Newark – Irvington, NJ
The portfolio included 7 properties ranging from 26 to 262 units with a total of 641 units plus two cell towers. The buildings are in densely populated mixed residential and commercial neighborhoods with easy access to NYC, Newark and other NJ employment centers via highways or transit. They have ample parking and an attractive unit mix of more than two-thirds 1 and 2-bedroom apartments. Although the properties were well located and in high demand from residents, they needed significant management and physical improvements to increase their value post-acquisition.
We identified undervalued assets that were institutionally owned but poorly managed with significant deferred maintenance and heavy lift value-add that detracted from their marketability and value. There were no institutional suitors; we were well positioned against competition from only a few other buyers and negotiated a very favorable price despite in-place rents that were well below market.
We spent more than $3.5mm on capex. More than half was prioritized for energy efficiency projects and deferred/preventative maintenance to improve property perception and long-term cost structure. The remainder was largely spent on unit renovations to generate both immediate and long-term upside. Through optimized turnover and renewal planning we generated significant rent increases from a combination of partial and full renovations. Additionally, we converted parking lot operation to one master lease to create a higher, predictable revenue stream and divert management resources to more productive tasks.
We intensively managed the property to optimize occupancy, collections and operating costs. Annual turnover was reduced to less than 20% from 40%+. Economic occupancy increased to 95%+ from approximately 85% and physical occupancy stabilized around 97% versus 90% when we acquired the property.
Generated higher than forecasted annualized returns in a shorter than expected timeframe.
- We refinanced the assets with new lenders at an implied valuation that delivered 41% appreciation in less than 2 years
- This refinancing returned more than 100% of the original equity investment
- The asset sold January 2021 for approximately double the acquisition price, generating an investor IRR exceeding 50% and ~3x multiple in less than 5 years