Case Study: Stonebridge at Paradise Valley

Stonebridge at Paradise Valley is a well located 384-unit garden style multifamily community located in Northeast Phoenix and acquired by CVG in 2014.

Metrics

Purchase Price:
$34,265,000

Total Equity:
$10,895,000

Purchase Date:
August 2014

Year Built:
1985

Total Units:
384

Average Sqft/Unit:
809

Starting Rents:
$716

Current Rents:
$1,120

Average CoC% During Hold:
11.5%

The Details

CVG targeted and acquired Stonebridge based on its excellent Northeast Phoenix location and underperforming position in the submarket. CVG’s original Investment thesis was that a $10,000/unit interior upgrade would result in $150+/month rent increase and that its more direct hands-on management approach would lead to increased renewal rents lowering loss to lease on all unit types, regardless of finish level. While the thesis was proved out, the growth of the Phoenix market which saw the gap between “classic” apartment rents and “renovated” apartment rents shrink, along with CVG’s long term hold strategy, led CVG to stop full renovations and instead offer a-la-carte or partial renovations upon prospect request thereby reducing capital expense, yet increasing the return on investment, while continuing to maintain and improve the asset.

Despite strong investment demand in Phoenix, especially for well-located value-add properties like Stonebridge, CVG made the decision to refinance rather than sell Stonebridge for a number of reasons:

  • CVG remains bullish on Phoenix, especially on well located infill assets in strong submarkets like Stonebridge.
  • The redevelopment of the Paradise Valley Mall located 1 mile from Stonebridge will add even greater economic stabilization to the area. The 92-acre redeveloped mixed use development site will include retail shops, including Whole Foods, residential multifamily, and self storage and will promote walkability and connectivity with pedestrian paths and common areas.
  • CVG’s ability to again reposition the asset by renovating interior units and freshening up the community amenities to capture the additional rent that is already being achieved in the marketplace.
  • By refinancing, CVG was able to return 2.6x to the investors, while continuing to own a highly desirable asset.

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