We’ve invested roughly $15 million in the acquisition of Parkland at Orange Park, a stabilized 358-unit apartment community in Orange Park, Florida, a suburb of Jacksonville.

At a strategic level, this investment fits within our affordably-priced Sunbelt apartment / rental housing thesis. From millennials to retirees, a broad group of Americans have been taking part in a migration from northern to southern states over the past decade, driving continued demand for well-priced, well-located real estate, and supporting steady returns for disciplined investors.

As we stated in our mid-year letter to investors, we believe that this long-term trend has only been further accelerated by the pandemic. In an economy where remote work is becoming the norm for more and more people, we expect that an increasing share of the population won’t need to live in expensive gateway cities and will instead seek out locations that offer lower living costs and more agreeable climates.

Business plan

Originally constructed in 1986, the buildings are in well-maintained condition, and the unit interiors were fully renovated in 2017.

As of December 2020, the property was roughly 95% occupied, having maintained similarly strong levels of occupancy through the course of the COVID-19 pandemic.

Since the unit interiors have all been recently renovated, we do not expect any major capital expenditures in the near future. Our partner has extensive property management experience so they plan to manage the property in-house.

We plan to hold the property for roughly ten years before seeking opportunities for an exit. Our goal is to earn consistent cash flow from rental income, with the potential for long-term upside by selling the property for more than we paid for it.

Why we invested

While the extent of the negative impacts of the COVID-19 pandemic on the broader economy remains uncertain, we believe this investment is well-positioned not only to withstand a prolonged economic downturn, but to potentially benefit from more permanent shifts in behavior that may result.

  • Income-generating asset: The community was 95% occupied at the time of our investment, generating consistent cash flow through rental income.
  • Experienced partner: Peak Capital Partners has acquired and managed approximately $4.1 billion of apartment communities over the last 10 years, and they currently own and operate approximately 23,000 units.
  • Attractive long-term financing: We obtained a 10-year senior loan with 4 years interest-only at Secured Overnight Financing Rate + 2.78% (as of January 2020, an effective all-in rate of roughly 2.9%).
  • Great location: Located on the southside of Jacksonville, the property is conveniently close to several major employers, including the Naval Air Station Jacksonville, which employs over 17,000 people making it one of the top employers in Jacksonville.

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