Although most properties in our portfolio are wholly owned by Timberland Partners, on occasion we will bring in a Joint Venture (JV) partner to provide outside equity for the acquisition. Such is the case with Royal Oaks Apartments in Eagan, MN.
Timberland Partners was presented with the opportunity to acquire this asset in the fall of 2015. At the time we were raising money and acquiring properties for our fifth multi-asset apartment fund, Timberland Partners Apartment Fund V, LLC (TPAF V). Not wanting to allocate 30 percent of the fund’s $38,650,000 in capital to a single asset, we looked to a joint venture partner, PA-based LEM Capital to partner with us on the investment. Liking the deal and trusting Timberland Partners to manage it well, a JV deal was formed whereby in January of 2016 TPAF V invested $2.292 million for a 20 percent interest in the property and an opportunity to participate increased ownership should the investment exceed a 13 percent IRR. The business plan was to implement strategic capital improvements at the property to raise the asking rents and implement Timberland Partners in-house property management to more efficiently manage the operations at the property. Collectively, these strategies would grow the Net Operating Income (NOI) at the property, and after stabilization at this higher level of NOI the property would be sold for a profit. The timeline was determined to be approximately five years from the time of acquisition to the anticipated sale.
Due in large part to the dedicated effort of the Timberland Partners capital expense management team, as well as the operations team at the property, the business plan was executed to the highest standard and ultimately generated phenomenal returns to the investment partners.
The property was sold on Dec. 1, 2020. In just under five years the property generated $5,710,676 in distributions to the partners, equating to a 25.3 percent internal rate of return (IRR) and an equity multiple (EM) of 2.50x.