Preserve on Maine in Rochester, MN has been a strong performing asset for Timberland Partners since it was acquired in October 2020. The property was purchased in a tenant in common structure between Timberland Partners Apartment Fund VII and Timberland Partners XVI, a partnership looking to complete a 1031 tax deferred exchange. The investors involved in the exchange were able to replace an aging, C+ quality property in Des Moines, IA, with a newer constructed property priced below replacement cost and operating with below-market rents. When the time comes to sell a property, Timberland Partners prefers to replace older, capital-intensive properties with something newer that has fewer long-term capital requirements.
As a Class A property, Preserve on Maine was identified as an ideal candidate for investment due to its quality of construction, location in the market, and for the opportunity to invest in a robust local economy with a highly educated workforce. As home to the world-renowned Mayo Clinic, Rochester is seeing sustained growth as the city continues to invest in infrastructure and attract world-class organizations. The city is in the midst of a 20-year, $5.6B economic initiative called Destination Medical Center (DMC). This initiative received state and local subsidies in exchange for private investment to help Mayo Clinic expand and to help diversify the regional economy. If all goes according to plan, the region will add over 30,000 jobs as a result of the project.
Additionally, at the time of acquisition Timberland Partners already owned and managed four communities in the Rochester market. Having this scale in the marketplace allows our management team to refer residents to our other neighboring communities and negotiate efficient prices with vendors who service multiple properties for the company.
The disciplined performance of the property management team has delivered great results. The property has maintained an average occupancy of 96.8% year to date. Through August 2022, the property’s Effective Gross Income is up 13.8% over the same period in the prior year. While expenses have been up 9.5% due to inflationary pressures, Net Operating Income is up 17.3% versus the prior year, contributing to increased distributions and real value creation for our partners.
