KNOXVILLE TRIO A STORY OF PERSERVERENCE & OVERCOMING

The Story

Quattro Capital acquired a portfolio of 67 units (35, 22, 10) from a second-generation builder whose father built the properties. The owner was a notorious slum lord type, and the properties were arguably the roughest in the area of North Knoxville. These properties had solid bones but came with a lot of work to do. However, some of the best buys come from mom-and-pop style owners.

The Challenges

This closing was to take place in March of 2020, and we had a lender back away 12 days from closing with about $250,000 of hard earnest money and investor money in hand. In times of uncertainty, the CLO market becomes unpredictable. Ultimately, we closed 6 months later with a CDFI balance sheet lender.

Quattro typically remains very liquid on each project to account for uncertainty in diligence. On this project, we not only operated through Covid-19 (lease traffic fell off for a time), but we also fought inflation trying to hold to a budget that was written in a pre-inflation era. Overall, we were able to keep the overages controlled and re-allocate funds in the budget.

The Outcome

Ultimately, Quattro was able to drive renovation of about 50% of the units to a Class B- level and pushed to be the sub-market leader in both rent and quality. We are under contract to sell the portfolio to a single larger operator for about $92,500 per unit. The operator loves what we put in place and intends to finish the project and hold for cash flow.

Buying from small operators and selling to big ones is one way we drive cap rate compression in our projects.