The Mi Casa Apartment community (“MC” or the “Property”) is situate in the Highland area of North Central Austin directly adjacent to the well traveled Airport Boulevard and between the Mopac Expressway and the I35 Inter-Regional Highway. The Property was built in 1966, and is comprised primarily of 1BR/1BA units.

We forecast investor demand for apartments to continue to rise prior to acquiring MC as Austin maintained its position as a leader in job creation.  In recent quarters prior to acquiring MC via providing a credit enhancement that preceded a foreclosure, institutional investors made significant inroads into the metro. In the absence of newly built apartments, this capital flowed into older vintage Class A properties, partly by way of joint ventures with operators. Elevated demand in this segment drove cap rates to the low-5 percent range. Stiff competition also shifted attention to large, well-located Class B assets during the period, which traded at the time in the low-6 percent range. Private in-state investors, meanwhile, were targeting smaller Class B-C deals like MC, though a sizable amount of this buyer demand remained unfulfilled. We forecast deals involving workforce housing to rise further in 2013 as accelerating grey and blue-collar hiring would support further improvements in Class B/C operations, thereby enhancing values.

Following our foreclosing on the borrower and acquiring MC, the Property was only 10% occupied and required significant improvement.  We invested $6,250/unit to replace the Property’s roof, repair the parking lot, renovate unit interiors and resolve over fifty code violations. After successfully improving and repositioning MC, we realized an outsized return via a sale two years after perfecting ownership and executing our repositioning plan.