Riverway Apartments
24 Units in Champlin, MN
Acquired in December of 2022
Purchase Price: $2,815,000
Renovation Cost: $475,000
Renovations at the Riverway Apartments were completed in September 2023, giving the apartments a complete makeover. Updates include new kitchen cabinets, stainless steel appliances, LVP flooring, LED light fixtures, nickel door hardware, and low-flow water fixtures. The outdated pink tile in the bathrooms was replaced with stud-mounted bath surrounds. We also installed new vanities, countertops, mirrors, and lighting. We updated the common areas by removing the 1960s wainscotting, installing new flooring, and transitioning to a modern paint scheme.
As of November 2023, the lease-up process was completed. Gross rents today are 50% higher than those at acquisition, and the property is now generating cash flow. The bank debt, set at 5.5%, has 6 years remaining until maturity.
With the renovation work completed, the focus for 2024 and beyond will be on providing an exceptional experience for our tenants while optimizing cash flow.
Pineview Townhomes
28 Townhomes in Jordan, MN
Acquired in July of 2021
Purchase Price: $5,095,000
At the time of purchase, the Pineview Townhomes were targeted for an operational value-add strategy as they had minimal deferred maintenance and rental rates that were 20% lower than the prevailing market rate.
Our efforts to optimize operations are paying off as the property experienced strong performance in 2023, with rent growth of 5.7%, following a blistering 8.8% increase in 2022. This growth significantly surpasses the Twin Cities' average of 3% over the past few years. Currently, the property maintains a high occupancy rate of 97%, and leasing activity remains steady as we move into 2024. The Freddie Mac SBL debt, set at 3.51%, has 7.5 years remaining until maturity.
Coming Soon: The Barcelona Apartments
71 Units in Crystal, MN
Scheduled closing date: March 8th, 2024
Purchase Price: $6,640,000
Renovation Cost: $1,884,000
The upcoming addition to Ridgeview’s portfolio, the Barcelona Apartments, is scheduled to close in March of 2024. As of this writing (2/19/24) we have a few spots left in this investment.
The Barcelona Apartments is a one-owner building being acquired at a 25% discount to comparable sales in the submarket. Real estate prices peaked around 2020 and 2021, during which multifamily loans were available at rates as low as 3%. Many apartment complexes in Crystal, Robbinsdale, and New Hope sold for over $125,000 per unit during that period. As the Federal Reserve waged war on inflation, multifamily interest rates have risen into the 6-7% range, putting downward pressure on sale prices. The current debt market directly influenced the acquisition price of Barcelona, which stands at $93,521 per unit.
Barcelona is currently renting 1-Bedrooms for $988 and 2-Bedrooms for $1,095, nearby renovated buildings are achieving much higher rents, with 1-bedroom units going for upwards of $1,280 and 2-bedroom units for $1,489. This represents a potential increase of $394 for 2-bedroom units and $194 for 1-bedroom units.
To obtain the rental increases and prepare the property for long-term ownership, we plan to complete a renovation similar to the project we completed at the Riverway Apartments. Updates to the complex include:
Apartment Renovations:
Kitchen cabinets
Granite countertops
Stainless appliances
LVP flooring
Paint walls, trim, and doors
LED light fixtures
Low-flow water fixtures: toilets, showerheads, faucets
Brushed nickel door hardware
Bathroom vanity and granite countertop
Blinds
Common Area Renovations:
Paint walls, trim, and doors
LED light fixtures
Brushed nickel door hardware
Amenities Added:
Fitness center
Package room
Sauna
Outdoor dog park
Modernizing the apartments and adding amenities will best position the property for long-term ownership. While The Barcelona has large, clean apartments, they are very much original to the 1970s. By updating the apartments and adding amenities, we can both increase the property’s NOI and attract top-tier tenants with strong credit profiles.
Market News
Bella Vista Apartments in New Hope Sell for $2.91 Million
According to a Finance & Commerce article, the Bella Vista Apartments, a 24-unit property located at 8100 36th Ave. N. in New Hope, has been sold for $2.9 million. This low-rise building, constructed in 1973 on 1.46 acres, comprises 24 apartments with an average size of 900 square feet.
The $2.91 million sale included a $757K down payment and a $2.153 million assumed mortgage at 3.33% running through 2031. The price works out to $121,250 per unit. The average sales price per unit for apartments in the Twin Cities metro area is $153,956, according to the Apartment Sales Tracker at finance-commerce.com.
Source: New Hope Apartments Sells for $2.9M. https://finance-commerce.com/2024/02/just-sold-new-hope-apartments-sell-for-2-9m/
Tips & Tricks
Terms:
Operational Value-add – Operational value-add refers to the implementation of improvements or changes in the day-to-day operations of a property to enhance its overall value. This can include optimizing operational efficiencies, improving tenant experience, increasing revenue streams, or reducing expenses. Essentially, it involves identifying and executing initiatives that directly impact the performance and profitability of the asset, ultimately leading to an increase in its value.