Market Opportunity

Turnstone Group LLC’s successful development and sale of the Murals of LynLake, a new construction project consisting of 109 apartment units and 7,000 square feet of retail space, exemplifies its ability to adapt to changing market conditions. In July 2006, Turnstone Group LLC took advantage of the softening condominium market to secure a site that could no longer support for-sale condominium units. The privately negotiated land purchase resulted in Turnstone Group LLC controlling a highly desirable, urban in-fill site, located on the Mid-Town Greenway and Lyndale Avenue, an area that achieves some of the top apartment rental performance in the Twin Cities market. The total capitalization of the project was $21.3 million.

Strategy

Turnstone Group LLC assembled a team of designers and contractors to create a plan that would appeal to young, urban professionals, while maintaining construction costs at a level to ensure the economic viability of the project. In addition, Turnstone Group LLC capitalized on the attractive construction financing available for such projects. Prior to the start of construction, Turnstone Group LLC secured a national institutional buyer to purchase the property upon completion. However, because of the credit market collapse in the fall of 2008, the buyer defaulted on its obligation to purchase the property and the purchase agreement was terminated. Within 30 days of the termination of the original purchase agreement, Turnstone Group LLC negotiated a sale to a second buyer who closed on the property in December 2008.

Results

The project was delivered on schedule and under its original construction budget. In addition, it delivered an IRR of 20.6% and a cash flow-to-equity multiple of 1.8x over the 29-month life of the investment.