With each fund, Timberland Partners Investments targets properties for acquisition that either present a value-add opportunity or produce day-one cash flow. While Synergy, our most recent acquisition in Lake St. Louis, Mo., is a newly constructed Class “A” property, the opportunity lies in the completion of the lease-up.
“We’ve recently bought newer construction properties that have strong cash flows on day-one,” said Brad Swenson, acquisition specialist for Timberland Partners Investments. “The lease-up component [of this deal] is what differentiates Synergy from the others.”
Timberland Partners Investments sourced this property off-market from a merchant builder/developer who primarily focuses on new development and sells shortly after completing construction. As a result of the current economic environment, Timberland Partners Investments negotiated and acquired Synergy at a purchase price below the current replacement value.
Synergy was leased around 27 percent at the time of acquisition, which presented Timberland Partners with an opportunity to add value through implementing our best-in-class on-site management practices to complete the lease-up process.
“We know the market, and we can bring our professional management approach to that lease-up process,” said Greg Ribich, vice president of investor relations for Timberland Partners. “That is where we create value.”
Synergy is located in the St. Charles County submarket, which is an affluent and fast-growing part of the St. Louis metro area where Timberland Partners owns seven other properties. This particular submarket boasts some of the lowest vacancies in the area, with a 93 percent occupancy rate during the second quarter of 2020. So far, the submarket hasn’t seen an increase in vacancies as a result of the COVID-19 pandemic, which is promising news for Timberland Partners. St. Charles County is also home to a mix of large office and industrial employers, which has likely contributed to the 10 percent increase in the area’s median household income since 2010.
The property itself boasts a variety of amenities renters are seeking out, such as open concept floor plans, gourmet kitchens, and in-unit washers and dryers. However, Synergy’s location within The Meadows at Lake St. Louis lifestyle center is what sets it apart, putting residents within walking distance of restaurants, shops, the local farmers market and fitness studios.
“When you sit back and look at the deal, considering the basis, the market, the potential growth, and the value that we are adding throughout the first 12-18 months, it truly checks the boxes in terms of being a long-term, strong investment,” Swenson explained.