Sunbelt Fund I Updates > Gleneagle Acquisition Closing Update
Gleneagle Apartments is a 204-unit complex in Columbia, S.C. the property is a 1973 build that has 80% original interiors, allowing us to implement a value-add program that already is supported by proven higher rent points, while leveraging our experienced management team to provide superior returns.
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Details on the Gleneagle Acquisition
- Columbia’s Saint Andrews neighborhood is split in half by I-26. Gleneagle is located on the west side of this divider, which has three key advantages: i) being located in Lexington (rather than Richland) county affords residents access to significantly better public schools, ii) there is much lower supply on this side of the highway, and iii) the proximity to more/better restaurants, retail, and shopping.
- Due to the impending expansion of the adjacent highway I-26, the number of interested buyers in the Gleneagle acquisition process was limited because of the complexity this expansion process brings to deal structuring/financing. We knew the strength of our sponsor group and depth of lending relationships gave us an edge in purchasing and as a result, we were able to acquire Gleneagle at a discount compared to where it would have traded without the expansion.
- The current owners of Gleneagle have been through three different third-party property management groups in their two years of property ownership which has significant hurt performance under their ownership. While the current third-party property management team has made strides to turn the property around and financials are trending in the right direction, current ownership has struggled over the course of these two years due to inexperienced management teams and a high staff turnover.
- Going hand-in-hand with the management struggles, the property did not reach stabilized occupancy and bad debt (>90% and <3%, respectively) until the month we put it under contract. We bid based on the expectation of the positive financial trend that started in July 2020, and thus far the asset’s performance has continued to improve throughout the DD process, a trend our team will harness and push forward over the months to come.
- With ~$1.2mm budgeted for unit renovations and ~$550k budgeted for roof replacements, HVAC replacements, and amenity enhancements, the asset is well capitalized to continue the proven value-add program, all while improving the appeal of the community as a whole.
- At an estimated $7,650 per renovation and with a renovated rental premium of $155 per month, we expect to generate 24% ROI on our renovations. With that said, we have seen some classics units generating $100 premiums over other classic units, so we anticipate being able to capture significant rent bumps on some units without having to go through the renovation process. We will approach resident lease renewals on a case-by-case basis to ensure we are meeting the demand balance of classic vs. renovated units.
- Our expected amenity improvements include:
- Adding a grilling area adjacent to the pool;
- A refresh of the pool area as a whole, refreshing the paint and improving the furniture;
- Replacing and improving the on-site gym equipment;
- Adding an office center for residents;
- Adding property-wide lighting in order to increase safety and curb appeal;
- Replacing up to 13 roofs on the property;
- Replacing the dilapidated sand volley-ball court with an outdoor exercise area;
- Adding an agility course to the dog park; and
- Adding an outdoor exercise trail that runs the perimeter of the property.
- Click here to see the Sunbelt Fund I Pro Forma including summary pro forma information for Gleaneagle.