At Scholar Properties we are continuously looking at opportunities to recapitalize and reposition our portfolios for maximum profitability. We go beyond what other asset managers provide by studying each property’s operating platform and market position to realize the full potential of the property and maximize the return for our investors.
In August 2012, Scholar Properties acquired 47 Forsyth Avenue South, Hamilton on the basis of its proximity to McMaster’s Main Campus and its versatility as a student housing real estate asset. The property was purchased at a 5.2% cap rate for $461,100 with existing Net Operating Income (“NOI”) of $24,000. An additional $30,000 was invested in renovations to upgrade common areas and divide an oversized living room into two additional bedrooms. The improved cash flow increased the properties net operating income by 50% to $36,000. With an adjusted cost base of approximately $500,000 the property now produced NOI of $36,000 and was renovated to a 7.2% cap rate.
Over the course of the next three years, Scholar Properties acquired 20 additional properties at an aggregate cost of $10.1M, using the same model of adding rentable bedrooms inexpensively to maximize cash flow and manage potential down side. All 20 acquisitions were either abutting or in close proximity to 47 Forsyth Ave. S., Hamilton. After the disposition of the not-abutting properties, the 14 remaining contiguous lots were sold to McMaster for $15.8M after engaging them in a competitive bidding process.
Using a limited partnership ownership structure, property acquisitions were funded through a series of three equity raises during the term of the project, as well as financing through Tier I banks, private lenders and secondary capital markets. A summary of projects performance follows:
|Performance Summary||Class A
|Distributions to Date||$262,606||$38,378||$0|
|Preferred Entitlement Outstanding||$254,861||$138,163||$34,230|
|Net Proceeds from Sale||$935,279||$1,013,288||$827,565|
|Distributions to Date||$517,467||$176,541||$34,230|