Case Studies - French Road Apartments

Year Built:
Total Units:
Class:
Purchase Price:

Renovation:

1971
200
B
$4,300,000
$21,500/unit
$230,000

French Road Apartments
Beaumont, Texas

The transaction was discovered through the local brokerage community. In a non-competitive bid environment, the broker solely targeted Virtu as an ideal buyer based on its knowledge and expertise in the local market (Virtu already owned a 152-unit property within one-half mile).
French Road was owned by an investor looking to retire who managed the property for stable cash flow and no longer wanted management responsibilities.
Virtu identified value in the well-maintained asset by its below market rents which could be raised while maintaining a stable occupancy. It was felt only a light renovation and aggressive marketing was necessary to enhance the cash flow.

In order to help facilitate the planned rent increase, a light renovation was focused on the leasing office/clubroom, some building exteriors, and minor upgrades to unit interiors including the replacement of outdated unit appliances.
Rent increased approximately 22% from acquisition to sale – in just under three years. In addition, a utility reimbursement plan was also instituted which further boosted income. Occupancy over the hold period averaged 92%; 94-95% in the final two years.

Purchased in June 2004 for $4,300,000 and sold in May 2007 for $7,200,000.
Distributions grew through the investment period up to 10% by sale, and were only interrupted by Hurricane Katrina. Investors also benefited from a one-time special distribution which was made from cash flow.
The 28% investor IRR was well in excess of projections, and the investors were returned more than 202% of their original equity over the term of the investment.