In March 2018, Henley USA launched an offering for a 228-unit apartment community in the Las Vegas submarket, with an intent to reposition the property from Class C to Class B. Henley USA sourced the transaction off-market through the seller who had owned the asset for over 25 years.
The business plan called for a deep value-add program that included investing $10,500 per unit, renovating unit interiors and exteriors, improving the common areas (clubhouse facilities, fitness center, landscaping, laundry room, etc.), hiring an institutional-quality property manager, and implementing utility reimbursement collection on all units, often referred to as RUBS, or Ratio Utility Billing System.
In the first quarter of ownership, renovated units were in high demand and being pre-leased before completion. Henley USA also reported being able to capture RUBS earlier than anticipated.
Exterior and Common Area Improvements Completed
By Q3 2019, essentially all capital construction was completed and occupancy was at 94%. Property improvements included upgrades to the leasing office, fitness center, new roofs, and more, all of which were well received by the tenants. Even during heavier renovation months, the property was able to achieve occupancy of 90% or greater. Henley USA began considering an early sale in 2020.
By Q4 2019, the property was under contract and it officially sold in March 2020. At the time of sale, Henley USA had renovated approximately 113 units (~50%), leaving upside for the future owners. Over the hold period, rents for the renovated units saw increases of approximately 25%. Perhaps more impressively, non-renovated units were released at market rates achieving rents increases close to 20% (including RUBS).
High rental demand and favorable submarket conditions created the opportunity for Henley USA to successfully execute the business plan and exit the investment approximately three years earlier than planned, achieving a higher-than-projected IRR for investors due, in part, to the early exit.
*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 Winsome West Multifamily offering that resulted in an approximate 23.5% (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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