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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