Recently we closed on a 122 unit apartment community in Memphis, TN. The apartment community is in a strong A class area, but the building is in C or maybe even D class condition. From the outside, the pool is green, the bushes and trees are overgrown, the windows are falling apart and the color is a drab dirty white. On the inside, the common space greats you with a decent looking entry and office, followed by a shiny new elevator with nicely tiled floors in the hallways. Step in a little further and you will notice patches all over the walls, missing ceiling tiles and a lot of wasted space throughout. Open the unit doors and welcome a kitchen from the 60’s, flooring that is tattered, shower tiles falling off of the moldy walls and plaster missing from below the leaky windows.
Sounds like a great building, right? Well, it’s old, tired and hasn’t been given much love in recent years, but that is about to change. As I am writing this, our crews are prepping to start painting the exterior, cleaning up the landscaping and replacing the windows. We will begin remodeling over 30 vacant units immediately, bringing run down units into the present day, with new kitchen cabinets, stone countertops, stainless appliances, Luxury Vinyl flooring and freshly tiled bathrooms. The common areas with be getting a total overhaul by opening up walls and creating beautiful and useable spaces for our residents. We will be adding in a state of the art work out center, a trendy party room, a package handling center, pet wash station, business center, giving the pool area a complete overhaul, adding a dog park and more.
Our plan is simple, but the execution is critical. Being able to quickly renovate the exterior and common areas is crucial to changing the overall look and feel of the building. Completing unit renovations in a timely fashion will require persistence, patience and a kind heart to the current residents. The perception of the building is negative in the community, so we will need to be purposeful in our approach, in order to change that into a positive and exciting vibe.
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. The building has fallen into disrepair. The residents complain about the living conditions and the lack of attention they receive. 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 community again!
So, what have I taken from this that may help you with your business?
- Be willing to dig deep and keep your eyes open: We originally planned to complete a $2.3 mm renovation, but after digging deep into the market demand and completing a full walk of the asset and neighborhood, we realized that it would better serve our investors and the community to nearly double our renovation budget.
- Secret shop the competition before you walk all the units. By doing the secret shopping first, I was really in tune with the market and what we could actually achieve. It allowed us to really envision the full scope of work that would make this project a success.
- Be open to opportunities: I was tempted to shoot this opportunity down right away. My partner Drew brought it to my attention and immediately I rejected the idea of a redevelopment during COVID. After opening myself up and really digging into the opportunity, I realized the enormous potential and was ready to push forward.
- 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 was experienced in the market and had the current debt on the property. The relationships with our investors allowed us to raise $5.5 mm in 4 days with a 100% commitment level. Lastly, relationships with my partners who came together equally to make this deal a reality.
I am excited for this partnership with all of my partners – both active and passive!
To your success!