The Claridge Apartments- The Art of Hidden Value and Million Dollar Water

Property management, process analysis and improvement, bridge loan financing, rehabilitation, value-add, business development, reposition and disposition

  • Claridge Apartments
  • Houston, Texas
  • 173 Units – Built in 1983
  • In 2007 the City of Houston was contemplating condemnation and the property was foreclosed.
    • 230 code violations
    • 30% of the property out of service due to flood damage
    • Rents were deeply discounted, and new residents were required to do their own make-ready.
  • Terri Clifton was engaged to clear up liens, citations and other liabilities to position the property for sale. This was accomplished over 24 month period with minimal additional investment.
  • Terri Clifton identified and pitched the deal to a private investment group.
  • Given the history of the property, investors had reservations. Identifying the hidden asset value, Terri confidently offered funding and assumed a percentage of ownership interest.
  • Acquisition was completed in September of 2009 for $3,924,851 ($22,687 per unit).
  • An additional $2.3 million was invested to rehabilitate the entire property.
  • Reuven Bisk arranged bridge loan financing.
  • The property was brought back to life over the next three years.
    • Completed extensive processes review
    • Identified extensive water usage
    • Implemented RUBS (Ratio Utility Billing System)
    • Detected and repaired leaks. Installed water conservation devices reducing water costs by 30%.
    • Water use was still extensive
    • Persisted with investigations
  • Properly maintained systems and with persistent management, convinced the City that metering was faulty. After meter change in January of 2014, water billing went down by another 43% to an average of $6,199 per month.
  • Improved water management (savings + RUBS) added $163,356/year in NOI.
  • Increased occupancy to 97%
  • Increased rents by 14%
  • Initiated regular monthly distributions

As a Result…

  •  The Claridge was sold in April of 2015 for $9,149,970 ($52,890 per unit) Cap rate: 9.64% for a 47% gain.
  • These hands-on, management-directed changes added $1,694,564 to the value of the property, or $9,795 per door
  • The property continues to provide healthy returns for current owners and is now upgraded to a B+ asset.
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