Allen Creek Apartments Burlington, Kentucky

Allen Creek Apartments
Burlington, Kentucky

Address: 2600 Peoples Court

Burlington, KY 41005

Year Built: 1973

Number of Units: 117

Unit Mix:

• 46 1BD/1BA
• 60 2BD/1BA
• 11 Studios

Property Size: 10 Three Story Buildings (6 bldgs. on Peoples Ct. and 3 bldgs. on Carlton Dr.)

Structure:

• Exterior: Concrete block with brick exterior
• Foundation: Poured
• Windows: Double-pane vinyl (replaced in 2014 & 2015)
• Electrical: Copper wiring
• Roofs: Pitched asphalt shingle over concrete
• Parking Lot: Concrete surface – paved 2014

The 117 unit Alan Creek Apartments is immediately located in the rapidly growing Northern Kentucky submarket of Boone County, a market defined as the Greater Cincinnati Market Area. Cincinnati’s Central Business District has a daytime employment population of 1.25M, and is only 16 miles from Allen Creek. Site Selection Magazine annually ranks the “Top Metro Areas in the U.S. for New Expanded Corporate Facilities”, where Cincinnati has ranked in the top 10 for 9 years in a row. Greater Cincinnati boasts a diverse economy and is home to leading companies in the financial, manufacturing, consumer products, healthcare, and retail sectors. The Greater Cincinnati area is home to 10 Fortune 500 headquarters, including Proctor & Gamble, Macy’s, and Kroger’s. In addition, a number of Fortune 500 companies have major operations in the region, including Citigroup, Fidelity, and General Electric.

In addition to the region’s stable occupancy rates of 94.4%, rental rates in Greater Cincinnati increased an average of 5% in the twelve months ending December 2015. This is on the heels of a 3.8% increase year over year from December 2013 to December 2014. The primary factors causing the increase are the positive demand drivers of job growth coupled with limited additions to new supply.

Allen Creek was last acquired as a distressed asset several years ago, and in the past two years has been fully renovated and stabilized with more than $3.8M in capital improvements. Those improvements included updating interiors of the units, replacing sanitary sewer and water delivery systems, installation of a storm sewer (none existed prior), replacing a retaining wall, new electric service/panels into every building, new windows, signage, landscaping, and entrance awnings, and the inclusion of four fully-accessible ADA Units.

During a very active bidding process for the property, management developed a favorable relationship with the seller, which afforded the fund a competitive advantage. As a result, the fund was successful in its efforts, and Allen Creek was acquired for $5,425,000 on November 2, 2016, which is substantially below the cost of replacement. Replacement costs for new construction in the Greater Cincinnati Market Area ranges from $90,000 to $130,000 per unit. The property was acquired for $46,000 per unit.

In year one, the gross cash on cash return on investment is projected at 15% based on current rents and occupancy levels.  However the lender represented that the loan on the property could include one to two years of interest only, and if so, would increase the gross cash on cash return for those years.