MarQ at 1st : Riverside, Arizona

Total number of units: 164

Riverside 625 W 1st St
Tempe, AZ 85281

PROPERTY DESCRIPTION

ACQUISITION PROCESS
Panther and Knightvest acquired The MarQ at 1st Apartments on May 29, 2019, for an all-in purchase price of $146,341 per unit. The property waslocated in the Tempe submarket of the Phoenix MSA, adjacent to Arizona State’s main campus and Tempe Town Lake, a recreational and entertainment hub. The property was built in 1985 and required significant capital investment at the time of acquisition to bring it up to today’s standards for the market. The plan was to upgrade both the interiors and the common areas at the property, narrow the market rent gap, and to ultimately sell the property for $225,101 per unit in 5 years (2024).

PROPERTY HISTORY
The Property had been owned by the seller since 2016 and had been well maintained; however, there was a substantial opportunity for value-add with this property given the strength of its location combined with a significant rent gap of over $800 for nearby properties with new construction. The property was unique for the area given its low density (only 22 units per acre vs 65 units per acre for new construction).This was a true differentiator as Tempe continues to densify with migration to the area. Knightvest’s plan was to enhance the common areas, amenities, pool areas and improve the interior renovations by adding its highest-level Quartz upgrade package (quartz countertops, stainless steel appliances, new cabinet door fronts and new hardware/fixtures) to all of the classic units at the property (45 units) while also making intermediate upgrades (including washer dryer connections and appliances in all units) to an additional 40 units. About 77% of the units were upgraded. At the time of sale, the property was 95% occupied with average rents of $1,168, a $226 increase over takeover rents.

EXECUTION AND SALE
The property was marketed for sale on May 20, 2021, with a call for offers on June 22, 2021. The property had very strong interest and was ultimately awarded to the buyer for $280,000 per unit ($46 million)which compared favorably to our underwritten exit price of $225,101 in year 5. Panther LP’s received a 40% average annual return and a 1.96x multiple on invested capital over the 2.4-year holding period. These returns compare favorably to our original underwriting which projected a 15% average annual return and a 1.75x multiple over a 5-year holding period.

This sale exceeded our pro-forma projections providing a 1.96x multiple to Panther FW Investors and an annual average return on investment of 40.45% over the 2.33 year holding period.