Wyndfall Apartments are a 56-unit garden-style complex in Hope Mills, NC. The 5.15-acre seven-building community was completed in 1998 and is nestled in a quiet residential neighborhood. The property offers all 2-bedroom units, each with approximately 1,280 square feet of living space. Located within the Fayetteville MSA, Wyndfall Apartments are 15 miles from Fort Bragg and minutes from shopping and the I-95 corridor.
Considering selling, the owner of Wyndfall Apartments consulted with the Sweetwater Capital Investment Sales team. The brokers quickly identified several challenges which had to be addressed for the owner to get the best price for his property.
Even though the apartments were maintained in good functional order, the units were dated, and the rents were hundreds of dollars below the market rate. Due to a lack of good record-keeping, there was no way to underwrite the property accurately, and it was doubtful a buyer would be able to obtain traditional financing.
The owner wanted $7,840,000 for Wyndfall Apartments – that would require trading at a 3.8 capitalization (cap) rate. It would be challenging to sell a Class-A property in the Fayetteville MSA at a 3.8 cap rate – let alone a 24-year-old Class-B property with limited financial records.
At a 5.0 capitalization rate, the property would trade at $6,000,000 – a total of $1.8M below the owner’s price point. There was a lot of work to get the owner the highest and best price possible.
The Sweetwater team identified several issues:
– Rental rates were well below market rates
– Dated units
– Poor rent collection
– Ineffective bookkeeping
– Excessive unit turn times – in large part due to the owner’s preferred vendors
– No preventative maintenance program
– No strategic renewal plans
– Minimal focus on curb appeal
– Incomplete and missing information from operations statements
– Unable to generate a complete historical operating statement
Obtain the highest and best possible price Wyndfall Apartments within six months.
The solution required a threefold approach. First – the property needed excellent management to increase rents, improve curb appeal, cut expenses, and build comprehensive records. Second – an outstanding marketing program needed to be developed. Third – the property needed to be put in front of a select group of buyers capable of closing on this great opportunity.
Sweetwater Property Management (SWPM) was called on to handle the first step. The SWPM team moved quickly to increase rent collection, push rents up, cut expenses, decrease turn time, increase curb appeal, and begin keeping accurate records. In short order, SWPM started to improve the property’s performance.
Working together with the property management team, the investment sales team, and the company’s analysts – the marketing team put together a complete promotion package including photos, 3-D tours, aerial photography and videos, flyers, a promotional video, and a dedicated landing page. It had been decided that this would be a limited release marketing event. Yet, the team cut no corners and produced high-quality material which highlighted the property’s value.
With effective property management in place and the marketing material ready, it was time for the first (and only) advertising blast. Due to the limited financial records, it would take a particular type of buyer to close on Wyndfall Apartments. Fortunately for the seller, the Sweetwater Investment Sales team knows several such investors. By mid-May, the team brought a well-qualified buyer to the table. Within two weeks of introducing the property to the investor, the purchase-and-sale agreement was signed, the earnest money was deposited, and due diligence had begun.
The investment sales team worked closely with the property management team, the seller, and other service providers to coordinate all the moving pieces required to facilitate a smooth transaction. By the end of June, the inspection period was complete. There were no issues, no re-trade, and the buyer selected Sweetwater Property Management to continue managing Wyndfall Apartments after closing.
As July drew to an end, the title and insurance work were completed, and the property closed early for an all-cash price of $8,500,000.
The entire Sweetwater team worked together to yield the seller significant gains over the initial valuation of Wyndfall Apartments.
Under the care of the Sweetwater Property Management team, the property’s Net Operating Income increased by 26% compared to 2021.
The marketing team and analyst created a fantastic product that the Sweetwater Capital Investment Sales team leveraged to find the right buyer.
When evaluated on the closing capitalization rate of 4.47, the value of Wyndfall Apartments had increased by 21%, from $6,722,000 to $8,500,000. The seller made $660K more than the initial pricing guidance of $7,840,000 and $1,778,000 more than he could have made a short five months earlier.