Auburn Gate was a tired, multi-family property in the greater Detroit area that had been devastated by the financial crisis and bankruptcy of the City of Detroit. HCI believed the worst was behind this part of the country and that investments in this area could benefit from both a recovery in the market fundamentals, as well as repositioning Auburn Gate to be a leading property in its sub-market. The property had “good bones,” and competitive properties in the area were demonstrating higher rents and occupancy, which is what was needed to make a renovated Auburn Gate a successful investment.
Rents and occupancy were both about 20% below market. The property had been run into the ground and required a capital program equal to 50% of the purchase price to reposition it. We made investments into the clubhouse, added new amenities, and created suites that were above anything else in the marketplace. We also selected a strong property manager to establish best-practice KPIs to create a better community for our tenants, which would in-turn drive better financial performance.
The Financial Transaction
An existing relationship brought us this opportunity. We already had a property in the same general area, making this a straightforward purchase with our existing partner in Michigan.
The Deal Drivers
- We were able to find the right partner; one who had a successful portfolio of multifamily investments while pushing the industry standards to better performance.
- We were invested in the Michigan area, which created natural synergies for asset management.
NOI has increased 2.4x since purchase with further opportunity for improvement.