Horizons at Fossil Creek : Sorrento
Total number of units: 420
5800 Sandshell Drive
Fort Worth, Texas 761037
The Horizons at Fossil Creek represented an attractive value-add investment opportunity within the Northeast Fort Worth submarket. The Property is a high quality, very well-maintained, Class B+ garden-style community originally constructed in 1998 by the Simpson Family (the patriarch of Grand Peaks). The asset sits on approximately 25 acres and consists of 56 garden style buildings with tile roofs. The Property offered potential for rental rate growth through an interior value-add program-upgrading the common areas and interiors to match its location and setting. The Property average unit size is 996 square feet consisting mainly of larger 2 and 3- bedroom units (about 66% of unit mix). It is located adjacent to The Golf Club at Fossil Creek and features 80 units with attached garages overlooking the golf course and an additional 134 detached garage buildings. Horizons includes a clubhouse/leasing office, 2 swimming pools, 24-hour fitness center, bark park, and golf putting green which is part of the green space to be repurposed.
The purchase price of $57,050,000 ($135,833 per unit) was considered within market pricing for this vintage property and location in the Northeast submarket of Fort Worth. The seller, Grand Peaks Properties (based in Denver, CO), took the property out to market in May 2018. While several offers were received, the seller requested the broker contact Knightvest directly. Knightvest had purchased one other property from Grand Peaks. The sales price was agreed upon even though it does not represent the highest offer received during marketing. We closed on October 30, 2018.
Panther and Knightvest acquired the Fossil Creek Apartments on October 30, 2018, for an all-in purchase price of $150,536 per unit. The property is located in north Fort Worth just east of I-35 and along Fossil Creek Golf Course where its central location and ease of access to both downtown Fort Worth and Alliance combined with its large floor plans and townhome style have made it an ideal location for renters. The operating plan for the investment called for significant enhancement to both the interior units and exterior of the property, including a renovated clubhouse, a new fitness center and coffee bar, a new outdoor resident entertainment center, and new cabanas at the 2 pools on the property. These common area improvements were completed in November 2019. Knightvest has also completed 366 interior upgrades to date, representing 87% of units. The total capital budget for this investment was $8.9 million, and during the 4.2-year holding period, in-place rents have grown $297, from $1,186 at acquisition to $1,483 today. The property has made uninterrupted distribution payments since month 5 of the holding period (March 2019) at a 5-6% annualized coupon rate.
EXECUTION AND SALE
The property was originally marketed for sale in September with a call for offers in late-October. The initial round of offers were encouraging, with 6 bidders at or near $80,000,000 ($190,476 per unit), however, during the best and final offer process in early-November, four of the bidders walked away and the remaining two bidders reduced their offers to $75,000,000. We and Knightvest felt these offers did not adequately value the property’s strategic positioning and future earnings potential, and thus decided to revisit the sale process at a future date when more conducive market conditions prevailed. Then, in mid-November, there was renewed interest from one of the original bidders on the property. The all cash buyer agreed to purchase the property for $82,500,000 ($196,429 per unit). After we agreed to a $200,000 seller credit for foundation repairs, the PSA was signed on December 21, 2022, and closed on December 30, 2022.
The $82,300,000 sale price ($195,952 per unit) compared favorably to our original projected exit 5-year price of $188,241 per unit (October 2023).
Panther LP’s received a 15.0% average annual return and a 1.63x multiple on invested capital (MOIC) over the 4.2-year holding period. These returns compared to original underwriting which projected a 15% average annual return over 5 years. At closing, Panther LP’s received a distribution equivalent to 1.44x of their original investment (previous distributions amount to 0.19x of original investment), thus the total of 1.63x.