Rehabbed apartment projects in University area see steady rent growth
By Ashley Fahey
Staff Writer, Charlotte Business Journal
Nov 10, 2017, 7:40am
Value-add multifamily properties continue to be an attractive for many real estate investors, particularly in submarkets with an abundance of aging communities and pent-up demand.
The University area of Charlotte has particularly been a target for value-add real estate investment, given much of the area was developed 15-plus years ago and interest in the submarket has stepped up, with employment gains and the Blue Line Extension opening in the spring. Several multifamily projects have been purchased for future repositioning or have already undergone a significant capital improvement program.
The Greater Charlotte Apartment Association led a tour on Wednesday that highlighted three apartment communities in and around University City that recently came under new ownership and received significant renovations: Hunt Club off of North Tryon Street, Pavilion at UC near University City Boulevard and the Interstate 485 interchange, and Elan at Mallard Creek off of West W.T. Harris Boulevard.
Investments in these communities ranged from nearly $5,000 to $25,000 per unit. All three communities received unit upgrades, including new appliances, finishes, flooring and cabinetry, as well as new or refurbished property amenities.
While the renovation programs at the projects varied, some common themes emerged among all three properties:
All three apartment communities saw a jump in rental rates following capital investment from new ownership.
Hunt Club, which received the most expensive and intensive renovations, has experienced an average rental rate increase of 33% across its five unit types. When Atlanta-based Cortland Partners acquired the community as part of a $273.9 million portfolio purchase in early 2015, rents averaged $684 to $859 monthly.
Following a renovation program that included new unit flooring, Bluetooth speaker light fixtures, countertops, cabinets, black appliances, Nest thermostats and adding a second bathroom to all but three of the property's two-bedroom, one-bathroom units, rents are now between $902 and $1,120 per month.
Rents also increased at Pavilion at UC and Elan Mallard Creek. Pavilion's rents went from $520 to $850 a month up to $741 to $1,101 following renovations that included resurfaced counters and cabinetry, new carpet and roll vinyl, new paint and color scheme, and a silver appliance package. LIV out of Birmingham, Ala., purchased Pavilion at UC for $18.4 million in 2016, and Hawthorne Residential Partners manages the property.
At Elan Mallard Creek, monthly rents went from $831 to $1,520 up to $932 to $1,615. There, ownership upgraded cabinetry and added granite countertops, backsplashes, stainless steel appliances, plank flooring, and washers and dryers in all units. Electra America out of North Palm Beach, Fla., purchased Elan Mallard Creek for $35.5 million last year as part of a portfolio deal. Robbins Property Associates manages the property.
Amenities continue to be a key investment among developers building new communities — around Charlotte, the newest properties coming online have a long list of amenities.
Most properties built 20 or so years ago did not include such lavish extras but, with repositioning, many have some of the most popular features incorporated in just about every new multifamily development coming out of the ground now.
Key among them: delivery management systems.
All three communities spotlighted on Thursday incorporated a new parcel locker system to manage deliveries. Pavilion at UC and Elan at Mallard Creek installed Luxer One package lockers in their clubhouses.
It's cut down significantly on the time leasing associates spend on managing deliveries — at Pavilion, nearly 1,500 packages have not been collected by management staff since launching Luxer One. Hunt Club uses Parcel Pending, a similar system popular among property management companies.
Some of the properties are looking at adding Amazon Hub, a locker system that e-commerce giant Amazon began rolling out to apartment communities earlier this year. That program allows packages from all carriers to be delivered into on-site lockers exclusively available to residents, making it different from the Amazon Locker program, which allows Amazon shoppers to pick up their packages at designated locations — in Charlotte, Amazon Lockers are in places like the EpiCentre, some 7-Eleven and QuikTrip stores, Northlake Mall, and the Whole Foods Market at Waverly.
Other amenities that older properties are introducing in their rehabs: lifestyle and social amenities that include state-of-the-art fitness equipment, in-water pool lounge chairs and pet spas.
All three properties had a fitness center before being renovated, but equipment was lacking or outdated — at Pavilion at UC, there was one elliptical, one treadmill and one multipurpose machine. It's since been overhauled into a fitness-style studio, with TRX equipment and a personal trainer who lives on site and is available for residents.
The property's "activity center" received a $40,000 renovation that included new Matrix Fitness equipment, the Luxer One system and an indoor pet-washing station. Another $40,000 was invested in the property's grounds for new lounge furniture, a fire pit and an outdoor kitchen with grilling stations.
At Hunt Club, the community's original clubhouse was demolished and rebuilt, opening about two months ago. The new community area includes a fitness center, business center and pool. A dog park was also added to the property.