Ballast Rock Real Estate: 2022 in Review — Value Added

One of Ballast Rock’s core principles is focusing on investments that have a positive social or environmental impact. For us, real estate investing is not just about cutting costs, increasing net operating income (“NOI”) and “sweating the assets.” It is about enhancing our residents’ living experience, empowering our staff to be the best they can be, and giving back to our local communities.

Our team prides themselves on providing safe, clean, and comfortable accommodations at attractive and attainable rental price points. But they also go beyond that by trying to improve the broader communities in which we live, invest, and work every day.

As the year draws to a close, we wanted to highlight some of the achievements of Ian Garcia and the asset management team, as well as Danielle Miner and the property management team. Our team has reached incredible heights this year, and we hope that by reading this you will understand why we truly believe our Ballast Rock Sunbelt Funds have both best-in-class asset management and property management teams.

Team Value-Add

Sunbelt Properties’ CEO Danielle Miner spent a huge amount of time this year developing the culture at our in-house property management company, Sunbelt Properties. By establishing several new initiatives, we have ensured employees can learn the skills and have access to the necessary tools to advance their careers, such as:

• Partnered with Nectar, an employee-recognition and social platform. Nectar allows our remote employees to interact with their managers as well as staff at other properties and allows team members’ achievements to be publicly recognized and rewarded. The platform helps Sunbelt Properties create and promote a culture of celebrating success, while helping to retain staff through positive affirmation and real-world rewards.
• Provided access to Gracehill, a real estate technology company that provides courses including Property Management Financials, Business Writing, and Dealing with Difficult People. This training allows our managers to develop essential skills to help increase property performance, reduce operational risk, and provide a remote and cost-efficient way to foster top talent.

In addition to these two new technology partners, Sunbelt Properties focused heavily on promoting a culture of “mentor managing” rather than “micromanaging” in 2022. The goal was for regional managers to lead by example, encourage employees to ask questions, and place an emphasis on professional development. Danielle very much led from the front by organizing the Gleneagle maintenance shop, digging ditches, emptying dog waste stations at property takeover, holding weekly company-wide property manager meetings, and encouraging employees to dig into the Gracehill coursework. With these initiatives, we believe that Sunbelt Properties can boost employee retention, promote an inclusive environment, and ultimately develop and retain top management talent.

Resident Value-Add

Here are just some of the things the Sunbelt Properties team did to help our residents in the last year:

• Sponsored a back-to-school supplies drive, where residents and members of the broader community could pick up free school supplies.
• Partnered with Appfolio and Experian RentBureau to help residents boost their credit scores through positive rent payment reporting.
• Helped our residents secure ~$500k of state-sponsored government rental assistance during 2022 (see table below).

Community Value-Add

Some examples of our team giving back to the communities in which we live and work included:

• Our GA/AL Regional and Coleman Place management/maintenance teams visit the Alabama Institute for the Deaf and Blind (“AIDB”) each Christmas. As part of their visit, they spend time with students and hand out toys to celebrate the holidays.
• Every year the management team in Fayetteville collects canned and non-perishable foods to donate to the Fayetteville chapter of Urban Ministries.

Property Value Add

These are the more capital-intensive projects that people typically think about when we talk about value-add in real estate – things like renovating internal units, repairing common areas, adding amenities like dog parks or swimming pools, etc.

Some specific examples in our portfolio included installing a new carwash station and repaving the parking lot at Georgetown Apartments, putting in new dog waste stations at Coleman Place, and repaving the parking lots at both Springlake and Huntingdon Apartments.

It’s not uncommon for apartment owners to cut corners when completing renovations to get a temporary rent bump without making lasting changes to the units or improving tenants’ living experiences. That is not how Ballast Rock does business. We take pride in the quality we offer to our renters and believe by focusing on capital expenditures that provide meaningful improvements in asset quality, our investors are rewarded over the long-term as the value from boosting our community reputation goes well beyond just the physical improvements these projects provide.

Below are some examples of the types of interior and exterior value-add projects we undertake at our properties. These before and after pictures highlight the quality of the upgrades we make, which is why we can consistently realize rent increases across our portfolio – we are continually improving the end-product we offer to our renters.

Here is an example of the renovation of one of our Gleneagle Apartments units. We added new white cabinet door fronts, vertical hardware, faux granite countertops, black/stainless appliances, vinyl flooring, and a subway tile backsplash.

Below are pictures of the new dog park we installed at Georgetown Apartments. At acquisition, this was a tennis court that was in a state of disrepair and seldom used by our residents. We tore up the court and laid fresh sod to create a fenced dog park at the center of the property.

Finally, below are the before and after pictures of our pool re-decking at Landmark Woods.

The Sunbelt team goes above and beyond for our residents, employees, communities, and properties because we don’t believe doing the right thing for investors and doing the right thing for our residents should be mutually exclusive.

Property management is difficult, and it is easy to get wrong. That is why building our own in-house property management company – with the right leadership team, culture, and priorities – was always a “must have” for Ballast Rock. It allows us to create a virtuous cycle: our managers can attract and retain the best talent, improving the quality of our properties, which then allows us to attract the best tenants, ultimately helping create longer term value for our communities, for our assets, and for our investors.

This value creation was demonstrated in the returns generated from the dispositions we made in Sunbelt Fund 1 earlier this year, which are summarized in the below table.

We expect Sunbelt Fund 1 to continue to unwind assets over the next 12-18 months. We expect to close on the final acquisition for Sunbelt Fund 2 in January 2022 and launch Sunbelt Fund 3 shortly thereafter.

If you would like to learn more about making a reservation in Sunbelt Fund 3, please reach out to IR@ballastrock.com