Aspen Heights – Norman (“AH Norman”) is a 194 unit (685 bed) new development located 1.5 miles from the University of Oklahoma. Virtus partnered with a developer who has been successful building cottage style student housing communities, a disruptive product type in the sector. Cottage living affords students the unique experience of having their own freestanding home, and has been proven to outperform traditional “garden‐style” competitors. With 24,044 enrolled students for Fall of 2014, the University of Oklahoma is poised to grow moderately over the coming years while continuing to strengthen its admissions standards and academic profile.
In addition to being closer to campus than direct competitors, the project offers market‐leading finishes, amenities, and customer service. The project also benefits from an operator whose resident retention ratios regularly exceed industry averages by 10‐15%.
Virtus began a quiet marketing effort to determine optimal pricing at the same time that its operating partner was investigating a portfolio-wide recapitalization. The portfolio exit proved more accretive to this investment, and Virtus chose to add this property to the entire transaction.
ONE Illinois (“ONE”) is a 524 unit (1,575 bed) garden-style property less than one mile from the University of Illinois at Urbana-Champaign. Built in 1997 and set on nearly 60 acres, ONE comprises what was originally two separate purpose-built student housing assets. Now operated and marketed together, ONE offers residents a diversified unit mix and access to two amenity areas. The property enjoys excellent visibility on a major north-south thoroughfare to campus, and is served by the Urbana-Champaign bus system. With an enrollment of 44,000 students, the Urbana-Champaign campus is the flagship of the University of Illinois system, and its international student population (a group naturally inclined to seek housing) is the second-highest in the nation.
Located within walking distance to Rutgers University’s main campus, Rockoff Hall is the only off-campus property leased by the bed in the New Brunswick market. As of the end of Q1, Rockoff Hall was 99.6% occupied due to a move-out over winter break.
In late 2012, Virtus began rollout of a strategic regional operating platform taking advantage of high affluence and favorable cost basis in the exurbs of Detroit due to overdone “headline risk” regarding the city core. Virtus had determined that the outlying exurbs of Detroit had highly attractive fundamentals for senior living facilities and that the basis and value addition possibilities were highly favorable. Together with its regional operating partner, who has decades of experience in the area, Virtus has acquired a total of 15 properties in the region.
Virtus purchased three Class A quality Senior Living facilities with a high memory care component in major cities in Florida. The properties had been originally financed with costly bonds, and Virtus was able to work out the capital stack to achieve a more favorable basis and financing structure as part of its acquisition. Together with its operating partner, Virtus is replacing in-place management and has projected a capital improvements campaign intended to keep the properties at their current favorable place in the competitive landscape.
Virtus acquired two assets in Vermont, which it had found attractive due to the extremely high in-place household wealth dynamics and very stringent barriers to entry for new construction in the region. The properties are some of the highest quality assets in their primary market and draw in residents from beyond state borders, including many from the Boston area.
This 2015 acquisition consists of four existing buildings, totaling 56,411 square feet, that are anchored by United Surgical Partners International (USPI), the largest national ambulatory surgery center (ASC) owned jointly by 35 specialty physicians and Dignity/Tenet Health. The existing buildings were 88% leased with a 6.8 weighted average lease term (“WALT”) and the current medical/retail occupancy split is 74% medical and 26% retail. Additionally, there are two “pad ready” sites totaling 2.6 acres, which can support an additional 34,066 square feet of medical or retail space.
Loker Medical Arts Pavilion (“Loker”) is a 61,064 square foot Class B+ MOB built in 2010 in downtown Los Angeles on California Health Medical Center’s campus. California Health Medical Center is owned and operated by Dignity Health Care, the fifth largest hospital provider in the nation and the largest hospital system in California. At acquisition, the property was only 58% occupied and Virtus purchased the property with the intent to increase occupancy and dispose of the asset, which it did in 2016.
Virtus sourced, acquired, and underwrote eight subject properties as separate investments, but with the goal of amassing a regional presence in the Virtus targeted market of Oklahoma City MSA, which would make it attractive to the REITs and other sizeable institutional buyers. The properties varied in quality, vintage, and operational details, but all were under-managed by local operators and ripe for significant value-add potential. Oklahoma City was chiefly targeted for its broadly favorable economic growth prospects and high market occupancies coupled with the fact that REITs and other large investors had not impacted the market with high valuations prevalent in similar cities.
As of disposition, the portfolio of properties on a combined basis were stabilized and had achieved their business plans. In light of the substantial increase in NOI across the portfolio combined with robust storage valuations, Virtus chose to test the sales market well ahead of the original underwritten hold period.
Lake Castleton is a 1,261 unit apartment complex in Indianapolis situated in a growth corridor between downtown and the burgeoning northern suburbs. The property is located within a primary market area serving employees of Community Hospital North, Roche, and Stanley security—all contributing to a highly resilient workforce dynamic. Virtus intends to renovate 772 units to create a significant rent increase over the next two years and better position the property to appeal to tenants who work in the area but have few options for updated interiors. This property is the result of Virtus efforts to maintain deal flow of assets with a significant yield component during a cyclical environment where conventional multifamily is beset by unsustainability high valuations.
This portfolio consisted of 748 units across two properties in the Bachman Lake area of central Dallas, TX. The primary market area is a small cluster of workforce-targeted apartments adjacent to Dallas Love Field Airport, with numerous job drivers and a relative lack of other rental housing due to the prevalence of commercial and single family property. Virtus acquired these assets alongside the existing owner who sought to retain their stake while completing the capital expenditures campaign that had already prompted significant rental rate increases. These efforts were tremendously successful and resulted in greater yield than underwritten, as well as significantly more capital appreciation when the properties were sold in 2Q2017.
Virtus partnered with Charter Stone Capital to develop a 65,000 sq. ft. charter school facility on a 13 acre site in Mesquite, TX. The facility is comprised of two buildings: a 35,000 sq. ft. new building and 30,000 sq. ft. renovation of a former medical center. The tenant is a regional charter system that has already proven to be a successful operator in another location within the market. The completed school will have the capacity to accommodate up to 1,000 students in grades Kindergarten through 12. Ample room will remain on the site for construction of additional buildings or placement of portable classroom units, in order to accommodate the school’s future growth. Construction began in January 2015 and was completed in 3Q 2015. The school has since passed all charter renewal hurdles and has met all underwritten benchmarks for student enrollment.