ADDRESS | PURCHASE DATE | SALE DATE | AVG. RENT AT PURCHASE |
|---|---|---|---|
400 Putnam Drive, Tallahassee | 11/2022 | 2025 (EST) | $767 |
AVG. RENT AT SALE | RENT INCREASE | NOI | IRR REALIZED |
|---|---|---|---|
$2,642 (EST) | 244% | 58% (EST) | 12% (EST) |
Past performance and statements regarding earnings are no guarantee of future results.
At a glance
400 Putnam Drive, Tallahassee | |
|---|---|
Purchase Date | 11/2022 |
Sale Date | 2025 (EST) |
Avg. rent at purchase | $767 |
Avg. rent at sale | $2,642 (EST) |
Rent increase | 244% |
NOI | 58% (EST) |
IRR realized | 12% (EST) |
Why we invested
Tallahassee is home to two prominent universities: Florida State University (FSU), a leading public institution in the United States, and Florida A&M University (FAMU), the largest of the Historically Black Colleges and Universities (HBCUs), which has a long tradition of advancing African American education.
With the continuous growth in student enrollment, on-campus housing capacities often fall short. This gap has led to a thriving market for private, high-end student housing. Students today expect “Student Living” to include fully furnished apartments with comprehensive amenities that allow them to “arrive with just one suitcase.”
Leases typically span the academic year, offering investors predictable turnover and efficient management, including scheduled renovations during semester breaks.
Private student housing providers are competing to attract students through enhanced comfort and amenities. Features such as fitness centers, swimming pools, and communal areas have become standard, distinguishing these facilities from traditional “student dormitories.” The term “student housing complex” more accurately reflects the modern living experience offered.
We have been presented with an off-market opportunity to acquire a student housing complex. The property comprises 80 modern apartments, each approximately 10,700 square feet, with four bedrooms (each with its own bathroom), a shared kitchen, and a furnished living lounge area. These apartments offer not only comfortable living but also an efficient layout that maximizes both student satisfaction and financial performance.
However, the property did not come without challenges. During its construction phase in 2003, the building suffered significant structural damage due to non-compliance with building codes by the contractor, who was later convicted of fraud.
The property then faced over a decade of mismanagement, leading to many units becoming uninhabitable and eventual foreclosure, where it was acquired by the original lender, a Canadian debt fund, which treated it as a minor asset, neglecting it further.
Challenges and Opportunities
- Acquiring this property required us to adapt to a new business model. Managing furnished apartments presented a new challenge, but also an opportunity, as furnished properties generally yield higher returns.
- Nearly 75% of the apartments needed renovation to become livable and generate adequate cash flow.Our expertise in planning and access to a network of skilled contractors enabled us to manage this complex process successfully, despite the inherent risk of unforeseen costs.
- Another critical task was restoring the property’s appeal to students. The previous management had rented to any willing payer, reducing its attractiveness for student residents.
- Since students typically choose their accommodations at the start of the academic semester, the renovation project faced a tight deadline. The likelihood of students changing their housing during the semester is low, making timely completion critical.
Results
Strategic Acquisition and Financial Flexibility
It is essential to acknowledge that the success of this project was significantly driven by the advantageous purchase price, a result solely attributable to our diligently built network, forged through considerable effort and trust.
Our rapid assessment of the property’s potential and the swift acquisition of necessary financing allowed us to seize the opportunity, making the acquisition itself a notable achievement.
This favorable entry point provided us with the financial flexibility to undertake the extensive renovation required, with approximately 40% of the investment allocated to renovation and reconstruction—a level of commitment not typical for our projects.
Addressing Challenges and Overcoming Setbacks
Indeed, we faced initial setbacks. The primary contractor needed to be replaced during the project, resulting in unforeseen legal disputes that required substantial effort to resolve, while we continued to advance the reconstruction with other partners.
Additionally, the original property manager’s toxic leadership led to high staff turnover, which not only impeded our efforts to maintain a consistent service level but also conflicted with our company values of respect, quality training, and collaboration.
Enhanced Renovations and Added Amenities
Our renovation efforts extended beyond facades, roofs, and balcony repairs. We also added amenities such as a clubhouse and restored the swimming pool and other exterior features to enhance the appeal of the property for students.
Active Management and Successful Outcomes
In the final stages before leasing, our management team was fully engaged, taking an active role in tasks including the final setup of furnishings to ensure timely completion.
Despite these challenges, the renovation was successfully completed at the start of the leasing cycle, achieving a 95% occupancy rate in the first year. We are actively leasing units for the upcoming semester and anticipate maintaining a similar occupancy rate while implementing further rent increases.
Another success story accomplished
We are satisfied with the project and, most importantly, with our accurate assessment of the property’s potential. This correct evaluation ultimately allowed us the freedom to undertake a more extensive renovation and to approach the inevitable construction surprises and cost increases with confidence.
Despite encountering several unforeseen challenges, these obstacles did not hinder us from achieving an exceptionally strong return on investment so far.
Exploring Sale Opportunities with Strategic Pricing
We have already begun exploring opportunities to sell the property and have initiated initial steps in the sales process.
However, due to the steady and reliable revenue generated from the asset, there is no immediate pressure to close a sale.
This allows us the flexibility to set more ambitious asking prices, giving us the ability to patiently seek out a buyer who recognizes the long-term value and potential of the property.
