Recently we closed on a 97-unit apartment community in Memphis, TN. This is one of the most iconic buildings in the city and is located in a fantastic part of town, however, the building is in C class condition, so a modern update, while keeping a historic look is necessary. The common space greats you with a decent looking entry and office, followed by a nice fitness center, but the rest of the area is a lot of wasted space and outdated. Open the unit doors and welcome a kitchen from the 80’s, flooring that is parquet, but is worn and tattered, the bathrooms are a blast right out of the 1940’s and the windows are leaky and in poor condition.
This is our second building in the area that is tired and hasn’t been given much love in recent years, but, just as with our other asset, that is about to change. Our plan is to add a pool and parking to the exterior, replace the windows, renovate the common spaces and gut the kitchens and baths. The trick on this project is to be true to the late 1930’s architecture, while also bringing the finishes to a modern era. The great news is that much of the plumbing, HVAC and electrical has been updated and the structural integrity is second to none. For an old building those are the most important things to have on your side!
Our goal is two-fold. First, provide excellent returns to our investors and ourselves. This will be done by executing the renovations quickly and efficiently, changing the perception of the building and hiring critical staff. The second, and perhaps more important part, is that we want to make an impact on the community and bring this iconic building into the future for the next generations to enjoy. The building has not been updated and the previous management did not take care of the residents. This change needs to happen immediately. Providing all of our residents with a safe, clean and modern place to live, along with staff members that care and fulfill their needs is important to us. We want the community to be proud of the apartment building again!
So, what have I taken from this that may help you with your business?
- Hold firm on your negotiations: Don’t get caught up in the market steam. Sellers hold the cards right now, but that doesn’t mean you have to pay what they want. This seller wanted a lot more. We didn’t want to pay more. Months of negotiations went by before we got the deal locked up, but it was ultimately at a price that we could make work.
- Prepare: There is a lot of front-end work that goes into a large renovation in a historic district. Our goal was to get a head start on the approval processes and blue prints prior to closing. Do the ground work up front, get your contractors and pricing lined up, so that when you do close, you can move the project forward.
- Be open to opportunities: Originally this property was off our radar due to the age of the building, but after we closed on a property down the street and really began to see the value in the area, we cautiously explored the property. We found that most of the mechanical systems had been upgraded and that structurally, the building was in as good of shape as most 20-year old buildings.
- Build relationships: Relationships are what got this deal done. The real estate broker brought it off market. The mortgage broker brought us a lender that is a great partner and bought into the concept. The relationships with our investors allowed us to raise $4.5 mm in 3 days with nearly a 100% commitment level.
I am excited for this partnership with all of my partners – both active and passive!
To your success!