In September 2017, Willow Creek Partners launched an offering for a 96-bed (48-unit) student housing apartment community in Raleigh, North Carolina, less than two miles from the growing NC State University campus.
The acquisition represented an off-market opportunity, which Willow Creek Partners sourced from a local seller. The property appraised for $250K more than the contract purchase price and had a history of strong occupancy. At the time of acquisition, the property was 100% leased for the 2017-2018 academic school year, just as it had been for the previous seven academic calendar years.
Willow Creek Partners’ business plan included repositioning the property by capitalizing on rental rate increases, implementing more vigilant expense management to ensure that property expenses were more in line with the market, and improving the overall asset condition with minor capital improvements.
Road to Stabilization: December 2019
Upon acquisition, the Willow Creek Partners quickly began executing on its business plan. After approximately two years of ownership, the property had undergone various capital improvements including; painting of the decks and weathered woodwork, installation of key fob access to all units, and staining of all exterior landings and stairwells. The property’s financial performance had also improved. As of Q4 2019, occupancy was still at 100%, expenses remained stable, and in-place rents had increased approximately 10% over the prior year.
Following the momentum of 2019, Willow Creek Partners planned to continue to effectively monitor expenses and increase base rents. However, COVID-19 brough economic uncertainty to the real estate market in early 2020. Despite the challenges encountered, Willow Creek Partners was able to maintain rent collections above 95% and occupancy at or above 97% throughout the year. In addition, Willow Creek Partners also successfully increased base rents by 4% and continued making distributions at an annualized rate of approximately 6%. As a result, net operating income (NOI) for 2020 was approximately 14.5% higher compared to NOI at acquisition.
With the property stabilized and performing, in Q1 2021 Willow Creek Partners engaged Cushman & Wakefield to market the property for sale. After a successful marketing effort, Willow Creek Partners accepted an offer that would provide favorable returns for investors and eliminate future market risk exposure.
The sale transaction officially closed in August 2021.
A successful business plan execution and favorable submarket conditions created the opportunity for Willow Creek Partners to exit the investment after approximately four years of ownership and achieve positive, albeit slightly lower-than-projected returns for investors.
*Net of the most onerous fees charged to clients of CrowdStreet Advisors, LLC, our registered investment advisor subsidiary; an investor’s actual returns on a realized investment may differ.
This report contains explanations of a series of events associated with the WCP Raleigh Student Housing offering that resulted in an approximate % (net of most onerous fees) IRR to investors (including those from the CrowdStreet Marketplace). Certain aspects of the report such as dates of major events and the final outcome are easily verifiable while others, particularly underlying reasons behind the sponsor’s business plan execution, are not.
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