A smart renovation and strong economy helped a Virginia company realize a $17 million gain this month on the sale of the Lake Tivoli Apartments in Kissimmee.
Chandler Management Corp. paid $49.5 million less than two years ago for the 384-unit complex that was built in 1990 and 2002. The firm sold the asset last week to Utah-based Bridge Investment Group for $67 million after giving the exterior and amenities a refresh.
The gated complex, which is located midway between Kissimmee’s two major hospitals, consists of 36 two-and three-story buildings and was 95-percent occupied at the time of sale.
CBRE’s Shelton Granade, Luke Wickham, and Justin Basquill represented the seller in the transaction. Wickham told GrowthSpotter Chandler benefited from great timing and a strong economy.
“They made some nice improvements to the some of the interiors and the exteriors, and were able to push the rents," he said.
Colin Apple, managing director of acquisitions for Bridge Multifamily, said the firm still sees value-add potential for Lake Tivoli. Base rents have grown organically by 25 percent since Chandler purchased the complex, he said.
“Newer product is renting for up to $400/month more, providing room and opportunity to complete our value-add business plan to provide higher quality living at a more affordable rent than the Class A product,” Apple added.
Bridge Property Management will take over management, and Bridge will renovate the unit interiors and amenity package. These amenities often include a health facility, a business center, and various recreational areas, coupled with social and community programs such as after-school homework programs for school-aged children, “English as a second language” programs in selected communities, movie nights, ice cream socials and other community events.
The plan falls right in line with Bridge Multifamily’s strategy of focusing on 1980s-2000s vintage two- and three-story garden apartments. The firm issued a white paper in May detailing the value-add potential for Class B apartments:
“For illustrative purposes, an average Value-Add investment of $7,500 in a 1990s vintage asset could result in $1,200 of additional annual revenue; at a conservative secondary market cap rate of 5.5 percent, the value and profit per unit are $21,818 and $14,318, respectively. Or, for every 100 units, there is an additional $1.4 million of upside in operational alpha achieved in addition to market rent growth over the investment hold.”
Bridge is a SEC-registered investment adviser with over $15 billion in assets under management. Bridge manages private equity funds, separately managed accounts, co-investments, and joint ventures.