Baton Rouge and Lafayette, Louisiana
THE WHAT AND THE WHY
Stirling Communities is our portfolio of 657 multi-family apartment units that are primarily student housing for Louisiana State University and University of Louisiana at Lafayette. Being a company traditionally focused on retail and office properties, Stirling initially acquired 370 units in Baton Rouge and Lafayette, Louisiana in 2011 and then added 287 more units in Baton Rouge in 2012.
The high national demand and low supply of multi-family properties creates a highly competitive environment, with most “A” properties trading in a price and return range that we strategically choose not to pursue. We sought to buy well-located, underperforming assets which could become great performers through repositioning, physical improvements, and better management. Since Stirling Communities was our first venture into multi-family property, we had to create new strategies and form strategic partnerships for thorough due diligence and long-term asset and property management.
We saw Stirling Communities as an opportunity to diversify into a new product type within our current footprint rather than going outside of it. More importantly, we understood the Baton Rouge and Lafayette market dynamics and knew that the undermanaged assets were in the right locations to make them performers. Being a strong value-added firm, we sought to reposition the group of underperforming assets through smart capital investment and partnered with an outside firm, BH Management, a top 20 company nationally, to provide long-term property management and leasing services.
In just one year, Stirling Communities almost doubled its original size due to the strategic acquisition of an additional property. Currently, the existing apartment units are over 90% leased. With approximately $1 million in deferred maintenance budgeted, we were able to perform all the issues and repair the properties while saving $250,000. The properties that were previously under-managed, suffering from poor occupancy, and quickly depreciating have been physically improved and, through focused and diligent asset management, have been repositioned into strong performers delivering solid risk-adjusted returns to investors.