Location: Phoenix, AZ
Property Type: Multifamily
Number of Units: 415
Acquisition Date: April 28th, 2011
Status: Sold by Gelt, Inc. on July 30th, 2014
In May 2011, Gelt acquired Ferntree and Colonnade Gardens (415-units) from AIMCO, a NYSE public REIT for $16,000,000. The properties are well located on Camelback Road between 18th and 19th Streets adjacent to the 51 Freeway in the prestigious Biltmore District. Gelt originated a Freddie Mac loan of $5,150,000 secured by the Colonnade property and assumed two Freddie Mac mortgages, with an approximate balance of $6,900,000, which were secured by the Ferntree property. The mortgages were cross-collateralized and consolidated to make reporting and disbursements more efficient. Gelt merged the two properties, renaming the complex The Colonnade.
Combining the two properties into one entity was the beginning of the rebranding process. Moving forward, we were able to market the property as one large 415-unit complex and thus save money on marketing. The consolidation was complete with the hiring of a single management company and maintenance staff to run the two properties with a single set of books. We created new collateral materials, new signage, a new website, and implemented an outreach marketing campaign to local businesses. Additionally, we negotiated all new service contracts and due to economies of scale, we were able to save a significant amount of money in operational expenses immediately.
In the first year of our ownership the property sprang more than 25 slab pipe leaks. We were well aware of the failing plumbing as a result of our due diligence and quickly addressed this problem by re-piping a large segment of the property with a product know as Aquatherm. With the new piping in place, the property?s plumbing system ran more efficiently and realized significant savings. Gelt also made a number of other capital improvements and additions to the property, which are listed below:
? Repainted all of the buildings to modernize its appearance
? Added state of the art washers and dryers that incorporate a credit card payment system and are able to communicate with computers and cell phones to notify users which machines are available and when laundry and dryers are complete
? Created a fully furnished model for potential residents
? Purchased new pool furniture
? Resurfaced the roofs
? Replaced inefficient chiller and boiler systems with high efficiency alternative
? Removed and replaced the irrigation system
? Installed a new water tower
? Upgraded the gym and its amenities
On the leasing side, we implemented an LRO program that sets the rental rates based on the property?s current occupancy, exposure, units on notice to vacate and the availability and rates at competing properties in the market. Subsequently the property?s rents grew by nearly 20% and maintained an occupancy rate between 95 ? 98% over Gelt?s ownership period.
The property was sold on July 30th, 2014 for $25.5 million, producing a 98% cumulative return to investors over the 39-month hold period.