Belvedere Apartments

Belvedere Apartments
Jackson, MS.

Address: 2625 Belvedere Drive
Jackson, MS. 39212

Year Built: 1967

Number of Units: 136

Unit Mix:

• 72 1BD/1BA Units
• 40 2BD/1BA Units
• 12 2BD/1.5BA Units
• 4 3BD/1 B
• 8 3BD/2 BA

Structure:

• Exterior: Brick veneer over wood framing
• Foundation: Poured concrete slab
• Roofs: Metal
• Parking Lot: Concrete

Common Area Amenities: Controlled Access, Playground, Swimming Pool and Tennis Court

The 136-unit Belvedere Apartments is located in Jackson, Mississippi, which is the largest city and capital of the state. When combined with the Trails at Northpointe and Briarwood Apartments (SJS II), Belvedere brings the total in Jackson to three properties with 360 apartment units. As has been learned in every other market the fund has scaled into, owning multiple properties in a single market allows management to take advantage of certain efficiencies, leading to lower expenses and better rent control. Adding this property to the Trails and Briarwood properties is expected to provide economies of scale and more efficient operations in Jackson.

The barriers that any competition faces entering this market are challenging. The Jackson MSA has approximately 20,000 apartment units. Less than 3% of this total supply, or only 600 units, have been constructed since 2005. Outside of small, in infill developments downtown, all of the municipalities have effective moratoriums on new multifamily development. As a result, virtually no multifamily has been delivered in the Northwest submarket in over 13 years. The negative sentiment towards new multifamily development by the local municipalities provides an excellent opportunity for well- located assets with sound operating fundamentals. (See Briarwood Apartments (SJS II) for more demographic and other information about the Jackson MSA.)

Belvedere Apartments was another almost off-market deal that the fund would not have had access to if it wasn’t for the connections of a key property management partner. Despite this being an older property, it looks to be in very good condition, including having almost ‘bulletproof’ metal roofing. The prior owner, who also managed the property, spent several hundred thousand dollars over their ownership period to refresh the exterior of the property. As a result, there was no major deferred maintenance found at the property. This was confirmed by the 100% inspection that was done on the property. There was no deferred maintenance of any kind that needed to be done other than a minor $5,000 repair to some of the railings on the property. The inspectors were very enthusiastic, not only about the physical status of the property, but also the state of the management of the property. A very diligent manager stayed on top of this property and our team was impressed with the cleanness of the leases and diversity of employment types among the tenants.

This property is very consistent with other properties the fund has targeted – some light value add, steady yield in the high teens going in, and just slowly rising over the life of the investment. The property was successfully purchased substantially below the cost of replacement in August 2017 for $3.2 Million.

Belvedere immediately meets our criteria for return. Based on current rents, the acquisition cap rate is 9.0, and with an interest only loan during year one, the cash on cash return is projected to be 20.3%. The prior owner was has very conservative, and consequently, current rental rates are below market. As the interest only period rolls off beginning in year two, management should be successful in bringing rents up to market to help offset, and we anticipate year two cash on cash to remain strong at a 16.8% ROI, and overall the 10-year IRR is projected to be 26.2%.