Fox Pointe Apartments
How We Generated a 27.33% Net IRR Over a 15-year Hold
120 Units
27.33% Net IRR*
6.56x Net Equity Multiple*
45.10% Net Simple Per Annum Return*
NCREIF Equity REIT Return: 9.01%
The Opportunity
Fox Pointe was a 120-unit Class C LIHTC affordable housing asset that we purchased out of maturity default in the depths of the GFC.
The property had reached the end of its LIHTC compliance period, and it had been capital starved. In addition to extensive deferred maintenance, the property also suffered from indifferent management. This inhibited its full conversion to market-rate housing.
The seller was the original developer with 4,000 units owned and managed across the Midwest, but the lack of liquidity during the GFC was so extreme that they could not refinance their mortgage at maturity. This lack of liquidity forced them into default. As buyers of this asset, however, we would face the very same liquidity issues with our acquisition financing.
Nevertheless, the demographics in this market were exceptional, and its employment base was healthy and sound. As result, we believed this property could prosper as market-rate housing if we could manage to finance the acquisition and refresh the asset.
The Execution
Piping Rock organized a joint venture with a sophisticated family office who could provide equity and fully committed bank debt. After closing, Piping Rock completed over $1 million in upgrades and improvements within the first twelve months. We replaced all roofing and siding property-wide, put a new asphalt overlay on the parking lots with fresh striping, fully remodeled the clubhouse, and we upgraded the apartment interiors with new appliances, cabinetry, countertops, flooring, and lighting. We also replaced all the landscaping.
Within five years, we had increased the NOI at Fox Pointe by almost 70%.
Within six years, we refinanced the property, and the proceeds were sufficient to return 100% of initial capital, satisfy the 8% Preferred Return in full, and produce a 21% net IRR.
In 2023, we refinanced the property once again, returning another multiple of capital to investors and further de-risking the asset. All refinancing proceeds were tax deferred.
In 2025, we sold the property, producing a 27.33% net IRR and a 6.56x net equity multiple.
This investment affirms our thesis that the Midwest offers strong pockets of growth that can rival the growth in more popular Sunbelt markets, yet these Midwest assets can be purchased at significant discounts to their Sunbelt peers.
What This Means For Investors
- Ability to identify value-oriented growth opportunities.
- Capacity to raise equity and debt even during periods of extreme market stress
- Fluency in structuring and managing successful long-term joint ventures with sophisticated partners
- Competence and experience in managing expedited, multidimensional value add programs
- Thorough, comprehensive knowledge of target markets and assets
- Repeatability and replicability
Clubhouse Prior to Remodel
Kitchen Before Remodel
Clubhouse After Remodel
Kitchen After Remodel
*Unaudited. Past performance is no guarantee of future returns