The Kensington Townhome offering consists of a heavy value-add 32-unit complex in Thurston County’s Tumwater submarket.
In 2020, ownership engaged Ted Sipila, Austin Kelley and Cramer Foster (Kidder Mathews Team) on how best to value, market and ultimately assist ownership liquidation of this complex.
The History
Owned by the original developers, Kensington Townhomes was constructed between 2005 – 2007. The complex consists of 32 townhomes style units spread throughout duplex and triplex layouts. All 3-bedroom 2.5-batroom units at 1,300 SF with garages, and original interiors ripe for renovations. Centrally located off Trosper Road, Kensington Townhomes sits 1/2 mile east of I5 and four miles south of Downtown Olympia. Kensington was being offered to investors as a true value-add deal with $600/unit achievable rent premiums post-renovation.
The Challenge
Due to Kensington’s tremendous upside, the KM team listed the complex at a compressed capitalization rate of 4.88% and total price of 8.6MM. Tumwater’s relatively quiet investor history caused a lack of comparable sales and rents to justify the blue sky that was being offered to investors. As a relatively untapped market, proving the post-renovation rent ceiling was the key to success in generating credible investor interest. An additional challenge: COVID-19 and the Washington State Eviction Momentum created concerns of future rent increases.
The Results
The KM team worked diligently in generating interests and ultimately providing ownership with a handful of offers to review. In the end, a growing Tumwater market saw the Kensington Townhome complex close at list price (8.6MM) setting new market standards for cap rate and price per door. Kensington Townhomes was purchased by a well-known investment firm that specializes in value-add deals in suburban markets across the nation.
