Takeover & Turnaround: The Henry at New Forest Case Study

In a recent Momentum Multifamily webinar, Managing Partners Dustin Miles and Hayden Harrington took attendees behind the scenes of one of Momentum’s recent acquisitions: The Henry at New Forest, a 246-unit Class A multifamily community in Northeast Houston.

Built in 2018, the four-story wrap property was acquired in late September for $34.4 million, or just under $139,000 per unit. The opportunity stood out not only because of its attractive basis, but because of the combination of Momentum’s local operating experience, a distressed seller, a clear value-add and operational improvement plan, and strong long-term submarket fundamentals.

In less than a year, Momentum increased the property’s net operating income (NOI) by approximately $419,000, largely through operational improvements and disciplined expense management—even in a challenging rent environment.

The webinar provided a detailed look at how the team identified the opportunity, underwrote the deal, approached due diligence, prepared for the transition, and began executing the business plan.

Why The Henry at New Forest Stood Out

Local Knowledge Created a Significant Advantage

One of the biggest advantages Momentum had with New Forest was familiarity with the immediate submarket.

The property sits directly next to The Henry at Liberty Hills, another Momentum-owned asset that has been in the portfolio for approximately four to five years. Liberty Hills is a more traditional garden-style community with an affordable component, while New Forest is a newer, higher-end wrap property with a different resident profile.

That existing ownership provided Momentum with firsthand data that would be difficult to replicate through traditional market research alone.

The team already had:

• Actual rent comps from its own units
• Real expense ratios from the immediate submarket
• An understanding of local traffic and demand
• Experience with the resident profile
• A clear picture of how the two properties could complement one another

Interestingly, Liberty Hills was outperforming the newer New Forest property in both rents and occupancy at the time of acquisition.

With only approximately five or six true competing properties in the immediate area, Momentum saw an opportunity to capture a broad range of local demand between the two assets—serving more budget-conscious residents at Liberty Hills while positioning New Forest toward higher-end renters.

A Location Positioned for Future Growth

New Forest is also located just south of Generation Park, one of the major economic growth areas in the Houston region.

The corridor is benefiting from billions of dollars in announced development, including approximately $6.5 billion from Eli Lilly and $2.3 billion from Bristol Myers.

Large-scale investments like these bring jobs, population growth, higher incomes, and additional demand for housing.

For Momentum, the long-term thesis was that continued development in Generation Park could support:

• Increased traffic and visibility
• Stronger occupancy stability
• Long-term rent growth
• Continued demand for quality housing in the area

Attractive Basis and a Distressed Seller

Momentum ultimately acquired New Forest for approximately $139,000 per unit, a compelling price for newer multifamily product in the submarket.

For context, a nearby comparable property north of the Beltway had recently traded for approximately $180,000 per unit. While the comparable was located in a somewhat stronger pocket, it provided a useful benchmark for the potential value of newer product in the area.

The seller’s circumstances also created an opportunity.

The previous ownership group had owned the property since shortly after its completion and had partnered with a large operator on multiple investments. When market conditions shifted and the broader portfolio experienced distress, the ownership group needed to sell assets to shore up equity elsewhere.

New Forest became one of those assets.

Winning the Deal Without Being the Highest Bidder

One of the more interesting aspects of the acquisition was that Momentum wasn’t the highest bidder.

Another buyer offered approximately $500,000 more, yet the seller ultimately selected Momentum.

The deciding factor was certainty of execution.

Momentum brought a proven track record of closing multifamily transactions at this size and scale, direct ownership experience immediately next door, and strong lender support. Freddie Mac was also comfortable with the deal and Momentum’s business plan.

The competing buyer had less independent transaction experience at this level and was relying more heavily on experience gained at a larger organization rather than a directly verifiable ownership track record.

For sellers, particularly those dealing with time-sensitive or distressed situations, the ability to actually close can be just as important as the purchase price.

Due Diligence Started Before Day One

Momentum’s approach to New Forest emphasized the importance of doing the work before closing, rather than waiting until the first day of ownership to figure out the business plan.

The team completed full unit walks, physically inspecting every apartment and documenting conditions, finishes, and discrepancies between lease files and actual occupancy.

The due diligence process also included:

• A Property Condition Assessment
• Long-term CapEx planning
• Exterior and signage evaluations
• Clubhouse and amenity assessments
• Management and staffing evaluations
• Detailed financial reviews
• Lease file audits
• Collections and delinquency reviews

One example highlighted during the webinar came from Hayden’s experience secret-shopping the property.

The front door was locked, an opaque vinyl decal blocked visibility into the office, and it wasn’t immediately clear whether the leasing office was open. The experience was enough to raise a simple but important question: if a prospective resident couldn’t easily tell whether the office was open, how many prospects were simply leaving?

That small interaction illustrated the amount of operational upside available through seemingly basic improvements to accessibility, hospitality, and the resident experience.

Identifying the Expense Opportunity

The financial review uncovered another significant opportunity.

New Forest had an expense ratio of approximately 56.6%, which Momentum considered high for a conventional multifamily property.

As a general benchmark, the team typically views an expense ratio in the high 40% range as healthy, while ratios above 50% can indicate bloated expenses or operational inefficiencies.

That gave Momentum confidence that NOI could grow even if top-line revenue remained relatively flat for a period of time.

The strategy was straightforward: tighten controllable expenses, eliminate waste, and bring the property in line with the operational standards already being used throughout the portfolio.

Building the Team Before Closing

Momentum also prepared the property management team before the acquisition closed.

An assistant manager from a nearby sister property was selected and promoted to property manager at New Forest. Contractors, designers, and signage vendors were lined up in advance, and the team developed a detailed CapEx and project-phasing plan.

The timing of those projects was intentional.

Because the property was acquired during peak leasing season, the immediate focus was on curb appeal, including exterior paint and signage. Clubhouse and amenity renovations were scheduled for the winter and slower leasing season.

The objective was to avoid scrambling after closing and ensure that the property had a clear identity and direction from Day One.

Running a Repeatable Playbook

Momentum approaches its properties with a systems-driven mindset.

Rather than creating an entirely new operating model for every acquisition, the company uses repeatable systems, vendors, contractors, management practices, standard operating procedures, and playbooks across the portfolio.

That approach allows the team to move faster and apply lessons learned from one property to the next.

At New Forest, temporary signage was installed immediately after closing, branding was prepared in advance, and the website, brochures, and digital presence were ready to launch.

Exterior projects were also already queued up.

The result was a transition based on an established playbook rather than improvisation.

Growing NOI Through Operational Improvements

Perhaps the most compelling part of the New Forest case study was the amount of NOI growth Momentum achieved despite a challenging revenue environment.

The property was dealing with market concessions and a necessary cleanup and re-tenanting phase, which limited immediate top-line income growth.

Instead, the team focused heavily on expenses, other income, and occupancy.

Reducing the Expense Ratio

Momentum reduced the property’s expense ratio by 12.29 percentage points, primarily through tighter control of operating expenses, eliminating waste, and bringing the property in line with existing portfolio standards.

That improvement contributed approximately $419,000 in incremental NOI in less than a year, even with income remaining roughly flat.

Increasing Other Income

The team also focused on increasing revenue from sources beyond base rent.

These included:

• Utility billing and recapture
• Technology and internet packages
• Valet trash and doorstep services
• Late and administrative fees
• Parking
• Garages
• Storage

Other income increased from approximately 14% of effective gross income under the previous ownership to approximately 16% under Momentum’s management.

While a two-percentage-point increase may sound modest, those additional revenues become increasingly valuable as rents grow because many of these income streams scale with the resident base and rental revenue.

Improving Occupancy and Managing Concessions

Momentum also anticipated that New Forest would require a cleanup and re-tenanting period.

That meant removing weaker tenants, working through bad debt, and bringing in stronger residents. In the short term, that process can create additional vacancy and limit income growth.

Within the first year, however, physical occupancy reached approximately 95%, while the property was approximately 98% leased and trending toward roughly 96% stabilized occupancy.

With occupancy stabilizing at a high level, the next opportunity is to gradually reduce concessions and allow the property’s top-line revenue to catch up with the operational improvements already achieved.

Structuring the Debt Around the Business Plan

The financing strategy was another important part of the acquisition.

Momentum used a five-year Freddie Mac loan, but the team paid close attention to the prepayment structure.

Instead of accepting five full years of yield maintenance, the loan was structured with:

• Three years of yield maintenance
• Followed by two years at a simple 1% prepayment penalty

That structure provides significantly more flexibility if market conditions create an opportunity to sell around Years 4 or 5.

Under a traditional five-year yield maintenance structure, selling in Year 4 could potentially result in more than $1 million in prepayment penalties. With the structure Momentum negotiated, the property moves into a much simpler 1% prepayment period during the final two years.

That creates additional optionality if market conditions are favorable between 2028 and 2030.

Turning $419,000 of NOI Growth Into Millions in Value

The operational improvements at New Forest have meaningful implications for the property’s value.

An increase of approximately $419,000 in NOI translates into roughly $7.6 million of value creation at a 5.5% cap rate.

At more aggressive cap rates, which can be applicable to high-quality 2018 wrap product, the implied value creation could exceed $8 million.

Against a total equity raise of slightly more than $13 million, that represents a potential 50%+ increase in value in less than a year, before the full benefit of several additional components of the business plan has been realized.

Those include:

• Burning off concessions
• Achieving full rent potential
• Benefiting from future rent growth
• Capitalizing on the submarket’s supply-and-demand dynamics

Importantly, much of the initial value creation has come from operational improvements rather than expensive interior renovations.

Transforming the Property From Tired to “Henry”

While operational improvements drove much of the initial NOI growth, Momentum also invested in the property’s physical appearance and resident experience.

Exterior and Curb Appeal

The property’s original exterior featured dated brown and flat colors, a faded orange accent, a small monument sign, and an overall tired street presence.

Momentum’s exterior plan included:

• A complete repaint in a brighter, more modern color scheme
• New, appropriately scaled monument signage
• Improved curb appeal and street presence

These improvements are particularly important because many prospective residents will only encounter an apartment community from the road or through online listing photos.

The first impression matters.

Clubhouse and Fitness Center

The clubhouse and fitness center are important parts of the property’s leasing tour, making them high-impact areas for improvement.

The clubhouse initially felt disjointed and lacked a cohesive design. The fitness center had strong underlying features—including high ceilings and plenty of space—but felt dated and underutilized.

Momentum reimagined the clubhouse with a cleaner, more cohesive design that aligned with the Henry brand.

The fitness center was also completely transformed with a brighter, more modern aesthetic. The high ceilings became a design feature rather than an overlooked element.

The renovation process also reinforced the importance of being involved at the property level.

The original plan called for painting the gym walls black, but testing the color revealed that the drywall seams were far more visible than anticipated. Because the team was involved during construction, the plan was changed to white before the project was completed, avoiding an expensive and disappointing finished product.

Finding Value in the Details

Not every value-creation strategy requires a major renovation.

One of the simplest examples at New Forest involved the property’s model units.

The previous ownership had two model apartments side by side—a one-bedroom and a two-bedroom. Since the two-bedroom model wasn’t necessary, Momentum converted it into a rent-ready unit and leased it.

That relatively simple operational decision is expected to generate approximately $20,000 in annual revenue.

At a 5.5% cap rate, that additional income represents roughly $363,000 in property value.

Momentum also refreshed the remaining model unit’s furniture and design while intentionally avoiding unnecessary interior renovations.

Because the existing unit finishes were already strong, there was no reason to spend thousands of dollars per unit simply for the sake of renovating.

The lesson is straightforward: value creation doesn’t always require spending more money. Sometimes it means identifying where money doesn’t need to be spent at all.

Using Resident Experience as a Performance Metric

Momentum also views resident experience as an important component of asset performance, and one of the ways the company measures that experience is through Google reviews.

At acquisition, New Forest had a 3.9-star rating.

In less than a year under Momentum’s ownership, the rating increased to approximately 4.2 stars, with 103 new reviews collected under the team’s management.

The improvement was driven by a systematic approach to requesting reviews at key resident touchpoints, including:

• After a property tour
• After move-in
• After completion of a work order

The process gives satisfied residents an easy opportunity to share their experience while also creating an additional layer of accountability for the onsite team.

Negative feedback can also be addressed more quickly when issues are surfaced early.

Momentum has incorporated Google review performance into its Amped asset management dashboard, allowing the team to monitor reviews in real time. Reviews below four stars are flagged for attention, and manager bonuses are tied in part to Google review performance.

Today, all properties across Momentum’s portfolio are above a 4.0-star rating, making resident experience a measurable component of the company’s operating standards.

The Bigger Picture: A Repeatable Approach to Value Creation

The Henry at New Forest case study illustrates several core elements of Momentum Multifamily’s approach to acquiring and operating multifamily assets.

Buy right. The property was acquired at an attractive basis in a submarket Momentum already understood, from a seller facing portfolio-level challenges.

Plan thoroughly. Due diligence, staffing, CapEx planning, vendor coordination, and branding were addressed before closing.

Execute consistently. Repeatable systems, established vendors, standardized processes, and an experienced management team allowed Momentum to move quickly after acquisition.

Focus on the operational details. Small improvements in expenses, other income, occupancy, resident experience, and property presentation can compound into significant NOI growth.

Most importantly, New Forest demonstrates that value can still be created in challenging market conditions.

The property did not require perfect rent growth or a massive interior renovation program to generate meaningful results. Instead, Momentum focused on the fundamentals: buying at the right basis, controlling expenses, improving operations, strengthening the resident experience, and executing a clear business plan.

With concessions expected to continue burning off, additional rent potential remaining, and significant economic development underway nearby, The Henry at New Forest is still in the early stages of its business plan.

The initial results—approximately $419,000 in NOI growth and more than $7 million in implied value creation—demonstrate what can happen when a strong acquisition strategy is paired with disciplined, hands-on asset management.