Praxis Newsletter – January 2013
Recognizing Opportunity, Delivering Results.
It’s not just a fancy tagline, it is the very purpose of our existence. Read on about how we did that in 2012 and you will see why real estate is now a very favored asset class.
Walnut Grove Apartments
We knew we hit a home run when we bought this 54-unit apartment complex in Austin Texas in 2010. What we didn’t expect, but are happy to receive, was a Grand Slam.
After purchasing the complex for $800,000, and spending another $701,000 on improvements and rebranding the property as Rustic Creek Apartment Homes, we sold the property in December 2012 for $2.53 million, returning 185% of our investors capital to them in 22 months, generating a healthy 42.64% IRR.
Many people say it can’t be done: buying, fixing, and reselling houses for a profit. Try convincing our PCL Properties investors! After making a simple change to our leverage strategy, selecting properties that need more work than a simple “paint & carpet” rehab, elevating our price point, and expanding our geography, we have been able to out-maneuver our competition and our returns have reaped the benefit. Our returns in this fund exceeded 20% in 2012, and momentum is building. In the third and fourth quarters, returns were as high as 28.5%.
Income and Appreciation
It seems like everywhere you read, there is an article about large investors buying pools of rental houses, making this the asset class du jour for 2012. We know why, the stabilized portion of our $13 million Income and Appreciation Fund’s rental pool averages a 9.67% cap rate and 18.16% levered return from rental cash flow, on an asset level. We are getting robust deal flow at excellent prices, favorable cap rates, and a discount to current market value of 29.6%. To continue this track record of success, we just launched our third Income and Appreciation fund, a $25 million offering. There are a lot of legs left in this strategy.
Elm Grove Apartments After raising rents over 8% in the first year, and seeing occupancy increase to 96%, the results are exceeding our expectations. Not only are we seeing income that is higher than our forecast, we have been able to distribute all preferred return without any accrual since the very beginning.
What about 2013?
We expect to continue to see real estate as an alternative investment for our clients to utilize in their efforts to contain volatility, escape the chaos of wall street, and earn risk-adjusted returns that fulfill their goals. Single family homes in California, and multifamily properties in Texas will be the best performers in 2013. The key to success is buying right. Let us know how we can help!