The Sahara was acquired April 2019 for $8.5M. It was purchased from an owner/operator that ran the property as 75% student housing and 25% short term hotel accommodations for visiting students, faculty, and parents. The property is comprised of 173 residential units, primarily studio units, and 2 commercial spaces on 3 acres.
The strategy for our target demographic was intentionally moved from the student population to the general, young professional population in Tucson. This strategy provides stability through diversification as the inherent issue with student housing are the periods of massive turnover and maintenance demand, causing inefficiencies in expense management of unit turns and high probability for delay and physical vacancy from down units. The control of balancing lease dates of expiration allows our management team to organize potential move outs to minimize down time and maximize income.
In addition to the initial purchase price, $2.7M was invested into improving the property. This included extensive cosmetic renovation of the entire property to bring it up to a Class B asset in a B- and gentrifying neighborhood on Stone Ave outside of downtown Tucson and University of Arizona. The property remained 75% occupied upon the onset and we continuously renovated on a schedule of 15 units every 21 days to release to management for lease up.
Exterior improvements included new youthful design elements, using bright colors to create fun social environments to draw in target population.
Interior improvements included complete refresh of apartment interiors, including updated kitchens, furniture and flooring.
Common area amenity improvements including a Yoga Studio, Gym, Study, Lounge, and Office, were completed parallel to the interior renovations of individual units.
Currently, we are finalizing the stabilization phase with financials supporting a $19M NOI Valuation on $11.2M in invested capital, resulting in a 45% Internal Rate of Return.