Situation: Client engaged ePropertyCare upfront in the underwriting process to propose a solution of smart building technology as a value-add for a Class A project. The client felt that there were very few traditional upgrades (paint, flooring, kitchen, etc.) to perform on the project, but smart building technology offered a new way to provide a value-add to increase rents and decrease costs.
Deployment: Client budgeted $4,000/unit for in-unit and building smart upgrades (~½ for ePropertyCare, ½ for external smart upgrades). The ePropertyCare upgrades include water protection, smart thermostat, smart lock, video doorbell, smart lighting. The building upgrades include electric car charging stations, carports and more.
Costs: The in-unit automation through ePropertyCare will be approximately ½ of the planned CapEx upgrades. This is $1,500 in hardware per unit, and $500 for installation. This totals ~$510k across the 255-units.
NOI Impact + Return from Rent Increases:
- Landlord is able to charge $72 more rent per unit. Over a 5-year period this leads to a $1.1M NOI increase.
- Using their assumed 5.58% Cap Rate, this leads to a $3.9M asset value increase (annual NOI / cap rate), representing a 6.7% increase on the underlying purchase price!
- Factoring in the cost of ePropertyCare hardware + install, this pays for itself in approximately 2.3 years!
Additional NOI Impact + Cost Savings through efficiencies:
- Though not modeled in their Pro Forma, the landlord is also able to reduce expenses:
- Water/Sewer + Insurance through water protection
- Leasing, Turn Re-keying, Workorder key pickup/drop off time through keyless entry
- Vacant-unit utility, repairs & maintenance through smart HVAC control + alerts
- If we conservatively model a 5% expense reduction, this translates to a $446k NOI impact over the 5-year period, leading to a $1.6M asset value increase.
- Now the return period shortens from 2.3 years to 1.6 years
Summary:
- Smart building technology can simultaneously increase rents nad lower expenses, and offers a compelling value-add investment in a property.