Case Studies
San Rafael Apartments
Santa Fe, New Mexico
- Year Built: 1986
- Total Units: 286
- Class: C+
- Purchase Price: $7,850,000 $27,448 /unit
- Renovation: $240,000
Opportunity:
- The transaction was procured through a broker relationship with which Virtu established a track record for acquiring low income tax credit properties.
- Income restrictions were expiring in one year – market rate buyers were still wary of assuming tax credit compliance. Purchase was approximately 65% of replacement cost.
- Virtu recognized the opportunity to implement a modest renovation and lease the units to the underserved conventional market-rate segment who did not meet the income requirements of the low-income tax credit properties, but could not afford the higher-end conventional properties.
Execution:
- Over 18 months, Virtu completed a renovation on the exteriors and leasing office, and cured various deferred maintenance issues. Modest interior upgrades to the vacant units included floor coverings and appliances.
- Rents increased for all unit types in addition to the implementation of a utility reimbursement program. Existing residents, impressed by the quality of management, renewed at levels higher than expected.
Result:
- The property was purchased in September 2002 for $7,850,000 and sold in August 2004 for $11,900,000.
- Cash flow exceeded expectations enabling distributions to investors above the projected preferred return.
- The investor IRR of 51% exceeded expectations, and the investors were returned more than 207% of their original equity over the term of the investment.