Park 33, 188 Units, Goshen, IN
How We Got It The asset was calling for offers at the start of the pandemic which caused a few bidders to retreat. We would have also moved to the sidelines, but Park 33 was a 1031 exchange asset and our window to effectuate a tax-free exchange was closing.
Investment Rationale Park 33 was a brand new, best-in-submarket asset that represented a 1031 exchange for Paddock Club which was sold in early 2020. The sale price of Paddock Club was almost 2 times the entry price, leading to a 3.5+ times return on initial capital. That, plus seven years of depreciation, lead to a sizable capital gain making a 1031 exchange more compelling. Fortunately, Paddock Club was sold at the pre-COVID-19 valuation without any price adjustment despite closing during the peak of the pandemic. Park 33 had the best floor plans of any Spyglass asset at the time of purchase. It was exceptional product in a submarket where the second-best asset was single-wide trailer rentals. As a result, Park 33 had an exceptional competitive profile allowing it to achieve 99+% occupancy shortly following acquisition. Our research showed that similarly sized MSA’s had upwards of 10x more competitive rental properties, and that dearth of quality rental product provided a highly favorable backdrop for future rent growth. Park 33 benefitted from the strongest tenant demographics of any asset we acquired at the time. The asset attracted the area’s best residents who had a median household income well north of $100,000 at the time of closing–the highest level of any of the 19 assets Spyglass acquired to date.
What We Did Village Green, an experienced property manager with other assets in the area, managed the deal on behalf of Spyglass. They did a great job managing The Paddock Club for us in northern Kentucky. We immediately invested in the leasing office staff. The office had been short-handed, leading to a slower than expected lease-up. We inferred that the lease-up speed was not indicative of the demand for this product but rather too few hands to close on prospects and too few marketing dollars to drive traffic to the property. We increased the online marketing budget more than tenfold at closing. As expected, we positioned the property at the top of any keyword search for a small monthly budget since competition for ad space is limited.
Results It would have been reasonable to assume that demand for big ticket, discretionary consumer durables like RV’s would plummet during the pandemic. But RV sales were up 170% year-over-year in 2021, and provided a strong backdrop for strong rental demand. We sold this asset in September 2023 and realized a 15.9% net IRR and a 1.52x multiple on invested capital (after exit costs and after the sponsor promote).