White Lakes Plaza Apartments

White Lakes Plaza Apartments
Topeka, Kansas

Address: 53733 SW Plaza Drive
Topeka, KS. 66609

Year Built: 1973

Number of Units: 144

Unit Mix:

• 73 1BD/1BA Units
• 71 2BD/1.5 BA Units

Property Size: 9 Two-story Buildings

Structure:

• Exterior: Wood frame / Brick veneer
• Roofs: Flat, built up. New to be installed with acquisition.
• Foundation: Poured concrete.
• HVAC: Individual units.
• Metering: All electric – individual. W/S/T – property owner.
• Parking: Asphalt paving. 100 covered spaces/180 uncovered spaces.

The 144 unit White Lakes Plaza Apartments is located in Topeka which is the capital of Kansas and home to more than 236,000 residents. White Lakes Plaza enjoys immediate proximity to all major roadways and is only a four-minute drive from downtown Topeka and the state capital buildings. With sub national average unemployment (4.3%), low cost of living, and continued job growth, the property is in a stable Class B sub-market where it meets all criteria for location. In addition to its favorable location, there has been minimal building in this area for a very long time, contributing to an extremely tight rental market where the entire metro area averages a 4.7% vacancy rate. Per REIS, there has been no new building since 2009, other than two very small properties in 2012 and 2014 totaling 40 units. The HUD report on Topeka shows that the total number of permits for apartments scheduled to be delivered in 2016 is for 8 units (not buildings).

The cost of doing business in Topeka is approximately 15% lower than the national average due to lower taxes, lower energy expenses, and local and state incentives. A number of companies maintain corporate headquarters in Topeka, including Collective Brands, which was formed in 2007 when Payless Shoe Source acquired Stride Rite Corp.; Hill’s Pet Nutrition, a global pet food company; and Security Benefit, a national financial services company that was bought by Guggenheim Partners. In addition, Goodyear, Frito-Lay and Del Monte Foods are major companies with manufacturing and distribution centers in Topeka. White Lakes is also conveniently located very close to a mix of retail, including a Walmart Supercenter next door. The combination of a shortfall of available workforce housing, close proximity of a Walmart Supercenter, the Frito-Lay distribution center, as well as stable mixed retail, creates strong rental demand for White Lakes Plaza’s units.

A property management company brought the White Lakes Plaza Apartment deal to the fund, which is being sold by a private owner/manager. Due diligence on the property revealed that the individual units are in very good condition in addition to having a good infrastructure. The only exception is the roofs, which are at end of life. An inspection and bidding process resulted in a $211,000 final quote for new roofs. Following a threat to pull out of the deal, the seller agreed to give a credit in escrow for that amount, so the property will have all new roofs fully paid for by the seller.

White Lakes Plaza was acquired for $6,030,000. Management has budgeted $68,000 for capital expenditures to make various improvements on the property that will add to its appeal and should provide a basis for raising rents faster than projected. However, based on current rents, the acquisition cap rate is 8.28%, and the annual cash on cash return is projected at 13.2% with a projected 10-year IRR of 24.4%.