Sunbelt Fund I Updates > Heather Ridge Sale
Heather Ridge ApartmentsDuring our ownership of Heather Ridge, the Ballast Rock asset management and Sunbelt Properties property management teams added significant value to Heather Ridge’s top line revenue, reduced revenue drags (i.e. concessions, loss to lease, and vacancy), all while enhancing the living experience for the property’s residents. At the time of sale average monthly rent had grown by 15% while decreasing tenant concessions from 9% at the time of purchase to 0%. These two factors drove average monthly revenue up by 26% during our ownership.
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More on the Heather Ridge Apartments Sale
Ballast Rock was able to add alpha in these transactions by supplementing the Heather Ridge acquisition with the subsequent acquisition of North Crossings. By combining these two adjacent properties that we acquired from separate owners, we were able to increase the economies of scale at the properties such as property management and maintenance efficiencies. As a result of the improved economies of scale, Ballast Rock was able to garner interest in the larger sale from institutional investors.
At the time of acquisition, our credit strength as a sponsor and capacity to close complex transactions enabled us to purchase Heather Ridge for below market value. Throughout the bidding process, there was a limited field of buyers due to a requirement that the previous owner’s CMBS securitized loan needed to be assumed. By purchasing the property with loan assumption, we acquired Heather Ridge at a 15-20% discount compared to where it would have transacted if it were free and clear of any debt.
Before we acquired Heather Ridge, the property’s units had a wide variety of renovation levels but with no systematic renovation strategy. Because of this mix of finish level, we created a three-track renovation program for Heather Ridge, where we offered classic, upgraded, and deluxe finish levels. By creating this three-track approach, we were able to lower turn costs by examining the exact condition of units upon turns and making a determination about how much capital the unit would need to get to one of the three finish levels. Furthermore, we were able to increase rental revenue and maximize occupancy by appealing to a wider variety of tenants because of the varying finish levels and rental price points.
As is typical with many C and some B class properties, the previous Heather Ridge owner had several deferred maintenance issues at the time of acquisition. Part of what differentiates Ballast Rock is that we pride ourselves on promptly identifying and repairing deferred maintenance to improve tenants’ living experiences at our properties. To give a few examples, some of the deferred maintenance that we tackled at Heather Ridge included replacing some of the property’s outdoor stairwells, completely repaving the parking lot, replacing a few roofs, and replacing the siding on buildings to prevent water intrusion. In just over 2.5 years of ownership, our team spent $1.1+ million in capital expenditures at Heather Ridge to refresh both the interior and exterior of the community. As a direct result of our systematic unit renovation program and exterior capital improvements, our team increased average monthly market rents at Heather Ridge by 26%.
Heather Ridge will net an internal rate or return (“IRR”) of 50% and a multiple on invested capital (“MOIC”) of 2.52x.
At the time of acquisition, our credit strength as a sponsor and capacity to close complex transactions enabled us to purchase Heather Ridge for below market value. Throughout the bidding process, there was a limited field of buyers due to a requirement that the previous owner’s CMBS securitized loan needed to be assumed. By purchasing the property with loan assumption, we acquired Heather Ridge at a 15-20% discount compared to where it would have transacted if it were free and clear of any debt.
Before we acquired Heather Ridge, the property’s units had a wide variety of renovation levels but with no systematic renovation strategy. Because of this mix of finish level, we created a three-track renovation program for Heather Ridge, where we offered classic, upgraded, and deluxe finish levels. By creating this three-track approach, we were able to lower turn costs by examining the exact condition of units upon turns and making a determination about how much capital the unit would need to get to one of the three finish levels. Furthermore, we were able to increase rental revenue and maximize occupancy by appealing to a wider variety of tenants because of the varying finish levels and rental price points.
As is typical with many C and some B class properties, the previous Heather Ridge owner had several deferred maintenance issues at the time of acquisition. Part of what differentiates Ballast Rock is that we pride ourselves on promptly identifying and repairing deferred maintenance to improve tenants’ living experiences at our properties. To give a few examples, some of the deferred maintenance that we tackled at Heather Ridge included replacing some of the property’s outdoor stairwells, completely repaving the parking lot, replacing a few roofs, and replacing the siding on buildings to prevent water intrusion. In just over 2.5 years of ownership, our team spent $1.1+ million in capital expenditures at Heather Ridge to refresh both the interior and exterior of the community. As a direct result of our systematic unit renovation program and exterior capital improvements, our team increased average monthly market rents at Heather Ridge by 26%.
Heather Ridge will net an internal rate or return (“IRR”) of 50% and a multiple on invested capital (“MOIC”) of 2.52x.
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