CGC Case

CARDINAL GROUP CONSULTING CASE STUDIES

DUE DILIGENCE

Cardinal Group Consulting was engaged to assist in the acquisition due diligence process for a 1,000+ bed student asset.

Although the client was a large, experienced owner, they had few internal resources dedicated to the acquisition of existing assets.

Utilizing our significant acquisition experience, Cardinal Group Consulting was able to propose a full suite of Due Diligence services including initial document request recommendations, lease file auditing, contract and historical financial review, and post-acquisition budgeting and management recommendations.

DUE DILIGENCE

GOAL To provide resources for the client that weren’t available internally and to provide an examination of current and historical operations to identify operational shortcomings and potential impacts to future operations.

SERVICES ●

~1,300 bed pre-lease and in-place lease file audit

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~400 unit walk inspection

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Personal Property Inventory

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3-Year Historical Financial Review

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Go-Forward Budgeting

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Historical CapEx & Maintenance Log Review

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Service Contract, Permit, & Insurance Review

DUE DILIGENCE

Through the due diligence process we identified several areas of underperformance that would need to be addressed upon acquisition. Examples include: Inability to fill key on-site positions Resulted in an overreliance on community interns which became a significant hurdle in completing and maintaining organized filing systems. This shortcoming also materialized in an overreliance on gift card concessions and lack of pre-leasing velocity.

Pest infiltration Historical maintenance logs showed numerous reports of pest infiltration and our service contract review revealed a significant lack of preventative pest control measures. These pest issues had affected the reputation of the community, hindering leasing traffic and were also proving detrimental to the asset itself.

DUE DILIGENCE

Throughout the due diligence process, Cardinal Group Consulting coordinated with the Buyer (our client), Seller and third-parties to ensure all necessary documentation was received and analyzed in order to evaluate current and historical operations.

Cardinal’s analysis was essential to the post-acquisition business plan of our client by identifying multiple areas of underperformance that were not previously known. These areas will contribute directly to the future performance of the asset, and as such are essential to the success of the investment.

"CARDINAL’S DUE DILIGENCE EXPERTISE HAS PROVED IMMENSELY VALUABLE TO OUR ACQUISITION PROCESS. THEIR TRANSACTION EXPERIENCE AND DETAILED APPROACH TO EVERYTHING FROM HISTORICAL FINANCIAL ANALYSIS, TO CONTRACT REVIEW, TO LEASE FILE AUDITS GAVE US THE CONFIDENCE TO MOVE FORWARD WITH OUR TRANSACTION.” DOUG SMYTHE vv

MARKET STUDY

Cardinal Group Consulting was engaged to perform a Market Study of the Columbia, SC market to determine the feasibility of a new private, off-campus student housing (POSH) development at the University of South Carolina.

MARKET STUDY

GOAL To engage a third-party source for insights on the University of South Carolina market environment and determine the viability of a new POSH development.

SERVICES ●

University trends (enrollment growth, on-campus housing costs and P3 development plans)

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Off-campus supply and demand metrics

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Historical occupancy and rent trends

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Future development pipeline

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Thorough competitive set analysis including rental rates, concessions, amenity offerings and utility structures.

MARKET STUDY

Cardinal Group Consulting provided our client with in-depth research on the University of South Carolina (USC) including enrollment trends, historical and future enrollment growth trends, on-campus housing options and future on-campus development plans. Select Pros and Cons from our research included: PROS ●

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CONS USC has experienced strong and steady enrollment

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When comparing historical deliveries to enrollment growth,

growth over the past 10 years with high market-wide

there was a significant amount of oversupply, which informed

occupancy and strong rent growth.

CGC that the market was benefiting from pent-up demand for

The University is investing $750 million into campus

POSH offerings. Relying on pent-up demand to fill new beds is

upgrades which should raise its national profile and

less reliable than enrollment growth, and therefore is a risk to

lead to future enrollment growth.

future development. ●

Through our analysis of the competitive POSH landscape, we determined that the client’s proposed rental rates were above the top of the market and likely unachievable without the use of significant concessions.

MARKET STUDY

Through our Market Study, Cardinal Group Consulting created a clear picture of the Columbia, SC market to inform our client’s decision to build in the market. Our competitive set analysis determined that the client’s proposed rental rates were too aggressive for the market. This analysis and candid feedback influenced the client to revise their building plans and resulted in a more achievable development proposal, one better suited to the specificities of the Columbia market.

“WE HAVE RELIED HEAVILY ON CARDINAL’S IMPRESSIVE BREADTH OF MARKET KNOWLEDGE THROUGHOUT THE US WHICH HAS ALLOWED US TO CONFIRM UNDERWRITING ASSUMPTIONS DURING THE PRE-DEVELOPMENT PHASE. OUR CONFIDENCE IN CARDINAL’S ACCURACY HAS RESULTED IN NUMEROUS SUCCESSFUL DEVELOPMENTS. FURTHER, CARDINAL’S MARKET RESEARCH REPORTS HAVE EQUIPPED US WITH NECESSARY MARKET FUNDAMENTALS TO MAKE STRATEGIC INVESTMENT DECISIONS.” TYLER PERLMUTTER

PRE-DEVELOPMENT

Cardinal Group Consulting was initially engaged early in the planning stages for a new conventional multifamily development to provide market intel on supply and demand metrics, demographics, population and employment statistic as well as early indications of potential rental rates. Through our market research, Cardinal helped to determine the feasibility of this new community before our client spent significant resources chasing the opportunity.

After about a year in the planning stages, Cardinal was again engaged to provide updated market information and put on a monthly retainer to provide ongoing pre-development consulting services throughout the design phase of the project.

Such design features included the review and recommendation of unit mix and unit sizes, interior unit features, clubhouse design and amenity inclusions and community branding.

PRE-DEVELOPMENT

GOAL To work with architects, interior designers, general contractors, and other third-parties on building design concepts; providing insight into competitive set offerings and making suggestions that would ensure the community would meet the wants and needs of our target residents.

SERVICES ●

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Attend bi-weekly OAC meetings and Design Development presentations to provide feedback on: ○

Overall unit mix and in-unit layouts

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Amenity inclusions, designs and layouts

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Leasing lobby layout and interior design features

Worked in association with Cardinal-affiliated marketing company Agency FIFTY3 in development of community branding including naming, logo and color scheme.

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Provided Lease-Up and Stabilized budgeting to be used in capital raising initiatives.

PRE-DEVELOPMENT

Cardinal Group Consulting was involved in numerous design and development proceedings. Our involvement included: 1)

Amenity Recommendations: Compared and contrasted market-wide and competitive set offerings to provide feedback on package locker requirements, layout and features of clubhouse, lobby and leasing spaces, coworking/private office inclusions, pool deck features and numerous other design elements.

2)

Unit Mix & Unit Layouts: Worked with Ownership and architects to make suggestions ranging from the inclusion and number of three-bedroom units with corresponding rental rates, location of washers and dryers, bedroom sizes, kitchen layouts and island inclusions, switched outlet requirements and numerous other features.

PRE-DEVELOPMENT

Cardinal Group Consulting provided our client with thoughtful feedback from the perspective of an experienced multifamily operator. Our involvement has ensured that this project is designed to not only meet the demands of the target resident base, but also designed to meet the needs of whatever property management company is installed to operate the community upon delivery and into the future.

"CARDINAL GROUP CONSULTING HAS BEEN AN EXCELLENT PARTNER THROUGHOUT THE PRE-DEVELOPMENT PROCESS, PROVIDING AN OBJECTIVE AND WELL-INFORMED VOICE. CARDINAL'S MANAGEMENT EXPERTISE HAS HELPED US INCORPORATE MANY OPERATIONAL EFFICIENCIES AND A THOUGHTFUL AMENITY DESIGN INTO OUR ASSETS." TIM SCHLICHTING

THANK YOU