“The sun – the bright sun, that brings back, not light alone, but new life, and hope, and freshness to man – burst upon the crowded city in clear and radiant glory.” – Charles Dickens
Phoenix, also known as “the Valley of the Sun”, has an average of 299 sunny days per year – more than any other city in the U.S. Phoenix also has the highest job and population growth in the nation as Americans flock to the region for its affordable housing and high quality of living. We’ve made 15 investments in the greater Phoenix area since 2011 and in 2017, we acquired Avalon Apartments, located in an up-and-coming area in central Phoenix, just five miles from downtown. Our business plan was to renovate the property and hold it for five to seven years as the surrounding neighborhood continued to improve.
Avalon, built in 1973, is situated on 3.5 acres and includes 117 apartments averaging 830 square feet. The property contains large open spaces and a variety of community amenities including a resort-style swimming pool, barbeque and outdoor lounge areas, fitness center, dog park, solar energy panels and covered parking. Avalon sits between downtown Phoenix and Camelback Mountain just west of Arcadia and south of Indian School Road, a major east-west thoroughfare with several retail centers and numerous restaurants. Residents have a short commute to the Camelback employment corridor and can walk to various nearby shopping, dining and recreational facilities.
Over the past 20 years, Phoenix has consistently ranked among the fastest-growing cities in the U.S. and has recently become a nationwide leader in several additional economic indicators. According to recent Census data, Phoenix welcomed an average of 43,000 residents each year between 2013 and 2017, the highest in-migration in the nation. Maricopa County – where Phoenix is
located – is home to one-half of Arizona’s population and is also the fastest growing county in the U.S. The State of Arizona saw GDP climb by 4% in 2018, the
fourth fastest in the nation, and the Kaufman Index, a New Pool Cabana, Turf, & Pool Furniture New Entrance Canopy leading indicator of new business creation in the U.S., ranked Phoenix as one of the top metro areas for startups and entrepreneurship for the last four years.
A highly skilled labor force coupled with a low-cost, business-friendly environment continues to attract companies to relocate to or expand operations in Phoenix. Downtown Phoenix is currently home to more than 300 technology companies compared with 67 in 2012. The City is also home to numerous large financial services companies including American Express, Discover, USAA, Charles Schwab, Vanguard, Nationwide Financial, Allstate, Wells Fargo, Bank of America, Chase, PayPal, Paychex, Northern Trust and Quicken Loans. The area is benefiting from an influx of residents migrating out of high-cost states like California seeking a lower cost of living, quality educational institutions and abundant outdoor activities.
When we acquired Avalon, it was just 76% leased in a submarket with a 90-95% average occupancy, providing an immediate opportunity to substantially increase the property’s cashflow. Within four months of our acquisition, we were able to stabilize operations and bring occupancy above 90%.
Earlier this year we began our interior renovation program including upgrading the kitchens (modern appliances, new cabinets and hardware, countertops/backsplashes, light fixtures and flooring), bathrooms (sinks, faucets, light fixtures, hardware, mirrors and bathtub surrounds) and replacing the living area carpet with faux wood, vinyl flooring. We also enhanced the property’s curb appeal through new exterior paint and landscaping, upgrades to the façade, improved common area gathering spaces and the addition of shade trellises.
We are pleased with the progress at Avalon as well as the continued improvement of the neighborhood. As the Phoenix market continues to grow, the future of the City – along with our Avalon community – couldn’t look any brighter.
This article was originally published in November 2019. To read the full newsletter, click here.