Investment Overview
In December of 2011, Croatan Investments closed on Preston Trails, a multifamily, garden style apartment community located in the cities of Chesapeake and Portsmouth, which are a part of the Norfolk-Virginia Beach MSA.
Challenges
Previously Real Estate Owned (REO), Preston Trails was acquired by Croatan as a distressed property with low occupancy, rents, and tenant profile and substantial deferred maintenance needs. Additionally, the asset was being inefficiently operated and marketed as two separate properties. Beyond implementing significant renovations, the Croatan team needed to improve the operating efficiencies and increase the tenant profile to bring the property in line with the sub market.
Outcome
▪ Croatan improved operating efficiencies by combining the two properties and rebranding the asset.
▪ We implemented a $1.8mm ($4,332/unit) renovation plan, which included residing phase I, bringing back online 10 down units, replacing the 25% of the units that ran off a boiler system with individual HVACs, electrical system upgrades, and upgrading the amenity packages to appeal to families. Additionally, we reduced utility expenses by sub-metering the water/sewer/gas, installing energy efficient windows and sliders, and modernizing the mechanical and electrical systems
▪ To improve the tenant profile, Croatan implemented a more stringent credit and income qualifying criteria for new residents.
▪ Within the first two years following acquisition, Croatan stabilized property operations and more than doubled the property NOI.
▪ In 2014, we closed on a refinancing with a new loan that was ~120% of our original cost basis.
▪ In 2018, we closed on a second refinancing with a new loan that was ~145% of our original cost basis and at a substantially lower interest rate than the prior loan.
▪ In March 2022, we sold the asset and generated a gross IRR of 52.62% and gross equity multiple of 9.06x over a 10.29 year hold.
