We hope you are doing well and staying safe. This month we have an exciting announcement to share! We are selling another one of our apartment communities ahead of schedule. We’ll also show some pictures and go over the renovation scope for that property.
We’re selling Canyon 35 Apartments!
We are under contract to the first property we bought, Canyon 35 Apartments. We bought this property with a plan to sell in 5 years, and we’re selling it after 3 years. We have owned 5 properties in Phoenix, 577 units in total. This will be our third exit in the past 12 months.
Name: Canyon 35 (formerly known as Silvertree Apartments)
Size: 98 units
Investor IRR: 23%
Investor Multiple: 1.8x (Example: $100k invested will return $180k)
It is bittersweet to sell the first property we bought. Similar to all of our properties, this was a heavy value-add. We like to describe it as a slow-flip with a cash flow component. Each unit we renovate allows us to increase rents by $300/month, sometimes more! Each unit renovated increases our NOI and commercial property values are based on the NOI. Assuming a 5% cap rate, each renovated unit boosts the value of our apartment by $72,000. That is a true value add!
Canyon 35 – Renovation Scope
“Opportunity is missed because it is dressed in overalls and looks like work” – Thomas Edison
Canyon 35 was purchased in August of 2018 with a renovation budget of $1.4M. The idea for this project was to create a product that did not exist in the market yet. We wanted to offer Class-A units with premium finishes in a Class-C 1980’s building.
We renovated both the exterior, interior, and community areas, as they are all important to attracting quality tenants. With each renovated unit, we brought on a qualified tenant and repositioned the property.
For the exterior, we went through a rebranding and changed the name from Silvertree to Canyon 35. We ordered new signage and painted the building to a modern look. The pool decking was expanded and we purchased new furniture for the pool area. The bbq grills throughout the property were replaced. Sunscreens were installed to improve the tenant’s quality of life and make the units more energy-efficient.
One of our favorite things about the scope is the community amenities. When we purchased the property, it did not have a gym or office area for the tenants. There was an oversized laundry room that we utilized to create a gym. The laundry room was remodeled to be more modern with credit card laundry machines. Also, the existing leasing office had some additional space that was not being used well. The additional space was turned into an office area for tenants.
For the interior renovations, it’s safe to say that we went all out. We were certainly many steps above the competition in the surrounding area. We installed new shaker cabinets instead of repainting, we had granite countertops instead of laminate, and stainless steel appliances rather than white. New light and plumbing fixtures were installed, and the flooring was updated in every unit. An in-unit washer and dryer were installed in several units as well.
Summary
While others are minimizing costs during the renovations, we are doing the exact opposite. By spending more and creating a quality product, we found that it is beneficial during the good and bad times. When times are tough and you’re competing against nearby apartments at a similar price point, prospective tenants will choose the nicest property. Likewise, in good time we can charge a premium for a superior product.
We’re selling Haven on Peoria
After nearly 20 months of ownership, we are under contract to sell Haven on Peoria. This will be our second exit in the past 12 months and should close by next month.
We like to look at each property as a long-term flip with cashflow. We renovate units and increase the cashflow with each completed renovation. As we get closer to renovating all the units, we either sell the property or refinance to boost the cashflow. Below are some details regarding the sale:
Name: Haven on Peoria
Size: 164 units
Investor IRR: 24%
Investor Multiple: 1.5x (Example: $100k invested will return $150k)
