Sierra Village Apartments met Trion Properties investment criteria almost perfectly. Trion, a private equity investment company, focuses on value-added and distressed commercial real estate assets with an emphasis on the multifamily sector. It specializes in properties that require moderate-to-heavy rehabilitation on a 12-24 month investment horizon.
The 185-unit Sierra Village Apartments, located in the Sacramento MSA, had languished since it had fallen into receivership in 2006. In 2012, it was included as part of a large $180 million receivership sale in 2012, but it was almost immediately slated for resale. Although the company that purchased it made some capital improvements to the property, it lacked the local market expertise to maximize the value of its expenditures or a strategy that would justify a more comprehensive renovation plan.
Trion believed that with more involved day-to-day management, investment in interior and exterior renovations, and aggressive leasing, there would be significant upside value to the acquisition.
Further increasing its attraction to Trion is Sierra Village’s location in an attractive submarket—North Highlands—within an MSA that is on the cusp of better economic times. Although the Sacramento MSA—the seat of California government—was hit hard by the recession, the state has weathered its budget crisis, and unemployment in the Sacramento MSA has declined 200 basis points over the last year.
To take advantage of this opportunity, though, Trion needed financing structure that would maximize the funds it could invest in the property and give it time to realize the value-added from its improvements.