Acquisition: Ranchwood

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Ranchwood Apartments was acquired in April 2014 from a non-profit seller and was brokered by Mr. Hashir Salim with KET Enterprises. The property was 60% occupied at rents only 62% of market rents and was beset by code deficiencies cited by the City of Houston. After due diligence was completed the acquisition was closed using debt secured through Peyton Jones with Green Bank.

The Plan

With 60% property occupancy at acquisition, we are able to more selectively reshape rent roll to market rates to minimize vacancy-driven carrying costs. In addition, improved for- profit management in place yields better allocation of resources as well as better client service levels and stronger leasing activities. Finally, the property receives an extensive renovation package to support the reposition as well as address deferred maintenance issues including:

  • New Hardie siding and paint
  • Roof replacement on all buildings
  • Fencing, access gate and parking lot repairs
  • Playground, signage, and landscaping
  • Code and building systems improvements
  • Unit interior upgrades
  • Security and operational improvements

In addition, the SI plan incorporated the assets heart of the Willow Watering Hole location including access to hiking and jogging trails from property, as well as the scenic views associated with the park.

Summary

Currently, project is well ahead of expectations. Rental rates are well in excess of pro forma estimates.
Property maintains a high occupancy while rents are cycled to market and renovated units are occupied.
Maintenance expenses below estimates due to economies of scale provided by sister asset located nearby, while service levels remain high.

Before

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After

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Acquisition: Fair Oaks

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Fair Oaks Apartments was acquired in April 2013 through a distressed asset sale by a foreign-owned entity. Tom Wilkinson of KET Enterprises brokered the transaction. After the completion of a thorough due diligence and navigating some complex legal and title issues, the asset was acquired in April 2013. At acquisition, asset was effectively 30% occupied, high crime, and extensive code enforcement issues besetting the property. In addition, undercapitalized management and extensive deferred maintenance needs presented further operational challenges.

The Plan

At onset, we focused on repositioning the asset through an aggressive lease up strategy coupled with an extensive physical rehabilitation and improvement program addressing the following areas:

  • Curbside and landscaping
  • Roofing and drainage
  • Site control, fencing and parking lot improvements
  • Exterior carpentry and resurfacing
  • Interior renovations to all units
  • Leasing office and operational improvements
  • Site amenity improvements
  • Repaired all detected life safety issues
  • Cleared all city code deficiencies and brought asset back into complete compliance

In addition, Shahda Investments due diligence uncovered elevated criminal levels, so they contracted Pro-Eye Solutions LLC, installed a IP surveillance system on site. In addition, they employed HPD-authored CPTED(Crime Prevention Through Environmental Deterrence) site design principles in the renovation scope as well as hire effective 3rd management partners, such as CPM, to further minimize malfeasance.

Summary

Upscale product well received by clients, commanding stabilized rental rates 23% higher than pre-acquisition estimates.
Asset stabilized 6 months ahead of schedule at occupancy rate well in excess of pro forma.
Minimal delinquency coupled with high resident retention and SI specific unit design, allow for low re-letting expenses, while keeping rents at market rates.
Currently providing strong cash flows to affiliates and awaiting placement of permanent financing or disposition.

Before

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After

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Acquisition: Terazza West

Terrazza-West-ExteriorATerazza West Apartments was acquired in June, 2013 through an off market transaction brokered through Matt Saunders of ARA- Houston. It is located less than a block away from SI sister property, Las Varandas Del Sur Apartments, allowing some economies of scale. At the time of acquisition, property operations were plagued by low occupancy, high deferred maintenance needs, poor and inefficient operations, and criminal/security issues. Although lenders typically are uncomfortable with assets in this operational and physical condition, our proven track record as well as our financial and operational strength, we had multiple financial suitors for this transaction, secured multiple highly competitive term sheets and ultimately selected Peyton Jones and Green Bank to provide debt for the transaction, with Shahda Investments affiliates providing the equity. We then formulated a plan to address these issues and allow the asset to reach its full potential, thereby creating equity.

The Plan

Our Asset Management Team began implementation by selecting Creative Property Management to provide property management services for the asset, with Shahda Investments maintaining the role of Asset Manager.

In order the address the crime issues, SI contracted Pro-Eye Solutions LLC to design and install an IP camera system, installed gates and fences and eliminated all intrinsic conditions that could   foster unwanted activities.   In addition, we secured effective uniformed security patrol service to patrol the asset and maintain “boots on the ground” as needed to maintain a safe environment. In addition, property management maintained strict resident qualification criteria, thereby limiting entrance of problem residents.

Renovation began in July 2013 which included improvements to the following areas:

  • Exterior paint/carpentry/siding
  • Roofing and property drainage
  • Site Control, parking lots and fencing
  • Resident amenities and landscaping
  • Building systems
  • Unit interior upgrades
  • Leasing and property operational improvements

Learn more about Terazza West.

Current Status

Construction

  • All deferred maintenance issues have been addressed and all amenities have been maintained and operational, with all code issues cleared.
  • All exterior work is completed and in budget.
  • Remaining improvements to the interiors of the final units, which is scheduled for completion in November 2014, are also in budget.

Operations

  • The asset is currently exceeding pre-acquisition estimates in overall occupancy and rental rates across all floor plans.
  • Both rental delinquencies and concessions are below estimates and property operating expenses are below pro-forma operating budgets.
  • Resident satisfaction levels are high, substantiated by high resident retention rates, increased rental rates and overall speed of the lease up.

Property Security

  • Police calls for service have decreased considerably and have remained low.
  • Residents, staff and police have reported a major improvement in property safety.
  • SI’s site control measures have minimized non-resident traffic, inherently decreasing unwanted behaviors.

Summary

  • Asset stabilized 5 months ahead of schedule at a higher occupancy percentage than pro forma.
  • Current rental rates are 20% higher than pre-acquisition estimates.
  • Resident retention rates remain high due to quality service levels and effective management, contributing to a faster lease up.
  • Asset is currently cash flowing well and building a track record of operations at stabilized levels and awaiting placement of permanent financing or disposition.

Before

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After

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