Investors Management Group is currently structuring the acquisition of Canopy at Baybrook as a Tenancy-In-Common (TIC) ownership structure via a 506(c) securities offering.
The acquisition is scheduled to close in February 2019.
UPDATE: This syndication is now 75% subscribed with only 3 TIC spots remaining. Contact: David Mikkelsen (971) 888-4010 ext. 108.
Canopy at Baybrook (currently known as Reafield Village) represents an opportunity to acquire a value-add, 324-unit apartment asset in an affluent neighborhood in Charlotte, North Carolina. The property will be repositioned as a true “luxury-value” community in this significantly high barrier-to-entry neighborhood as IMG completes interior upgrades, expands amenities offerings and implements operational improvements.
IMG principals have prior success in the Charlotte MSA and identify this market to be well positioned to capture continued strong renter demand and accelerated income growth. Canopy at Baybrook will mark IMG’s 7th acquisition (1,350 units) in North Carolina and its 23rd in the Southeastern U.S. in this cycle, representing 5,378 total units.
Canopy at Baybrook is anticipated to be a 5-7 year hold.
Targeted 7-year projections:
• Avg. annual cash-on-cash return: 7.10%
• IRR: 14.59%
• Equity multiple: 2.34x
Dynamic South Charlotte location
The Property boasts close proximity to two of the city’s most coveted neighborhoods: Ballantyne and South Park. More than 143,000 jobs are located in Ballantyne, South Park and the Highway 51 corridor all within a 15-minute drive of the Property. Families are moving to this neighborhood for its zoning within some of Charlotte-Mecklenburg County’s top “A”-rated schools.
Positive operating trends
In December 2018, Canopy posted its best month ever for income collection and net operating income. Primary drivers were rent increases and consistently high occupancy. Current occupancy is above 95%; the property is leased at 97% as of February 1.
Rents achieved for non-renovated units are approaching IMG’s projected rents for renovated units. Examples include 1BD rents at $1,020 (IMG renovated rent is $1,050) and 2BD rents at $1,240 – $1,255 (IMG renovated rent is $1,275).
Charlotte’s population is forecasted to grow by 21% in the next 10 years, making it the third-fastest growing MSA in the United States.
Robust job creation
Charlotte was recently named the nation’s No. 1 Tech Town with 11% growth in IT jobs forecasted over the next five years. Ballantyne Corporate Park is the main driver of demand in South Charlotte, containing more than 35 Fortune 500 companies. Located 10 minutes from the Property, it is easily the largest corporate park in the metro at 4.5 million SF, which added 1 million SF and an estimated 3,000 new jobs in the last six years with another 900K SF in the pipeline.
Strong multifamily market fundamentals
Effective rents at the Property have grown 6% per year (since since Q1 2016) and Q3 2018 occupancy averages 95%. Retention rate has been positive with renewals on over 50% of lease expirations. Charlotte’s average effective rent climbed to $1,081 per month in June, a 4.0% yr-over-yr increase.
Low risk of new competitive supply
Canopy at Baybrook enjoys an in-fill location surrounded by desirable single-family neighborhoods where no new apartment construction has occurred since 2001.
Comparable sale activity
The Retreat at McAlpine Creek, located directly across the road from Canopy, just sold for $60M. The price of the 400-unit property equates to $150K/unit, with a capital expenditure budget of $4.5M, for a rehabbed price of $161K/unit. Roughly half the cap ex budget is anticipated to fund structural and plumbing repairs. The property is the same vintage as Canopy and achieves lower rents per square foot.
By comparison, Canopy is being acquired at $140K/unit, with a capital expenditure budget of $2.5M, for a rehabbed price of $148K/unit. IMG believes it is acquiring Canopy at an exceptional value, and The Retreat at McAlpine Creek is another supportive sale comparable.
Attractive demographics are evidenced by average household incomes in the Property’s immediate area over $100K and average home values of $400K+, both of which are more than double respective state averages. The concentration of wealth in the neighborhood is evidenced by the number of country clubs, golf courses, and maximum home values reaching $7M+ at Quail Hollow, less than a mile away. CoStar reports that “South Charlotte residents are more likely to be college educated and to earn substantially more” (Oct. 2018).
The Property occupies a low-density, 30-acre site on Reafield Drive offering exceptional monument signage visibility to over 32,000 cars daily on Highway 51.
Bordering Canopy at Baybrook is Challis Farm, one of Charlotte’s few gated luxury communities. Situated on Challis Lake, this subdivision is home to high profile Charlotteans and professional athletes and offers private golf-course access to the prestigious Carmel Country Club. Newer, high-end apartment developments in surrounding submarkets have established rent price points in a range from $1.65 to $2.00+ per SF, making Canopy at Baybrook a comparative value to both existing and in-migrating renters.
IMG will implement a comprehensive repositioning plan to elevate the Property from a “value” community to a “luxury-value” community.
IMG’s transformation will support the Property’s momentum to achieve rents at the top of its submarket, in line with those currently earned by competitors that are either newer construction or renovated to a high standard. Repositioning will be accomplished by completing two key steps:
The Property name will be changed from Reafield Village to Canopy at Baybrook. A new logo with brand guidelines will be thoughtfully designed. Print and web marketing material plus directional signage will be refreshed to create a modern, upscale image for the Property.
Capital improvements of approximately $2.4M are planned for completion during the first 24 – 36 months of ownership. A total of $1.4M is dedicated to improving unit interiors. The balance is allocated toward upgrades in community amenities, completing exterior renovations, and remediating deferred maintenance.
The Seller has already completed upgrades to some common areas and renovations to select unit interiors. These improvements have successfully resulted in rent premiums earned. IMG’s value-add investment strategy capitalizes on the Property’s existing strong performance by continuing a repositioning that elevates Canopy at Baybrook to compete within the market’s “luxury-value” segment.
Transaction update: Our close date is set for February 27. Closing was moved back two weeks to accommodate investors completing 1031 exchanges.
To request the full offering memorandum and PPM, contact:
Karlin Conklin (971) 888-4010 ext. 104 • firstname.lastname@example.org
Dave Mikkelsen (971) 888-4010 ext. 108 • email@example.com
This Offering Memorandum was written and is being presented solely to support the promotion or marketing of IMG and a possible future offering of securities in an IMG sponsored project (the “Offering”). All offers and sales of any securities will be made only to Accredited Investors through a Confidential Private Placement Memorandum and any exhibits and attachments thereto (collectively, the “PPM”). This Offering Memorandum is not the PPM, and is not intended nor shall it be construed to be an offer to sell any securities. No PPM will be presented to you unless and until IMG has first been able to validate your status as an Accredited Investor.