Value Add Case Study (2 Apartment Communities)

[Ben Leybovich]

@Sam Grooms and I syndicate apartments in Phoenix. IN that I am sure you are hearing lots of different things from lots of different people, which can confuse and paralyze the mind, I thought a bit of concrete good news might be welcome.

I am sure at some point I'll write something for the blog, but below are some numbers you might find interesting, reassuring, or entertaining.

VALUE ADD CASE STUDY #1 - Canyon 35 Apartments

Purchased 20 months ago

- 98 Units in Phoenix.

- Purchase Price $8.15M

- Renovation Budget $1.5M.

- In-place Income $60,000/mo.

Current Status

- Revenue $86,000

- T-12 OpEx $430,000 ($36,000/month)

- Community Reno complete

- 49 Interiors Complete.

- 1 interior in process (pre-leased)

- Remaining LTL $14,000

Upon Completion

- Projected Income $100,000

- T-12 OpEx $36,000

- Projected NOI $64,000Annual ($765,000 annually)

Valuation 

- At 5 cap: $15.3M

- At 5.5 cap: $13.9M

- At 6 cap: $12.75M

By the time we've recovered the remaining units (12 months or less) and materialized the $14,000 of LTL, we will have increased the NOI from $25,460 at acquisition to over $60,000. This will be finished in under 3 years, unless we sell the asset before as a proven value add. April revenue was 105% of March.

VALUE ADD CAS STUDY #2 - Haven at South Mountain Apartments

Purchased 11 months ago

- 117 Units in Phoenix

- Purchase Price $10.75M

- Renovation Budget $1.5M

- In-place Income $90,000/mo.

Current Status

- Revenue $107,000T

- 12 OpEx $470,000 ($40,000/month)

- Community Reno complete

- 61 Interiors Complete

- 6 interiors in process (pre-leased)

- Remaining LTL $19,000Forced 

- Vacancy $4,500 (due to Reno)

Upon Completion 

- Projected Income $135,000

- OpEx $40,000

- NOI $95,000 (Annual NOI $1.14M)

Valuation 

- At 5 cap: $22.5M

- At 5.5 cap $20.5M

- At 6 cap $19M

CONCLUSION

Guys, both of these are obviously proven value adds. We are at this moment, in April of 2020 in the middle of the COVID-19 pandemic leasing these units and getting these rents. Furthermore, none of these numbers include any future rent growth, which we will have.

A good deal is a good deal. A good strategy is a good strategy. In any environment. 

Good luck to all of you, and please take the news with a grain of salt. At any time someone is making money. Why not you...?!