Charleston Square Apartments
How We Generated a 4.10x Net Equity Multiple From a Rare Off Market Purchase
88 Units
Full Cycle Exit
13 year Hold
19.16% Net IRR*
4.10x Net Equity Multiple*
31.29% Simple Per Annum Return*
NCREIF Equity Return: 8.19%
The Opportunity
Charleston Square is an 88-unit apartment property that we purchased in an off market transaction with no competition. Rents were at least 20% below market.
The Execution
The property had minor deferred maintenance which we addressed within the first six months.
The pool area occupied a very prominent location with high visibility where additional investment could have an immediate impact. Consequently, we focused our initial upgrade efforts on new pool fencing, furniture and landscaping.
Two years after closing, the property was producing annual cash flow in excess of 10%, and debt coverage was in excess of 2x. Within four years, we had grown NOI by almost 90% with limited investment in interior upgrades.
Four years after closing, we refinanced the existing debt with new fixed rate HUD 223(f) debt that fully amortized to zero over 35 years. The new long term fixed rate, fully amortizing debt removed all refinancing risk. Most important, the refinancing proceeds were 100% tax deferred and sufficient to return 100% of initial capital plus a multiple.
Upon full cycle exit, the property generated a 19.16% net IRR and a 4.10x net multiple.
What This Means For Investors
- Ability to act on time sensitive opportunities
- Underwriting accuracy
- Bespoke value-add business plans
- Thorough knowledge of target markets and assets
- Repeatability and Replicability
Pool Area Prior to Remodel
Kitchen Before Remodel
Pool Area After Remodel
Kitchen After Remodel
*Unaudited. Past performance is no guarantee of future returns.