Adjacent to an existing Northland property in Melbourne, FL, Caribbean Villas had fallen into disrepair and was being poorly managed by its’ then owners.  The community had multiple uninhabitable units and due to neglected repairs, tarps were covering roofs for more than a year. However, the structure of the property was incredible, it had great floor plans and garages, and desirable amenity potential. Additionally, the property was situated next to a Northland community in a high growth location with economic drivers such as major retailers, employers, colleges, sought-after beaches, and highways all nearby. Northland saw the value and potential in rehabbing this asset.

Opportunity

The management upside combined with the unique structural qualities of the asset was an incredibly rare combination to find, and thus a fantastic opportunity for Northland to turn the property around. Northland acquired Caribbean Villas in July 2016.

Execution

Since acquiring Caribbean Villas, Northland has completed extensive interior and exterior upgrades, including upgrading 40% of the units, replacing roofs, new exterior paint, new garage doors, updating landscaping, redoing parking lots, installing a new monument sign, and updating the clubhouse.

Results

From when Northland acquired the property in July 2016 to December 2017, total revenue has increased by nearly 79%. A year and a half after acquisition, Caribbean Villas was preleased at 97%

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While visiting our Fort Myers portfolio, we discovered a property on a beautiful 50-acre site that did not appear in market studies, was perceived to be subsidized housing and was running at 80% occupancy in a 96% occupancy market.  We unearthed that the owner was an absentee subsidized housing developer who had syndicated the equity and had no economic incentive to maximize cash flow.  Nor did the sponsor have the resources to repair damage from a tropical storm several years prior.  Northland had to “look through” the in-place investment optics and envision a value-add rehab for the property.

Opportunity

Negotiating directly with the owner, Northland was able to acquire Iona Lakes for significantly less than true current value, looking through the in place “performance” and leveraging our market-leading footprint to underwrite the cost of the rehab and the post rehab rental structure.

Execution

Iona Lakes’ value-add was diverse and comprehensive, including new interior units, exterior paint, curbing, parking lots, a perimeter wall, access gates, full-site landscaping, exterior lighting, irrigation, fountain and lake improvements, and new amenities including an outdoor kitchen and mini golf.

Results

By the end of the first year of ownership, revenue had increased and vacancy had fallen from 21% to 6%.  This trend of outperformance continued.  In the three years since acquisition, Iona Lakes revenue has increased and NOI has nearly doubled.

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Background

In the years following the Great Recession, Florida was ground zero for the housing crisis, with foreclosure rates sharply above the national average and communities suffering from the wealth destruction caused by the housing bust.  As a result, Florida multifamily was redlined by investors and lenders.

Opportunity

This backdrop left a void of investment capital and multifamily buyers, despite the fact that the single family/condo market collapse drove a significant shift from homeownership to rentership.  The reduction in supply through the conversion of luxury multifamily into condos during the pre-crisis years, further underpinned the recovery, and when Florida’s underlying economies gained momentum in 2012-2015, rent growth significantly outpaced the national average.  After research and due diligence, Northland announced our intent to target Florida generally, and Fort Myers, Melbourne, and Palm Beach County, specifically, for acquisitions.

Execution 

Northland acquired 13 Florida communities between 2011 and 2015, with a primary focus on Fort Myers.  Fort Myers offered a compelling opportunity to achieve meaningful scale at deeply discounted prices, particularly because the high-end units taken out of inventory and sold as condominiums left only nine class-A apartment communities.  Northland tried to acquire all of them, and was successful in buying six.  The acquisitions exemplified several of Northland’s deal targeting strategies including a foreclosure auction, best-in-class town jewel, a deep value-add, and a broken condo deal.

Results

Northland’s acquisitions in Fort Myers produced the highest single-market consolidated returns in the firm’s history.

The post Case Study: Fort Myers 2011- 2015 appeared first on Northland.

Background

Northland has a 25-year history in Austin entering in the early ‘90s recession and exiting in 2001 prior to the “tech wreck.”  Northland re-entered in 2005, when our research indicated that a diverse mix of job drivers, the city’s growing appeal to young professionals, and the state’s business friendly climate would ensure long-term stability and strong growth.  Northland specifically concentrated on the Arboretum and southwest submarkets, in-fill, high barrier to entry locations in a traffic burdened city.  While Austin was not spared the significant job losses and rent declines of the Great Recession, Northland believed that its diverse mix of job drivers, the city’s growing appeal to young professionals, and the state’s business-friendly climate would ensure Austin’s long-term stability and high growth trajectory.

Opportunity

When a large national REIT decided to exit its entire Austin position in 2008, the portfolio offered a tremendous opportunity for Northland: three direct adjacencies to our existing four property position in the Arboretum, four additional properties in the surrounding submarket, and two properties in the desirable southwest submarket.

Execution

Northland acquired the nine community portfolio and became Austin’s largest multifamily owner.  The distressed investment climate at the time – with difficult access to new financing, limited competition, and high levels of uncertainty – allowed Northland to step in and acquire the portfolio at a significant discount to true value.

Results

Northland’s analysis of Austin’s growth potential proved prescient, as the last five years has seen Austin solidify its identity as a top five city in the United States, as a hub of technology and innovation, and as a key job center to some of the U.S.’s most successful corporations.  Over the past six years, Northland’s 18 properties in Austin have experienced annual rent growth outperforming the national average.

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