Pine Hill, NJ

Realized Deal : Chalet Gardens Apartments

Sponsored By Premier Properties

Risk Profile
Value-Add
Amount Invested
$1,250,000
Targeted IRR
19.8%
Actual IRR*
25.1%
Targeted Equity Multiple
2.66x
Actual Equity Multiple*
1.55x
Targeted Hold Period
7.0 years
Actual Hold Period
2.0 years

In mid-April 2019, Premier Properties launched an offering for a 484-unit, Class B garden-style apartment community located in the Philadelphia MSA.

Premier Properties had acquired the property in an off-market transaction earlier in the month, and thus presented CrowdStreet investors with an opportunity to invest at an attractive basis and with no acquisition risk. Although the property had historically maintained high occupancy, it had recently suffered from cash-strapped ownership, resulting in deferred maintenance and significant neglect of its curbside appeal. These conditions forced previous ownership to maintain below-market rents.

Upon acquiring the property, Premier Properties planned to replace existing management with its in-house property management team to maximize operational efficiencies. Approximately $8.8 million was allocated to a comprehensive property improvement plan, which included modernizing unit interiors, as well as exterior and amenity upgrades.

Premier Properties anticipated that these renovations would allow it to adjust rents up to market rates, which would drive net operating income growth. Expectations were that rent increases of at least 25% could be achieved.

The original business plan contemplated refinancing the asset after three years with a long term agency loan based on the increased value created from the rent appreciation from property renovations, which would result in a partial return of capital to investors. Premier Properties targeted selling or recapitalizing the property after a seven year investment hold period.

Project Timeline

Transformation Underway

June 2019

A complete transformation of the property was underway just one quarter into the investment hold. Over the first three months, Premier Properties completed a sizable tree removal and cleanup project throughout the complex, in total removing over 200 wild and dead trees. Decades worth of overgrown, thick brush was removed and cleaned up, opening large swaths of grassy areas which now allowed the sunlight to penetrate. The roof replacement and installation of new siding was also in full swing with over 10 buildings completed to date, alongside the installation of new gutters and leaders. Exterior doors were being replaced or repainted, helping now project a clean, upscale property profile. Approximately 34 units were completely renovated to the latest Premier Properties standards, and were being rented at rates exceeding underwriting by $40. The new property manager was regrouping the team and training them on the Premier Properties ways and standards, to ensure the property offered a quality living experience for its residents.

Progress Continues

December 2020

Throughout 2020, the property saw significant leasing velocity and continued on a strong path towards stabilization. At year end, the property was approximately 93% occupied and 95% leased and was achieving healthy rent premiums on the renovated units.

In addition to strong demand for the renovated product, the renters’ demographics had also changed significantly, with the property now attracting a financially stronger and more stable tenancy base. Furthermore, in the fourth quarter, a new Ratio Utility Billing System (“RUBS”) program was successfully rolled out, which now charged tenants for utility consumption not paid for previously, thus creating a new revenue source. At year-end, the property was approximately 93% occupied and 95% leased.

Early Sale

March 2021

In Q1 2021, Premier Properties informed investors that it had received a bona fide offer from a qualified purchaser who owned assets in the submarket, and that it had executed a contract to sell the property with the purchaser making a significant non-refundable deposit. The sale transaction was completed in March 2021.

Final Outcome

An attractive basis and good business plan execution, including effective management, exterior property upgrades and interior unit renovations, and rent growth, allowed Premier Properties to exit the investment earlier than planned and achieve favorable returns for investors.

*Net of fees

This report contains explanations of a series of events associated with Premier Properties’ Chalet Gardens Apartments offering that resulted in an approximate 55% (net of fees) absolute return on original equity 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.

The report partially relies upon the sponsor’s explanations, the information contained within sponsor-produced quarterly reports, and conference calls. This analysis is not an assertion of independently verified facts but, rather, is for informational purposes only, to convey CrowdStreet’s understanding of what transpired.

CrowdStreet makes no representation or warranty, express or implied, in relation to the fairness, accuracy, correctness, completeness, or reliability of the information contained in this report. CrowdStreet does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this report or for any decision based on it.

This communication should not be construed nor is it intended to be a recommendation to purchase, sell or hold any security or otherwise to be investment, tax, financial, accounting, legal, regulatory or compliance advice. Furthermore, this communication does not establish an attorney-client relationship or constitute legal advice.