Windtree Apartments Acquisition Announcement

Details on the Windtree Apartments Acquisition

• Windtree boasts a median income of $47,079 and $43,603 in the 1- and 3-mile areas respectively.

• Windtree was previously owned by the original developer - a Fayetteville based real estate development company that builds single family home communities and owns over 700 multifamily units. Despite their multifamily experience, the previous owner would consistently renew tenants at below market rates – what we typically see with a “mom and pop” operator – to keep tenant turnover as low as possible.

• While the previous owner is an experienced owner-operator, they tended to operate to maximize physical occupancy rather than economic occupancy and have left rents below market for some time. As a result, we expect to acquire a property that is nearly 100% occupied and has residents who have seen marginal rent increases in the years leading up to this sale.

• Ballast Rock will be able to maximize the property’s performance while maintaining a strong resident base through improved operations and renovations.

• Within a 3-mile radius of Windtree, 34% of all employees work in education & health services, which we view among the most stable employer types.

• Windtree is only a 10-minute drive from Cape Fear Valley Medical Center. The medical center is a staple location for Cape Fear Valley Health Systems, the third largest employer in Cumberland County.

• Windtree’s two main rental competitors, Legacy at Cross Creek ($382-$393 per month higher) and Morganton Place ($283-$508 per month higher) have significantly higher asking rents than Windtree. As a result, we expect Windtree will have minimal turnover as we raise rents in line with the Fayetteville market.

• Due to our experience owning and operating three other properties in Fayetteville, Heather Ridge, North Crossings, and Sycamore Townhomes, our acquisition and asset management teams have significant knowledge of market rental rates and the in-market expenses associated with managing multifamily properties in Fayetteville.

• Between late July, when Ballast Rock went under contract to purchase Windtree, and late September, the 10-year Treasury increased by 23%. Given the effect this interest rate movement had on our loan terms, Ballast Rock was able to negotiate a significant discount to the originally negotiated purchase price.

• We exited our Fayetteville Holdings – Heather Ridge, North Crossings, and Sycamore – at various stages this past spring/summer. Those sales were opportunistic because of the interest rate environment in 4Q21/1Q22 and the type of buyer who was looking at the deals, rather than a reflection of our view on Fayetteville as a market. To put the dispositions in the context of this acquisition, we’ve created the below table comparing trailing cap rates, price per door, year of construction, and asset class: ​