Normandale Apartments (Stratton Park & Somerset)
Normandale Portfolio, comprising of 528 units, located in two communities: Stratton Park Apartments (previously named Country Place) and Somerset Apartments (previously named Bent Tree). Both properties, located in west Fort Worth, were built in in 1985-1986. Unit sizes averaged 735 square feet. Construction is two story wood frame with a combination of brick veneer and hardi plank exterior siding with pitched, composition shingle roofs. All units are individually metered for electricity and have individual HVAC units providing for low maintenance.
The property was put under contract February 27, 2013, by Knightvest Capital of Dallas who has been Panther’s partner in a majority of our multifamily acquisitions. Knightvest provides onsite property management services and invests alongside Panther. Panther FW Investments provided 73.51% of the acquisition equity. Knightvest obtains other third party equity and assumes 100% responsibility for acquisition financing including any recourse required by the lender. Panther FW Investments and its’ investors provide no guaranties on the debt.
Panther and Knightvest closed the transaction on April 26, 2013. The portfolio was 90% occupied at time of purchase and had some of the lowest rents in Dallas/Fort Worth averaging $423. The business plan included extensive interior capital improvements; plus, minor exterior improvements. This was a value-add project scheduled to take approximately 36 to 60 months to produce a 2.04 multiple to the individual investor.
The Portfolio purchase price was less than $24,000 per unit. The acquisition projected 10% annual distributions to investors starting month 13; however, upon takeover it was evident that the existing resident profile needed to be re-qualified. In October 2014, Knightvest negotiated an attractive refinancing of the properties enabling a payout distribution of 100% of the accrued unpaid preferred return. Post refinancing, monthly distributions of 10% continued through closing.
EXECUTION AND SALE
Exceeding income projections for the first quarter of 2016, the property was listed for sale in April, 2016 with call for offers due June 10th, 2016. There were a total of seven offers and three companies competed in “Best and Final”. The property contract was awarded to Nicholas Residential, LLC on June 20th, 2016. The contract was fully executed on Tuesday, July 12th and closed on October 27, 2016.
Panther’s original presentation projected hold period was 3 to 5 years with an exit cap of 8.5%. Knightvest was able to capture this value-add component in 42 months at an exit cap rate of approximately 6%.
This sale surpassed our pro-forma projections offering a 2.79 multiple to Panther FW Investors and achieving a record for Panther of an annual average return on investment in excess of approximately 39.0%.