Westheimer Oaks Apartments (“WO” or the “Property”), is a workforce apartment community located in Austin’s expanding North East submarket. The Property was built in 1970 and is comprised of 70 apartment units situate on a 3.16 acre (+/-) site.

Austin’s diverse economy and robust migration of professional and blue/grey collar workers remained central to our investment thesis prior to acquiring WO. Based on forecast population and economic growth, we projected a widening of the income gap but also the rental spread in the workforce sector. With new developments during this period averaging over $1.54 psf, there wasn’t much competition for market share between Class A and Class B properties. However, competition heated up between the units of Class B and C. Continued high demand kept occupancy rates at or near 96%, with steady increases in rents. So much so, that rents became equal in these two classes at $1.15 psf. The upward movement was attributed to the fact that 37% of B and C properties had been significantly upgraded/rehabbed at the time, with new features that produced revenues between $35 – $375 per month. Additionally, we felt the acquisition of such assets in desirable path of growth areas would maintain and/or increase their underlying value given demographic shifts and lack of developable sites in such locations.

The WO investment was consistent with the above, and represented a mispricing opportunity based on absentee ownership that relied on a subpar manager to drive rents and maintain the Property. We felt that there was a growing expansion in this submarket that could be monetized following further improvements to and operational enhancements at the Property.  Our initiatives produced substantial increases in operating performance resulting in a overall return that far exceeded the original mid-teen IRR projection.