Case Study I

Case Study I:

Maple Hills Apartments

Location:
No. Units:
Financing:
Low to Moderate:
Lender:

Fontana, California
280
Bond Financed
20%
California Federal Bank (Formally Redlands Federal Bank)

Charter Realty Group ("CRG") was selected as the management company for Maple Hills in December 1996. The Property was in deteriorating condition, both physically and economically. CRG together with the cooperation of the lender and a limited investor moved decisively to stop any further damage and economic loss to this asset.

In December 1996 the property was experiencing problems in many areas. Occupancy was 57%. Delinquency was above $52,000 monthly. Forty-eight units of the 120 vacant units were classified as down units, as all have been severely cannibalized by the previous management company. Most of the remaining residents did not work, and loitered about the property daily. The irrigation system was partially down, mostly due to vandalism. Laundry areas were un-kept and the landscaped areas were mostly mud. The management/leasing area was set up in an apartment; it was unclean. Supplies and leasing forms were not available, and the telephone system did not work properly. CRG developed a plan of action that would stop any further deterioration and put into motion a rehabilitation and leasing program.

The action plan was multi phased. First the exact number of vacant units was determined, as was the cost associated with turning these units. Next, all residents who were delinquent were given notice to bring their account current or face eviction. A new management and maintenance team was assembled. A program to change the tenant profile was undertaken. Security was utilized on the property by the prior management company inefficiently. CRG re-deployed security monitoring to maximize their effectiveness. Rehabilitation of the property's common area was evaluated. An amenity program was developed to satisfy several age levels, from children to adults.

The renovation plan included: Changing exterior signage and painting the perimeter fence. The creation of a safe, new playground area by blocking off center traffic. Upgrading laundry rooms, water heater systems, and renovating the club house that was not being utilized. The creation of a central community area including barbecue grills, sand volleyball, and a full size basketball court close to the pool and playground. Extensive landscaping improvements were also implemented.

Maple Hills was regarded as a lease-up renovation property. As units were brought on line, undesirable tenants were evicted. The immediate result was a decrease in occupancy. Once there was a stabilized group of residents, we set out to lease newly decorated apartments.

The property was a two story, garden style project. Each building contained six to ten units. The units were put on line starting from the front or those having street exposure. Once these blocks of units were leased, the next group of apartments, in the middle of the property, was made ready for leasing. And, finally the last phase, in the rear of the property were completed. This plan gave the on site management better control of the property and its residents.

Twenty-four of the down units were returned to service by the end of the first year, using in house maintenance personnel. During the next three months, additional ten units were returned to service. Soon thereafter, the remaining down units where renovated and placed in service. Much of the work required was accomplished with cash flow from operations. By the end of summer '97, occupancy had reached 85%. The competitive market area was also experiencing 85% occupancy. Our new strategy was to exceed 90% occupancy by targeting residents living at other properties. 90% occupancy was achieved within the next four months.

The physical needs of the property were evaluated relative to the funds available for the many capital projects, ease of management, and resident access to the facilities. CRG has many years of experience in working with under performing properties.

The property was later sold returning 100% of principal to the lender and a positive return to the investors.