Insula sells Kissimmee apartment complex, nets $13M ROI & reinvests locally

UPDATED: October 10, 2016 03:23 PM — After spending $2 million to renovate a 44-year-old Kissimmee apartment complex, Sarosota-based Insula Companies sold the asset on Sept. 30 for $32.6 million -- netting at least $13 million in profit.

The former 366-unit Dorado Apartments at 1400 W. Donagan Ave., just west of John Young Parkway, was built in 1972.

Insula Founding Partner Fred Cochran told GrowthSpotter on Thursday his company bought the property in January 2014. He said it had been held by the same owner for 35 years and had been neglected. The rents were below market for the red-hot Loop area of Kissimmee due to poor condition of the property.

"A lot of landlords don't reinvest the right amount of money into the physical plant,"  he said. "The owner passed away, and we were able to buy it at a fairly low price."

Insula's strategy is to acquire B/C class, garden style, value-add communities requiring cosmetic or substantial rehab, as well as underperforming properties which may have management-induced problems. The firm paid $16.75 million for the Dorado in Janaury 2014.

"We felt if we invested a couple of million into the property, our tenants would be willing to pay a little bit more in rent," Cochran said.

The renovation plan featured interior upgrades to 50 units, which included new lighting, flooring, appliances, kitchen cabinets and granite counters. But most of the money was spent to give the building exteriors and common areas a much-needed facelift.

The buildings were painted and some were re-roofed with Spanish tiles. Architectural elements, such as wood gables, were added to enhance the new Valencian theme. New railings and doors were installed throughout the community.

Lush landscaping was installed, and all three swimming pools were renovated with pavers, sun-sails, fountains and new grilling stations. An auxiliary clubhouse was converted into a new fitness center and a dog park was added.

"We were right - people were willing to pay more to live in a nice community," Cochran said. "It just needed to be fixed up."

Investors took notice, too.  Since the 2015 grand reopening, several brokers approached Insula with unsolicited offers, including the buyer, Colorado-based Goldelm Apartments. Goldelm partners with The Michaelson Group to manage its Orlando assets.

"We didn't realize how hot the Kissimmee market had become," Cochran said.

In fact, it's so hot Insula couldn't find another distressed property in Kissimmee to fulfill the 1031 exchange. Cochran said the firm closed Thursday on the 212-unit Calibre Bend apartments in Winter Park.

"This is a property that has been institutionally owned for a long time," he said. "It's a safe place to put the proceeds from the Valencian sale."

CBRE's Shelton Granade, Luke Wickham, and Justin Basquill represented the seller. 

The Valencian sale was Insula's second Kissimmee transaction last week. On Sept. 29 the company sold 130-unit Sun Club apartments to California real estate investor George Ullrich for $8.15 million. Insula had purchased the complex in March 2015 for $4.5 million. The company has two other assets in Kissimmee.

"It's one of the best markets we're in," Cochran said. "We love it."

Editor's Note: This article was updated to include the names of the seller's agents.

Have a tip about Central Florida development? Contact me at lkinsler@GrowthSpotter.com or (407)420-6261, or tweet me at @LKinslerOGrowth. Follow GrowthSpotter on Facebook, Twitter and LinkedIn.