CASE STUDIES

3 Street is executing a niche acquisition strategy that capitalizes on the growing and under served, middle market Hispanic segment by repositioning multifamily communities in select submarkets. 3 Street has rolled out its Lifestyle Community Approach to reposition and add value to its investments.

The lifestyle community approach for the Hispanic market niche involves adding improvements, amenities and services that solves on-going living problems for the target niche. To symbolize and promote the lifestyle communities, the Z Villa Communities brand has been integrated in all properties.

Villa de Sonora

Phoenix, AZ
156-Units
Investment Date: August 2007
Total Capitalization: $9,862,000

Opportunity

• Excellent value-add, under performing property that fits investment approach and acquisition criteria with heavy Hispanic population, middle market area, class 'C' property that can be repositioned to class 'B', and troubled out-of-state property owner.
• Property suffering with high vacancy, poor resident profile, low rents, and a lot of deferred maintenance allowing for below market acquisition price.
• Excellent location for Hispanic target niche. Property located adjacent to Ranch Market, a leading Hispanic grocery supermarket.
• Large green belt to add park style amenities to effectuate Hispanic lifestyle.

Value- Add Investment Strategy

• Hire a leading professional property management company with successful track record managing turnaround properties to upgrade rental operations.
• Reduce unit turnover by implementing Lifestyle Community Approach, thus increasing NOI from lower turn costs and higher collections.
• Add $6,611 per unit in capital improvements to interior and exterior of property with amenities and services targeted at the Hispanic lifestyle to increase rents.
• Increase 19% below market rents to market rates.
• Implement resident utility bill back system, increase operating income by $25 per unit.

Results

• Achieving higher than pro forma rent increases along with unbudgeted rent premiums creating additional income.
• Dominating local trade area in soft rental market with heavy leasing activity allowing for quicker rent-roll turn.
• Renovations 45% ahead of scheduled timeline.

Villa de La Paz

Phoenix, AZ
104-Units
Investment Date: November 2007
Total Capitalization: $7,512,000

Opportunity

• Absentee out-of-state property owner suffering with low rents and a lot of deferred maintenance allowing for below market acquisition price.
• Niche acquisition strategy provided opportunity to acquire off market deal in heavy middle market Hispanic area.
• Excellent value-add property with heavy Hispanic population, middle market area, and class 'C' property that can be repositioned to class 'B'.
• Excellent location for Hispanic target niche. Property located within walking distance to Ranch Market, a leading Hispanic grocery supermarket.

Value- Add Investment Strategy

• Hire a leading professional property management company with successful track record managing turnaround properties to upgrade rental operations.
• Reduce unit turnover by implementing Lifestyle Community Approach, thus increasing NOI from lower turn costs and higher collections.
• Add $9,083 per unit in capital improvements to interior and exterior of property with amenities and services targeted at Hispanic lifestyle to increase rents.
• Increase 18% below market rents to market rates. Also, charge rent premiums on select units within community based on location and type.
• Replace T-111 exterior siding with new stucco to update architectural appeal.

Results

• Raised rents to year 1 pro forma rental rates.
• Renovation and reposition timeline on schedule and on budget.

Quail Point Apartments

Phoenix, AZ
264-Units
Investment Date: March 2008
Total Capitalization: $18,535,000

Opportunity

• Excellent value - add, under performing property that fits investment approach and acquisition criteria with heavy Hispanic population, middle market area, class 'C' property that can be repositioned to class 'B', and troubled property owner.
• Inexperienced property owner suffering with low rents and a lot of deferred maintenance allowing for below market acquisition price.
• Unique niche acquisition strategy provided opportunity to acquire off market deal.
• Excellent location for Hispanic target niche. Property located adjacent to Food City Market, Arizona's leading Hispanic grocery supermarket chain.
• Large area to add park style amenities to build and grow the Hispanic lifestyle.

Value - Add Investment Strategy

• Hire a leading professional property management company with successful track record managing turnaround properties to upgrade rental operations.
• Reduce unit turnover by implementing Lifestyle Community Approach, thus increasing NOI from lower turn costs and higher collections.
• Add $7,381 per unit in capital improvements to interior and exterior of property with amenities and services targeted at Hispanic lifestyle to increase rents.
• Increase 20% below market rents to market rates. Also, charge rent premiums on select units within community based on location and type.

Results

• Recent acquisition in transition.