Bartlett Crossing Apartments Memphis, Tennessee

Bartlett Crossing Apartments
Memphis, Tennessee

Address: 2245 Sycamore View
Memphis, TN 38134

Year Built: 1990

Number of Units: 152

Unit Mix:

• 70 1BD/1BA
• 82 2BD/2BA

Property Size: 13 Two and Three Story Garden Style Buildings

Structure:

• Exterior: Brick and Vinyl Siding
• Windows: Aluminum-framed, double-pane with insulated glass and half screens
• Electrical: Separately metered units with copper wiring
• Roofs: Pitched, wood truss support system with plywood decking and asphalt shingles .
• Parking Lot: Sealed blacktop

The 152 Unit Bartlett Crossing Apartments is also part of the two-property portfolio acquired in Memphis, Tennessee. Bartlett Creek enjoys all the same economic and demographic benefits from its Memphis location as The Enclave Apartments. In addition, Bartlett Crossing is the closest multifamily property in Memphis to the City of Bartlett. Bartlett is an upscale municipality of Shelby County with very few multifamily properties located within its city limits. The average household income within a five mile radius of the property is $69,200. No new units are expected to come on-line within the City of Bartlett in the near future, creating a strong barrier to entry, and competitive rents within the city average $1,040, or $0.94 per square foot. This puts Bartlett Crossing in an enviable position to provide an alternative to living in the City of Bartlett, while enjoying the same location.

The Raleigh/Bartlett Submarket is well located with convenient access to all major employment areas in Memphis. The area is less than ten miles from the downtown central business district and the medical corridor, and is only seven miles from the Poplar/I-240 Office Class “A” Office Corridor, the hot spot for executive offices for local and national companies. Three large office parks are located within three miles of Bartlett Crossing, which include major employers like Pfizer, Keebler, ServiceMaster, Accredo Nova Factor and Accredo Health, ACH Foods, Clear Channel Outdoor, AT&T, and others.

The property is also located five miles from the Wolfchase Galleria corridor, which is home to nearly six million square feet of retail space – the largest concentration in Memphis. This prime retail area caters to every consumer in the metro area as well as visitors within a 100-mile radius. Big Box retailers located in this area include Super Target, Super Wal-Mart, Best Buy, Home Depot, Lowe’s and Kohl’s. The 1.1 million SF Wolfchase Galleria includes Macy’s, Dillard’s, J.C.Penny, and Sears, plus 120 specialty stores. IKEA will soon add another 271,000 SF of retail space in late 2016.

Built in 1990, the Bartlett Creek Apartments is overall in very good condition, with only $30,000 of expenditures required to fully refresh the property. Bartlett Crossing is also a continued value-add opportunity. The prior owner implemented the same successful interior upgrade program as they did with The Enclave that provides significant revenue upside for the property. Under that program, nine units were renovated at an average cost of $2,500 per unit. Those units were then leased, resulting in an average rental increase of $65, or 9%. Based on those rent increases, the ROI for the upgrades is 31%.

The fund was one of 4 to 5 finalists that competed for this two-property portfolio.  Although not the highest bidder, the fund was successfully awarded the purchase contracts due to its established track record of professionally and efficiently closing on so many prior properties. The Bartlett Crossing Apartments was acquired for $8.8 Million on September 30, 2016.

This is a property that could very well see an improvement in cap rate in addition to the yield. Another buyer was willing to pay $9.4 million for it, in part because it is in such a solid area. Plus, the first few renovated units interior showed a big increase in rents, so there is a 9%+ upside in rents if management continues that program, which will also increase the value of the property.  The initial plan is to do 5-6 units in year one, and see how hard management can push the rents up.

The year one gross cash on cash return on investment is projected to be 16.1%, and should increase to 18.2% for year two. However there are two variables in this acquisition that could push returns higher. First, management is obtaining a Fannie Mae loan on this property that includes an interest only period of one to two years. Interest only should increase gross cash on cash returns by up to 6 points. Secondly, management applied for a Fannie Mae Green Program that by making certain energy efficient and conservation friendly improvements could result in a discounted interest rate as low as 3.7% that would increase returns even more.