At our core, Bender Companies’ investment strategy and focus is to identify well-located, undervalued assets that present a value-add opportunity. “Value-add” is a term often used in describing multifamily investing and can be layered in meaning. At Bender Companies, that meaning is relatively simple. It can be best defined when we are evaluating an opportunity and ask ourselves: What can we do to drive the net operating income of the asset forward? We look for several levers to pull to create that value, including improving management inefficiencies through our in-house property management, capital improvements, unit renovations, ancillary revenue enhancement and cost reduction strategies. 

Our primary focus is on Midwest markets within a five-hour drive of Chicago, where our corporate office is based. We leverage our in-house property management platform, local expertise, and convenient accessibility to investment opportunities we pursue to drive home our value-add strategy. Fairmount Meadows Apartments in Milwaukee, WI is a prime example where we were able to execute this strategy. In January of 2021, in partnership with Eastham Capital, through its Eastham Capital Fund V, LP, we purchased this 1970 vintage 128-unit property. This investment was guided by the following thesis: 

• Mark to market strategy to organically grow rents 25%+ 

• Minor interior improvements to three-bedroom units to move rents up $300+ with an attractive return on cost of 25%  

• Reduce operating costs compared to the seller’s historical expenses 

• Acquire deal at an attractive basis ($61,719/unit) 

Milwaukee Fundamentals 

Two of the most fundamental aspects we consider when investing in multifamily are rent growth and occupancy. Milwaukee has consistently proven to be one of the most resilient markets in which we invest, outperforming national averages in each category over the past three years. Despite experiencing a notable increase in apartment deliveries, Milwaukee has maintained strong renter demand, with occupancy averaging over 96% and rent growth exceeding 4% since 2021. These impressive metrics played a crucial role in our decision to pursue the acquisition of Fairmount Meadows. 

Milwaukee’s diverse economy, demand, and major employment drivers were also significant factors in our analysis. The Greater Milwaukee MSA is home to six Fortune 500 headquarters, including Northwestern Mutual, Kohl’s, and Fiserv. The presence of these top employers significantly bolstered the investment opportunity, as they can profoundly impact a property’s success. Additionally, Milwaukee is the most populated metro in Wisconsin, home to 1.6 million residents. At the time of acquisition, the area was projected to see a 11.4% increase in average household income and 4.3% population growth over the next five years. 

Timeliness 

At Bender Companies, the thought process around selling an asset holds an equal amount of merit as does acquiring one. For Fairmount Meadows, the continued strength of the market, along with other market tailwinds such as a muted delivery pipeline projected over the next three years of 1,350 units/year compared to 2,500 units/year averages over the last five (as of Q1 2024), were timely to our thought process around exiting the asset. While we don’t try to time the market, we understand that the longevity of strong market metrics is attractive to a potential buyer. We remain optimistic about the Midwest’s ability to offer strong metrics and deliver steady and predictable performance, which we recognize as a big draw for multifamily investors. Beyond these fundamentals, we successfully accelerated and executed our business plan, putting us in a position to deliver a favorable result to our investors ahead of schedule. 

Value Enhancement and Results 

In less than three years of ownership, we were able to organically grow rents 28.5% and achieve 81% net operating income growth, surpassing our projections by a considerable margin. We infused $750,000+ of capital into the property that consisted of roof replacements, hallway lighting and paint upgrades, and asphalt work. Ultimately, we were able to employ our value-add strategies through organic rent growth, supplementary revenue streams such as the implementation of RUBS and pet charges, as well as utilize our in-house property management team to streamline operating expenses. While we aim to hold onto assets for at least five years, we carried out our business plan in just 32 months. As a result, we successfully sold the property in November of 2023 for 50%+ more than our original purchase price, yielding a gross realized IRR of 49% and equity multiple of 2.18x. 

One thing remains certain: We are committed to capitalizing on multifamily opportunities across the Midwest that align with our investment strategy. We continue to take a disciplined approach to pursuing investments as we look to grow our portfolio and carry out our business plans. Fairmount Meadows exemplifies this strategy remarkably well, and we are excited to continue building our track record and delivering robust returns for our investor base across our nearly 5,000-unit portfolio. 

By Connor Boyer, Senior Investment Analyst