 an internal rate of return (“IRR”) of 34% and a multiple on invested capital (“MOIC”) of 2.3x.
Given (i) the need for significant loss-to-lease burn-off for College Park’s classic units, and (ii) the lack of market-supported comparable properties showing renovated rental premiums were attainable, our asset management team chose to perform only a limited systematic renovation program. Instead, our in-house property management team improved the quality of the property’s resident base (i.e. operational value-add). When Ballast Rock purchased the property in October 2019, 32% of College Park’s residents were supported by Section 8 rental assistance. As of today’s closing, only 12% of tenants needed any form of rental assistance.
In part due to the improved tenant base, Ballast Rock decreased loss-to-lease by 50.4%, increased average market rents by $61 (8.8%) and grew average monthly rents by $85 per month (13.2%). As a result, we increased the property’s trailing 3-month annualized revenue from the time of acquisition to the time of closing by 30.8%. Simultaneously, our asset management and Sunbelt Properties team reduced property-wide expenses 1.7% despite being in a high-inflation environment which put upward pressure on maintenance, staffing, insurance and technology costs.
Over the last two years, our team ran two separate in-house processes to pursue a potential sale. In early 2020, Central Georgia Technical College (CGTC), a small school adjacent to College Park, approached us due to their need for additional student housing. After exploring both a direct sale to CGTC and a potential master lease, we decided to hold off on selling as we felt we could get both a better sale price further down the road and better rents from non-student tenants. In late 2021, we ran an internal off-market sale process where we directly reached out to buyers who had inquired about College Park or one of our other properties over the past couple of years. We put our internal underwriting and financials in front of 15+ groups and ultimately decided to list the property through a fully marketed process to secure the highest price and best surety of close.
In early 2021, we had a fire in four units at College Park. With the insurance proceeds, we renovated these units to a higher finish than our typical renovation program – new shaker-style cabinetry, faux granite countertops, stainless steel appliances, vinyl flooring, and many more cosmetic upgrades. These four units came online in early 2022 and proved out $175 (or 24%) monthly premiums in advance of the sale. With these premiums, we gave our investment sales broker the ammunition they needed to take the property to market. Through using Cushman & Wakefield, the Southeast’s largest multifamily sales broker by market share, we received five separate bids – all above our initial 2021 off-market asking price of $18mm. We opted to take the third highest bid (at a ~1% discount to the highest bidder), as they had the best track record of closing on deals of this type and offered significant hard money day-1.
The sale of College Park will net SB1 an internal rate of return (“IRR”) of 34% and a multiple on invested capital (“MOIC”) of 2.3x.
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