Market Rate Case Studies
Clocktower Apartments
Portland, OR
OVERVIEW
Guardian Management identified The Clocktower Apartments as an attractive rehabilitation and repositioning opportunity in a premier Portland, Ore., submarket. From a list price of $14,300,000, Guardian negotiated a purchase price of $10,400,000 and acquired the 195-unit property with two tenancy-in-common (TIC) co-owners. Guardian and its co-owners assumed a low-leverage loan to complete the purchase in October 2003.
OBJECTIVE
Although Clocktower occupies an “A” location in a top-performing submarket, the seller, an institutional owner, struggled to maintain occupancy at the property and morale among its management staff. Guardian recognized the seller’s management weakness and misunderstanding of the market. Guardian formulated an ownership plan to capitalize on operating upside by managing and improving the property to a level competitive with surrounding multifamily communities.
EXECUTION
Guardian directed a full-scale physical renovation concurrently with a new management campaign. Ownership invested more than $610,000 in rehab over the first 13 months of ownership, with upgrades including new exterior paint, siding repairs, landscape redesign and signage. Interiors also received updates including fixtures, lighting and crown molding in some units.
OUTCOME
i. Guardian’s management team improved NOI (net operating income) 64 % from 2004 to 2005 and 23% from 2005 to 2006.
ii. Guardian directed a refinance in 2005 which locked a 10-year rate at 5.16% and produced distributable proceeds of $1,743,000.
iii. Upon the sale of its TIC ownership in 2007 at a price of $18,500,000, Guardian realized an internal rate of return of 35%.