Plantation Woodlands - Plantation Woodlands is a Class A, 432 unit apartment community, built in two phases (2009/2011), located in The Woodlands, Texas. The property consists of two and three story plantation style buildings and a single story clubhouse/amenity building. Average unit size is 839 square feet. Units include granite countertops, black appliances, dark wood cabinets, full size washer and dryers, garden tubs and brushed nickel lighting. Community amenities include an indoor basketball court, theater room, state-of-the-art fitness center, children's playscape and two resort style pools with grilling cabanas.
We purchased this asset in an off market transaction which is extremely rare for a property of this size. The developer was experiencing a slower-than-expected lease up on the second phase of the development which was made more difficult by the lease expirations that were being generated by the normal course of business for the first phase of the project. The developer was facing a construction loan maturity and made the decision to accept our off market offer.
The asset was purchased in the summer of 2011 for less than $120,000/unit which was slightly less than a 6.0% cap rate for this unstabilized asset. The project was less than 90% occupied at the time of purchase but leasing momentum in The Woodlands had been gaining steam throughout 2011 and significant job creation was beginning in the area. In particular, Exxon Mobil announced a major corporate relocation to The Woodlands and this set off a significant "land rush" in this part of Houston. A sharp increase in land prices meant that our basis for this newly developed project was now below replacement cost for similar assets. Our strategy was to stabilize the asset and monitor the investment market for a good time to sell.
We were able to stabilize the asset in less time than we originally anticipated. With a strong occupancy, we lifted the rental rates at the project and experienced significant growth in net operating income. Throughout 2012 and into 2013, investor appetite for The Woodlands became very heated and a number of high dollar per unit trades occurred in the area. Falcon Southwest encouraged our JV equity partner to sell the asset in the Summer of 2013. This conversation resulted in the JV partner buying out Falcon Southwest's interest in the project in the Summer of 2013. While the terms of that sale are confidential, the leveraged internal rate of return for the project at the agreed value would have significantly exceeded 30%.
7421 Burnet Road, Suite 300-291, Austin, TX 78757
512.590.8315 phone 512.590.8313 fax