Capital Place Apartments : Mason Oliver

Total number of units: 292

11 S 12th St, Phoenix,
AZ 85034, USA

Property Description

Panther and Knightvest purchased Capital Place (renamed Mason Oliver) on June 23, 2020, which marked our 22nd acquisition with Knightvest. It is a midrise wrap apartment community completed in 2015 with 292 units or 375,119 net rentable square feet (SF) on two separate city blocks (11 Capital Place and 12 Capital Place are the current respective names). The property is based in the Downtown Phoenix submarket of the Phoenix MSA in central location near Sky Harbor Airport and Downtown Phoenix with easy access to major thoroughfares including Interstate-10 and Highway 202. Capital Place consists of two mid-rise buildings built in 2015 and separated by one city block. The unit mix consists of 50 (17%) studio apartments, 172 (59%) one-bedroom apartments, 62 (21%) two-bedroom apartments and 8 (3%) three-bedroom apartments. The average unit size is 827 SF with studios averaging 615 SF, 1 BRs at 767 SF, 2 BR’s at 1,095 and 3 BRs at 1,324 SF. The property has structured parking on the ground floor with a total of 327 parking spaces, or 1.1 per unit (tenants pay $40/mo. for a parking spot). Key amenities at each property include fitness centers, swimming pools, resident clubhouses and business centers (11 Capital Place also includes a conference room).

Acquisition Process

Panther and Knightvest acquired Capital Place Apartments on June 23, 2020, for an all-in purchase price of $220,274 per unit. The business plan included modest changes to common areas, reposition to a better tenant profile, and stabilizing the community. This was the first property to implement the Knightvest Quartz 2.0 interior upgrade program which included quartz countertops with waterfall edges, permanent quartz kitchen islands, and custom back splash thereby narrowing the market rent gap and ultimately projected to sell the property for $277,820 per unit in 5 years (2025).

Knightvest secured debt of $38.12 million (59% loan-to-cost) with a floating interest rate of 30-day LIBOR + 280 basis points (3.00% at acquisition) with a 10-year term, interest only for 5 years.

Property History

At the time of purchase, the Phoenix Metro area had added 80,000 new jobs from June 2018 to June 2019, which ranked #2 nationally. Phoenix also ranked 4th nationally for projected population growth for the period 2016 to 2026 at 118,000 new residents annually and was #1 in the nation for rent growth in 2019 at 8.1%. This market success brought several developers and new apartment supply to the Downtown area with ~1,200 units delivered in 2024, and ten high-rise mixed-use buildings expected to open in 2025. As such the average rents at the property have remained flat since 2023. Looking ahead, Phoenix, and more specifically, the Downtown Phoenix submarket, are projected to be some of the last markets to stabilize as they absorb a larger amount of new supply than other markets throughout the US.

Capital Place started paying distributions as projected at 5% in October 2020 and increased to 7% through 2022. Distributions were suspended to accrue funds for our 2-year interest rate cap extension in June 2023. Over the hold period the average in-place rents grew +$302 ($1,261 at acquisition vs. $1,563 today) and our average occupancy was 93%. Net operating income improved 24.4% through 2024 ($2.5M at acquisition vs $3.1M in 2024).

Execution and Sale

The property was sold for a 4.85% cap rate on trailing 12-month net operating income. Panther LP’s will receive an 0.4% average annual return or a 1.02x multiple on invested capital (MOIC) over the 5.1-year holding period. These returns compare to our original underwriting which projected a +/-15% average annual return and a 1.73x multiple over a 5-year holding period. At closing, Panther LP’s received a distribution equivalent to 0.795x of their original investment. Previous distributions received to date were 0.142x original investment plus there was a holdback at closing of 0.085x, for a total investor MOIC of 1.02x.