Marketupdate Edition 5 – August 2018

Wilkinson Corporation Purchases Brookhaven Multifamily Portfolio

Wilkinson Corporation is pleased to announce the acquisition of  three multifamily properties in the Atlanta area on July 19, 2018, marking the third in a recent succession of joint ventures with Torchlight Investors of New York  City.

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The three garden- style, mid-century properties, Epic Gardens Apartments (112 units), Terraces at Brookhaven (244 units), and Northeast Plaza (100 units), lie adjacent to each other in the City of Brookhaven in greater Northeast Atlanta. The communities will be repositioned and renamed, with Epic Gardens Apartments becoming Magnolia Gardens at Brookhaven; while Terraces at Brookhaven and Northeast Plaza will be combined into a single property named The Commons at Briarwood Park. Wilkinson Asset Management assumed management of the communities at the time of closing.

This purchase is “another great investment in the promise of the Atlanta market,” according to George Waymire, Wilkinson Corporation’s Executive Vice President of Acquisitions and Development. “We have realized significant gains in property value from other multifamily properties in this neighborhood and are confident that we will experience similar appreciation with this portfolio.”

Magnolia Gardens is comprised of 14 buildings housing one-, two-, and three-bedroom multifamily units on a low-density eight-acre plot with two swimming pools, a leasing office, and a laundry facility. It was built in 1962 and has been well maintained but never renovated.

The Commons at Briarwood Park,  will now encompass 44 buildings spread over 26 acres. Built in 1966, the community has nine one-, two-, and three-bedroom options and offers two swimming pools, a playground, soccer field, laundry facility, and a clubhouse.

The joint venture plans to invest in renovations and improvements to the properties. The exterior and amenities of Magnolia Gardens will receive a significant upgrade to modernize and improve curb appeal, as well as renovations including new kitchen cabinetry and backsplash, stainless steel high-efficiency appliances such as washers and dryers in every apartment, wood-inspired plank flooring, upgraded carpeting, higher efficiency lighting, and low water use bathroom toilets and faucets.

The Commons at Briarwood Park will see renovations focused on improving building exteriors and amenities, including the clubhouse, playground, pools, laundry facility and common areas, as well as water conservation and security enhancements. Limited interior renovations will be completed on an as-needed basis.

The communities will be positioned as part of Wilkinson Asset Management’s Village Collection, catering to working class families. Improvements will be centered around creating family-friendly amenities and providing functional and practical updates that add value to the community and its residents. “It is heartwarming for me personally to be a part of creating family-friendly communities that our residents can take pride in,” remarked Kimra Holcomb, COO and President of Wilkinson Asset Management. “We aim to deliver safe, well-maintained, affordable and neighborly communities to our Village Collection residents, and these properties are a perfect fit for that strategy.”

This acquisition marks the 30th property that the company has acquired in the greater Atlanta market.

Location, Location, Location: The Texas Market

A large part of our success in investing in multifamily apartments is choosing the right market and sub-market. Over the years we have developed deep experience in these markets, and have built significant relationships with brokers and sellers there as well. We currently focus on these markets because of the growth in this asset class, but we have had investments all across the U.S. and are constantly looking for the next good market. We currently operate four properties in Texas: three in the city of Houston and one northeast of the city of Dallas.

Houston Highlights

  • 6.9 million residents in the 9-county metro area making it the fifth most populous area in the Unites Sates.

  • The city of Houston is the 4th most populous in the U.S. (2.3 million residents)

  • 15 foreign governments maintain trade and commercial offices in Houston

  • $192.2 billion in trade handled by the Houston-Galveston Customs Districts in 2017

  • Houston has the largest export market in the U.S. — Port Houston ranks first in import tonnage for 26 straight years

  • 5,000+ Houston companies do business abroad

Source: Greater Houston Partnership Talking Points Q2/18

Dallas Highlights

  • The Dallas-Fort Worth (DFW) region has 22 Fortune 500 company and 42 Fortune 1000 company headquarters, including ExxonMobil, Texas Instruments, AT&T, American Airlines, J.C. Penney, KimberlyClark, Toyota, and Dr Pepper

  • DFW created more jobs from 2016 to 2017 than New York, Los Angeles, and Chicago metros

  • Best state for business for 13 consecutive years (Chief Executive Magazine)

  • 5th fastest growing economies and #1 best city for job growth (Forbes, 2017)

  • Cost of doing business in Dallas is 4% lower than the national average (Moody’s)

  • Top 5 Hot Housing Market, 2018 (Realtor.com)

  • The DFW region adds 393 new residents each day (U.S. Census, 2015–2016)

Source: Dallas Economic Development Guide 2018


MarketUpdate Edition 4 – May 2018

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Wilkinson Acquires Luxury Apartment Community in Atlanta’s Buckhead Neighborhood

Wilkinson Corporation and a joint venture partner acquired 32Hundred Lenox, a luxury midrise conventional multifamily community, in the upscale Buckhead area of Atlanta the first week of May 2018. Wilkinson Corporation’s affiliated property management entity, Wilkinson Asset Management, has undertaken management of the community.

“This is a prime location within a high growth market. We expect that demand for rental housing will continue to grow given this is one of the country’s most expensive residential housing markets,” said Wilkinson Asset Management’s Chief Operating Officer and President, Kimra Holcomb. “The neighborhood is home to some of the Southeast’s most exclusive retail and dining, with unlimited opportunities for business and recreation. By adding resort-style amenities and luxurious apartment interior upgrades, we feel confident in our opportunity for success with this property,” Holcomb explained.

The 14-acre, gated site houses 431 mid-century modern apartments spread across 6 buildings, as well as a business office, fitness center, and courtyard with two swimming pools. Built in 1961, the community has undergone a partial renovation since 2015. Wilkinson and its joint venture partner plan to invest several million USD to complete the renovation, overhauling the grounds and existing amenities to create a resort-style pool and sundeck area, a pet park, and an outdoor living area with grilling kitchen, fire pit, and community garden for resident use, as well as completing high-quality luxurious interior remodels. Wilkinson Corporation’s Executive Vice President of Acquisitions and Development, George Waymire observed that “proven rent premiums for redeveloped units in this market make the community an excellent opportunity for a value-add addition to our portfolio.”

32Hundred Lenox adds to the company’s current portfolio of multifamily properties in the Atlanta Metro area. “Atlanta is one of our top target markets,” remarked Waymire. “We continue to focus on acquisitions there and look forward to additional purchases in the future.” This is the 28th community that the Wilkinson Family of Companies has acquired in the Atlanta market. 

Investment in this acquisition is closed.

Location, Location, Location

A large part of our success in investing in multifamily apartments is choosing the right market and submarket. Over the years we have developed deep experience in these markets, and have built significant relationships with brokers and sellers there as well. We currently focus on these markets because of the growth in this asset class, but we have had investments all across the U.S. and are constantly looking for the next good market.

Our other currently-owned properties in the Atlanta metro

Three of the seven properties we currently operate in the Atlanta metro (880 Lakeside, Forest Ridge, and The Park on Windy Hill) are located in Marietta, in Cobb County, on the northwest side of the metro. Three others (Lakeside Retreat, The Hills on Breckinridge, and The Retreat at Arc Way) are in the towns of Peachtree Corners, Duluth, and Norcross in Gwinnett County, northeast of Atlanta.

Cobb County Highlights

  • Ranked 12th most-educated among all counties in the U.S. As of 2016, 42.77% aged 25+ and above possessed a bachelor’s degree or higher, compared to the U.S. average of 27.9 percent.

  • Cobb County International Airport-McCollum Field is third most-trafficked in Georgia, close to Atlanta’s central business district.

  • One of the most sought-after locations for growing industries, including aerospace, technology, healthcare, and professional services.

  • See more information on Cobb County at www.selectcobb.com

Gwinnett County Highlights

  • Duluth, Georgia, is one of the leading corporate headquarters centers in metro Atlanta. Major industry sectors include health care, information technology, industrial, and automotive repair.

  • Gwinnett County’s largest city, Peachtree Corners, is a regional technology hub, home to numerous technology and life sciences companies and is also the regional headquarters of large national and international companies.

Sources: www.duluthga.net/business/economic_development/index.php and www.peachtreecornersga.gov/businesses/economic-development


MarketUpdate Edition 3 – April 2018

More Terms and Definitions

In our last newsletter, we introduced the term Net Operating Income (NOI), which is revenue minus operating expenses.

We showed that by controlling an asset’s net operating income, we have significant and dramatic influence over that asset’s value, which helps us provide value to our investors. Another term that you might hear us refer to or see mentioned in our presentations is “Cap Rate” a short version of Capitalization Rate.

Cap Rate

This is the rate of return on a real estate investment property based on the income that the property is expected to generate. We use the cap rate to estimate the potential return on an investor’s investment. The cap rate of an investment is calculated by dividing the investment’s NOI by the property’s current market value. 

Example:

$1,320,000 (net operating income of property) / $24,000,000 (current market value of property) = 5.5% Cap Rate

When we examine a property using the cap rate (among other calculations) we can tell how well the property is performing now, compared with similar properties in the same market, and how well it might perform if we acquire it and add capital improvements. 

This is one of the tools we use to help us acquire and operate properties that will end up providing a good return for our investors.

Our Target Property Types

We use the following criteria to identify suitable multifamily apartment community investment opportunities, although it is possible our targets may not meet all of these criteria:

  • We buy apartment communities at or below replacement cost

  • We look for Class B and C Properties in Class A or B locations. Class A properties are best quality with high rents, top amenities, desired location, and newer construction, which doesn’t allow much room for investment growth. Class B is generally good quality with moderate rents, although amenities may be lacking. Class C is of acceptable quality with affordable rents, but construction is dated requiring overall improvement and re-branding. We can acquire Class B and C properties  at lower prices with room to add value through various improvements. Our overall experience with this model has generally provided solid returns.

  • 200 units or more—Our acquisitions over the past year range from 222 units to over 600 units (our largest single acquisition to date)

  • “Garden style” and “mid-rise” apartments. Garden-style apartments are one to three stories in height, in a garden-like setting, in a suburban, rural, or urban location. Mid-rise apartments are multistory buildings with elevators, typically in urban areas.

  • 1982 or newer construction

  • Properties that attract private-pay tenants: Private-pay tenants are able to make rent payments on their own, instead of requiring regular government assistance to make rent payments.

Market Specifications

We search for suitable properties:

  • Within 100 miles of other properties managed by Wilkinson, as much as possible

  • In primary metropolitan areas such as Atlanta, Georgia and Dallas, Fort Worth, and Houston, Texas; and in secondary markets such as Indianapolis, Indiana

  • In markets showing continuing growth potential, close to corporate headquarters and large well-established companies offering good employment opportunities, and close to desired services, major highways, and recreational opportunities

Target Market Profile

Among our list of target markets, the largest market of focus has been the Atlanta, Georgia metro area.

Atlanta Metro Snapshot

  • Highly-ranked U.S. metro area in business, innovation and entrepreneurship, jobs and workforce, quality of life, higher education, and more (2017)

  • World’s busiest airport

  • Several Fortune 500/1000 companies are located in the Atlanta metro area, such as The Home Depot, United Parcel Service (UPS), The Coca-Cola Company, Delta Air Lines, Inc., The Southern Company, Genuine Parts Company, First Data Corporation, SunTrust Banks, Inc., and others

Highlights In the News

  • According to an online news source, the Atlanta metro area gained nearly 90,000 residents between 2016 and 2017 (based on U.S. Census Bureau statistics), the third-highest population gain of any metro area in the United States.

  • Mercedes-Benz recently moved its U.S. headquarters from New Jersey to Sandy Springs, on the North side of Atlanta.

Sources


MarketUpdate Edition 2 – February 2018

In our first MarketUpdate newsletter, we gave a brief introduction to the Wilkinson Family of Companies and how we work together to provide investment opportunities in U.S. real estate. We noted that the company focus is primarily on “value-add multifamily apartments.” In this edition, we want to provide a deeper understanding of the multifamily product and how we build our business model around it. 

What is “Multifamily”?

A multifamily apartment property is a large community with many rental units all owned on one title (we usually target those with 200 units or more)—not individual condos or private homes.

These properties can include community amenities such as outdoor common areas, swimming pools, fitness centers, sports courts, pet areas, and more.

What Is “Value-add”?

Value-add properties are those that can be purchased at or below replacement cost because they need some capital improvements or changes in management practices (opportunities for adding value ) to increase the property’s potential revenue generation for our investors. 

Net Operating Income

To provide value for our investors:

We operate acquired properties as revenue-producing businesses, working to increase occupancy and rent while at the same time decreasing operational expenses.

We make “value-add” property and operational improvements to help increase Net Operating Income (NOI), which is defined as revenue minus operating expenses

By controlling an asset’s net operating income, we have significant and dramatic influence over that asset’s value. To help increase revenue and decrease operating expenses, we take steps such as these:

  • Implement property improvement renovations

  • Improve curb appeal

  • Improve operational efficiencies

  • Initiate utility conservation initiatives

  • Reduce operating expenses

  • Increase occupancy rates

  • Increase rental rates

Case Studies

Two examples of value-add multifamily apartments in the Atlanta, Georgia area that Wilkinson has taken full cycle:

The Haverly at Stone Mountain

  • 360 units built in 1980

  • Acquired in 2012 and sold in 2014

  • Capital Improvements: $1.8 MM USD

  • Sale: 122% increase in value above acquisition price

Riverview Apartments

  • 138 units built in 2008

  • Acquired in 2011 and sold in 2016

  • Capital improvements: $350,000 USD

  • Sale: 91% increase in value above acquisition price