Renovation program for ~850 units and potential to add onsite density of ~550 units
Riverside is an apartment community located near Metro in the Huntington market, which is experiencing significant economic growth. In May 2016, we identified an affordability gap of approximately $600-$900 between the monthly effective rents at Riverside and the newest Class A product. This was significantly greater than the $300-$350 average differential between Class A and Class B rents and created an opportunity for us to grow income through unit renovations of approximately 850 units. Riverside consists of three apartment buildings on 28 acres of land, which presents us with an opportunity for ground-up development of approximately 550 units in a submarket with limited planned new supply and strong job growth driven by major employers such as the USPTO, NSF and MGM National Harbor.
We commenced a unit renovation program in the second half of 2016 to increase rents and generate revenue growth. The yield on cost on the units renovated thus far is in the mid-high teens and is in line with our underwriting expectations. We remain on track to commence the ground-up development of approximately 550 additional units at Riverside Apartments in the second-half of 2018. Continued positive market conditions will be validated prior to the commencement of the development project.
Similar to The Wellington, this research-led acquisition demonstrates our disciplined capital allocation through the purchase of value-add, urban-infill multifamily assets with strong income growth potential at a significant discount to replacement cost. Our research identified Riverside Apartments to be well-located in a submarket with strong employment drivers and limited supply. The asset provides us with a compelling opportunity to renovate approximately 850 units to generate rental growth, and the potential opportunity to develop additional units onsite, thereby offering multiple price points in a submarket with a strong population of renters.”
Paul T. McDermott
President & CEO