COTTAGES BY THE BAY – Panama City Beach, Florida

[Josh Eitingon]

Investment Info:

Large multi-family (5+ units) buy & hold investment in Panama City Beach.

Purchase price: $2,340,000
Cash invested: $1,089,000
Sale price: $3,430,000

Cottages by the Bay was purchased prior to DXE’s ownership in a distressed portfolio sale. Previously named Cypress apartments, the property was an outlier among the other assets in their acquisition. The prior ownership group’s initial plan was to hold the asset however, they quickly realized that they were not operating efficiently and were open to a quick sale. The community was well located and was acquired at a compelling basis of $34,000 per unit.

What made you interested in investing in this type of deal?

Very well located in a growing city. It was off-market and we had a strong management company that had a proven track record in the area.

How did you find this deal and how did you negotiate it?

Leveraging our broker relationships in the Southeast, DXE was able to get access to this Off-Market opportunity.

How did you finance this deal?

Loan assumption of the existing debt through a life company.

How did you add value to the deal?

Repainted the property, replaced all doors, rebranded, implemented new management and strict leasing standards. Engaged tenants with community activities. A strategic interior renovation plan was immediately implemented upgrading units in-house efficiently creating significant value.

What was the outcome?

The property was sold in August of 2017. After 29 months of ownership, the project sold for ~$49,000 per unit, realizing a 27% IRR and a 1.61 equity multiple.

Lessons learned? Challenges?

Inheriting significant delinquency and troubled tenants we immediately introduced a new management team and rolled out a handful of strategic capital improvements. Dealt with employee turnover that delayed the transitioning and re-stabilizing process.