Columns On Wetherington

COWColumns on Wetherington

Property Type: Multifamily
Location: Florence, Ky
Size: 192 Units
Year Purchased: 2011
Year Sold: 2015
Return: 25% IRR

Introduction:

Ackermann Group has a successful history of acquiring and investing in institutional size apartment communities.  With over 60 years in the industry and over 30 years of executive experience, Ackermann Group’s mission is to foster renewed viability and profit for underperforming or underdeveloped real estate assets. The company’s goal is to provide lasting value to communities, residents, businesses, and investors through integrity, reliability and commitment.

The Opportunity:

Columns on Wetherington presented an opportunity to acquire an established A Class community in the greater Cincinnati Metropolitan area at a significant discount to replacement cost. The luxury apartment community features elegant architectural design, spacious floor plans, 192 well-appointed apartment homes, and resort-style amenities within minutes of Downtown Cincinnati, the Cincinnati-Northern Kentucky International Airport and an abundance of shopping, fine dining and entertainment venues. The property is located within a well-established residential neighborhood with access to playgrounds, fishings ponds and miles of walking paths. The apartment homes offer a luxury condo feel with private entries and direct access garages. The community offers a full range of lifestyle amenities including a clubhouse, fitness center, resort-style swimming pool, basketball court, putting green and car care center.

The investment presented an opportunity to acquire a Class A apartment asset in one of the regions fastest growing submarkets which lacked quality rental options.  The property offered elegant architectural design, spacious floor plans, well-appointed apartment homes, and resort-style amenities.  The location provided a walkable residential neighborhood with easy access to schools, shopping, playgrounds, fishing ponds and miles of walking paths.  The submarket is one of the fastest up-and-coming areas in the Cincinnati MSA and is positioned for continued resurgence from recessionary pressure as the local economy adds new jobs leading to the formation of new households.

The Approach:

Ackermann Group’s strategy is to capitalize on improving market conditions to capture desirable annual cash returns.  Columns on Wetherington was acquired well below replacement value.  Located in one of Cincinnati’s fastest growing neighborhoods, the submarket presents strong household income and employment to support the growth forecasts.  By implementing Ackermann Group’s standards and practices, the asset’s operational systems could be improved for efficiency, curb appeal could reach its potential, and sales and resident retention could be maximized to grow cash flow. Based on Ackermann Group’s in depth market analysis, it was determined that the average rent was below comparable properties in this market creating opportunities for immediate rent growth. In addition, the growing population and businesses in the area, would allow for sustainable and consistent revenue for a mid-term hold.

The Added Value:

Ackermann Group distributed 14.2% and 13.7% cash-on-cash returns in the first two years of operations.  The curb appeal improvements and operational efficiencies implemented in the first 6 months, allowed management to increase rent while capturing significant operating costs through utility reimbursements.  During the first 12 months of ownership, Ackermann Group improved Net Rental Income (net of: Bad Debt, Vacancy and Non-Revenue units) 6.5% and Net Operating Income (NOI) 10.0%.  The increase in NOI along with declining cap rates in the current market, has resulted in a 36.5% increase in value.

The Exit:

Ackermann Group acknowledged the opportunity to capitalize on growing cash flow, fantastic market conditions, and strong demand from institutional buyers in the marketplace.  Columns on Wetherington went to market with an expectation of receiving a 6% cap rate on a trailing 12 month NOI after capital. The property received five cash offers, three being from institutional caliber buyers, accomplishing a sale within four months of taking the property to market. The sale achieved a 6.1% cap rate. Columns on Wetherington was purchased in July 2011 for $18,750,000 with a Proforma Return of 18.08% IRR over 10 years.  The investment was sold in February of 2015 for $25,000,000 achieving an actual return of 25.83% IRR over three and half years net of defeasance costs.