Dimension on 27th

Jevan took the failing property near Grand Canyon University and increased the property value by 103% in just two years.

Property Overview

In January of 2017, we purchased the 260 unit Desert Place apartment complex located near Grand Canyon University (“GCU”) in Phoenix, Az in an off-market transaction.

Desert Place’s previous owners bought the property as a sort of side project. As experienced class A owners and operates, they were unable to deal with the problems that arose from owning a working class asset. The underground hot water lines were failing and the property suffered from multiple leaks per month. Further the property performance suffered from crime in the surrounding area and a rough tenant profile.

PURCHASE PRICE
$11.5M
RECAPITALIZED VALUE
$23M
IRR
55%

Strategy

We watched as GCU’s footprint and student enrollment began to expand rapidly and invest heavily in the areas surrounding campus. We negotiated, through a broker, an off-market sale of the property and immediately began our business plan of renovating and securing the property. To date, we have abandon the boiler system and installed individual hot water heaters in all of the units (allowing us to eliminate the property’s gas bill), repainted the exteriors, upgraded the clubhouse, improved the common areas, and renovated about 20% of the units. The final item to be completed at the property is the perimeter fencing to help secure the property.

The renovations along with the rebranding of the property to Dimension on 27th have been well received by the community. Overall rents have increased by approx. 15% with renovated units receiving on average a $55 premium, representing a 55% return on our interior renovation costs. The property’s utility expense has dropped 27% thanks to the elimination of the gas bill, meanwhile Jevan has increased the RUBs penetration by 16%. Ultimately translating to a 25% increase in net operating income in 15 months of ownership.

Investment Summary

  • Rents increased 15% with $57 premium for renovated units which is a 55% return on costs
  • Utility expense reduced 27% due to elimination of gas bill
  • Increased RUBs by 16% translating to a 34.7% increase in NOI in just 24 months of ownership
  • Over the two year period of ownership, Jevan added $11.7M or 103% in property value
  • Project generated over $7.6M in total profit and an internal rate of return over 50%

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