Renovation program for ~680 units and potential to add onsite density of ~400 units
The Wellington is an apartment community located in South Arlington near I-395 and provides easy access to The Pentagon, Crystal City and DC. In July 2015, we identified an affordability gap of approximately $400-$500 between the monthly effective rent at the newest Class A product in the submarket. This was greater than the $300-$350 average differential between Class A and Class B rents and created an opportunity for us to grow income through the unit renovations of approximately 680 units. The Wellington consists of three mid-rise apartment buildings on 28 acres of land, which presents us with an opportunity to add additional density of approximately 400 units in a submarket with limited planned new supply.
We commenced a unit renovation program in late 2015 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 400 additional units onsite in a ground-up development called The Trove in the first-half of 2017.
Consistent with Washington REIT's value-add strategy, The Wellington provides a compelling opportunity to renovate over 680 units to generate rental growth, and the further opportunity to develop a five-story Class A apartment building onsite. Our in-depth targeted research identified The Wellington to be well-located in a submarket with a limited supply of new product and a strong population of renters for both Class A and Class B apartments. We continue to improve the quality and scale of our Multifamily portfolio both through this urban in-fill, amenity-based acquisition, and continued dispositions of our legacy assets."
Paul T. McDermott
President & CEO