Campus View Apartments, Lawrence, Kansas

Campus View Apartments
Lawrence, Kansas

Address: 2350 Ridge Court and
2428 Redbud Lane
Lawrence, KS 66046

Year Built: 1960

Number of Units: 129

Unit Mix:

• 64 1BD/1 BA
• 64 2BD/1 BA
• 1 Studio

The 129-unit Campus View Apartments is the first property acquired by Fund II, and is located in a solid secondary metro area only one half mile from the University of Kansas in Lawrence, Kansas, providing a solid tenant base that’s impacted less by economic fluctuations. Some argue that universities thrive in tougher economic times. Beyond that, the Lawrence metro area moved up to 55^th on the 2015 Milken Best Small Cities index from 99^th on the 2014 report.  Consistent with its favorable demographics, a large east coast REIT recently acquired two properties not far from Campus View Apartments and is very positive on the area. The property was found through contacts in the area before it was opened up to the market by CRBE. It was offered at $4.1 Million, and acquired off market for $3.9 Million, which represents a 10% cap rate based on existing rents. Management believes that a 9% cap rate is more appropriate for similar buildings in the area, and based on that, believes the Campus View Apartments is likely worth at least $4.5M, and may have sold for closer to that amount if the sale had been opened up to the general public.

Campus View Apartments is a slightly older property, and inspections conducted prior to purchase revealed some initial repairs would be necessary to bring it up to the level expected of properties in the portfolio. In addition to setting aside $200k to make all the initial renovations, a 10 year enhancement program was adopted that will result in a complete refresh of every unit’s flooring, appliances and fixtures, creating a quality asset by the end of the anticipated ownership period. After setting aside funds for the initial repairs and allowing for the 10-year enhancement program from operating income, the first year cash on cash return is still projected to be just over 20% based on current rents.

Part of the value proposition in acquiring this property was knowing the owners had not been aggressive on rents, and were just managing for occupancy. A rent survey in the area indicated similar properties had comparable units on the market for more money. The rental rate for most of the units was found to be 9% to 11% under market. When average rents are brought up to market in year two, the cash on cash return is projected to increase to 26%. As of the end of Q2 2016, the property was 97% leased with only 4 vacant units.