Holiday Cove Disposition Announcement
Holiday Cove Apartments in Forsyth, GA
CHARLESTON, SC | July 30, 2024
Sunbelt Multifamily Fund 1 (“SB1”) is excited to announce the sale of Holiday Cove Apartments, a 96-unit asset in Forsyth, GA. Although it was SB1’s seventh acquisition, it marks the fifth disposition for the fund.
Holiday Cove was sold to a single asset syndicator through a fully marketed process. The negotiated contract included a sizable, nonrefundable, day-1 earnest money deposit, giving our disposition team confidence in the execution amid a turbulent rate environment.
See below for further information about why the fund decided to sell Holiday Cove, how the asset management and operations teams created value during the fund’s ownership and why the acquisitions team were excited to acquire the asset back in 2020.
Disposition Timing
SB1 disposed of 4 of the 9 assets in the fund in early 2022. The plan for the remainder of the portfolio was to continue executing on each property’s individual value-add strategy to maximize value before opportunistically selling into periods of market strength.
With an estimated average market rent of $1,110, assuming complete renovation of remaining classic units, the current spread between average in place and market rent for Holiday Cove was just $20. Given 52% of the property’s units remain in classic condition, the team felt they had successfully repositioned the asset and had maximized operational value for the fund.
In addition, the table below shows market rents for Holiday Cove vs nearby comparable properties. We can see that Holiday Cove’s average rents are well ahead of their competitors, only trailing newer and/or more urban competitors which are materially higher quality assets.
Holiday Cove Rents vs. Competitors
Source: Costar
As such, the team decided it was time to exit, but we still needed to select the best time to sell. After a significant rally in US Treasuries in Q4 2023 we saw an opportunity as potential buyers were buoyed by the more attractive rate environment. To maximize sale proceeds, we waited until the 2024 Spring leasing season before beginning the fully marketed process for the asset.
Creating Value
After the acquisition in January 2020 our in-house property management team, Sunbelt Properties, took over management of the asset. Sunbelt Properties immediately started to execute our interior renovations, common-area improvements, and operational efficiencies, which included:
renovating 46 units with LVP flooring, black appliances, faux granite countertops, hardware and lighting fixture upgrades, a fresh coat of paint, and bathroom vanity upgrades.
complete roof replacement and HVAC replacements.
All told, we invested almost $1mm through Capex at Holiday Cove and, as a result, we were able to achieve regular monthly rent increases of between $25 to $50 per unit. The property’s average rent at disposition was $1,090, which is a 72.2% increase over the average rent at the time of acquisition.
What We Saw When We Acquired the Asset
Through our close broker relationships, we were shown Holiday Cove Apartments in the summer of 2019 as an off-market sale. The owners were the adult children of the original developers, who had inherited the property from their parents. It was an unusually long acquisition process, taking 7 months, but it allowed us to acquire the property at an attractive cost basis of just $45k/unit.
In addition, the sellers were absentee owners, who emphasized high occupancy and reducing unit turns rather than pushing rents and streamlining operations. As such, we believed there was a lot of scope for increasing operational efficiencies and improving net operating income.
Finally, Forsyth, GA is a small but growing metro area nestled along the Atlanta-Macon I-75 corridor. The Ballast Rock team recognized that, as the only market-rate apartment community in the town, and with no near-term incremental rental supply, the asset had a lot of potential upside to be captured by market rent increases.
