1979: The origin of Royal Properties can be traced when Rodrick L. Schmidt purchased an 11-room rooming house on 209 East John St. in Champaign, Illinois. Schmidt owned and operated the rooming house for several years, and then—along with Michael J. Henneman—purchased the adjacent property, located at 211 East John. Both properties continued to be owned and operated as rooming houses through 1983.
1984: Royal Oak Apartments Limited Partnership was formed with Schmidt, Henneman and Eric Worner serving as the general partners. The partnership was formed to demolish two existing rooming houses on East John and construct a 24-unit student apartment complex with two- and four-bedroom apartments. Royal Oak Apartments Limited Partnership consisted of nine investment units at $50,000 per unit, invested over six years. The initial investment was $5,000, followed by four annual payments of $10,000 and a final $5,000 payment in the sixth year. After contributing $35,000 per unit, the project was refinanced, and the remaining $15,000 investment was not needed by the investor. From inception, the partnership performed beyond expectations, with the property enjoying virtually 100% occupancy. Operating expenses were at or below original projections, and the economic return outperformed original projections.
1985: Royal Crest Apartments Limited Partnership formed when Schmidt, Henneman and Worner bought a third rooming house directly adjacent to the Royal Oak Apartment complex. The rooming house was demolished, and the partners then constructed the Royal Crest apartments. The complex consists of three- and four-bedroom units with an underground-parking garage. The partnership was formed with 15 investment units at $20,000 per unit. This was a one-time investment, not staged, as structured in the Royal Oak and Court Limited Partnerships. The partnership performed beyond expectations, enjoying 100% occupancy from inception.
Royal Court Apartments Limited Partnership was formed by Schmidt and Henneman. It consisted of 10 investment units of $85,000 each. The partnership purchased two existing apartment complexes at 605 South 5th St. and 509 Bash Ct., both in Champaign, Illinois. The total package was 40 units, consisting of one-, two-, three-, four- and six-bedroom apartments. When purchased, the two properties were approximately nine and 11 years old, respectively.
1986: Royal Park Apartments Partnership was added to the Royal Properties portfolio when the partnership purchased and demolished a rental house. The partnership then constructed the Royal Park apartments, 12 three-bedroom units located at 210 East Healy St. in Champaign, Illinois. The partnership is a general partnership in which Henneman, Worner and Schmidt owned 60% of the partnership. The project was well received, with occupancy levels always near 100%.
Royal Towne Apartments Partnership was formed to demolish two rental houses and construct 18 three- and four-bedroom units at 411 East Healy St. in Champaign. The Royal Towne complex continued to be one of our most popular properties and ran at full occupancy until it was sold in 1999.
1987: Royal Heights Apartments Limited Partnership was established. As a result, Royal Heights Apartments—a 24-unit complex developed by the partnership—now stands two blocks from the Eastern Illinois University Campus in Charleston, Illinois, on the site of a former fraternity. The partnership was designed to have 11 partnership units of $22,000 each, once again structured as a one-time investment. The original design accommodated five students per apartment. Upon completion, the occupancy was lowered because of density regulations. As a result, the units were marketed as three-bedroom units with accommodations for up to four residents. Royal Heights always ran at near 100% occupancy until the property was sold in 1999.
1988: Royal Properties broadened its operations with the support and encouragement of Gloria Dauten, a successful campus property developer, owner and manager. Royal Properties decided to venture outside the state of Illinois. At this time, Thomas E. Harrington, Jr., also joined Royal Properties. The partners began initial market research with the help of a hired consultant, developing criterion for possible development. This criterion included several relevant factors ranging from the minimum size of a university or city to the minimum ACT scores, average income of students’ parents, maximum number of existing complexes, maximum levels of occupancy and other determinates linked to the specific location. All criterions were fed into a computer, narrowing the possibilities for future expansion. Concentrating on the Southeast, initial visits were made to the University of Kentucky, the University of Alabama, Auburn University, the University of Georgia, Florida State University, the University of Florida, the University of Virginia and several schools in the Carolinas.
Rick Schmidt, Tom Harrington and Michael Henneman formed
Royal Apartments U.S.A., Inc., with Michael Henneman serving as the first President/CEO.
1991: Royal (Pavilion) Tallahassee II Limited Partnership was created to handle the second purchase near the Florida State campus. Royal Tallahassee II Limited Partnership purchased a church one block away from the Royal Oaks development. With the sale of the property, the congregation was able to relocate to a brand-new facility. The former church building was then demolished, making way for a 60-unit, three- and four-bedroom complex, known as Royal Pavilion Apartments. The project has been a perennial favorite of Florida State students, and has always enjoyed 100% occupancy. The Royal Tallahassee II Limited Partnership was established with two limited partnership units. The units were sold to three investors, totaling $500,000, with each investor receiving a 10% preferred return. At the time of the offering, limited partners were given the opportunity to make a buy-sell agreement with the general partners. One of the three limited partners elected to do so, and that agreement is funded with a life insurance contract.
1992: Royal (Village) Tallahassee III Partnership was established to develop the third Florida State site. This partnership purchased a wooded lot, located two blocks from the Royal Pavilion Apartments, and developed a 75-unit, three- and four-bedroom complex known as the Royal Village Apartments. This project was funded by a single investor, making a one-time investment of $650,000 with a 10% preferred return. Once again, the investor and other general partners entered into a buy-sell agreement funded with a life insurance contract. In the third year of operation, the property experienced some vacancy, primarily due to competition from a brand-new 500-unit complex located approximately two miles from campus, as well as limited parking for tenants. The newness of the competition wore off after the first year. In addition, the Royal Properties partners purchased a lot adjacent to the Royal Village Apartments, enhancing the project’s parking capabilities. These two factors, along with superior location and the dedicated management practices of all Royal Properties, combined to regain 100% occupancy for all of the following years.
1994: Royal Lexington Apartments Limited Partnership was added to the Royal Properties portfolio. The property developed under the partnership stands two blocks from the entrance of the University of Kentucky in Lexington. The limited partnership was established based on seven partnership units of $250,000 each. The site was originally home to a 3.5-acre tobacco warehouse, which was demolished for the construction of the project. The development includes 96 three- and four-bedroom apartments. Although the project was completed on time, it appeared to be behind schedule during the leasing period, and hence opened at 88% occupancy. Even so, investors received a 10% preferred return. As is the case in every Royal Properties investment, the preferred investor has always received his or her stated return. In the second year of operation, the project achieved 100% occupancy.
1996: Royal Gainesville Apartments Limited Partnership was the next Royal Properties project. The 6.5-acre site at the University of Florida in Gainesville is approximately seven blocks from the university. The partnership demolished 12 houses and constructed 120 three- and four-bedroom units, known as Royal Village Apartments. The partnership was established with $1,852,000 of limited partnership equity. The project opened in August 1996, and is currently at 100% occupancy.
1998: Royal Orlando Limited Partnership developed property that was completed and occupied in 1998. The Northgate Lakes project was built in two phases over a two-year period and has enjoyed 100% occupancy since the first phase opened in 1997. Northgate Lakes contains 195 apartment units with 712 bedrooms. The partnership was established with $3,300,000 of limited partnership equity. The project is currently at 100% occupancy.
1999: Royal Tucson Limited Partnership was perhaps the most dramatic development process in the company’s history. The 99-unit project was built on two separate infill sites near the University of Arizona. The university, with over 36,000 students, is very short on close-proximity student-oriented housing. The closest similar project is over three miles away from campus. Building a new student apartment complex within an established historic district presented many unique challenges, but on August 17, 2000, the 367-bed facility opened for occupancy. The Entrada Real project achieved 95% occupancy within two months of opening. This successful development was the first company project to incorporate high-speed Internet wiring in each bedroom. Due to the popularity of the high-speed service, it was decided that all future projects would be pre-wired for this service, while all existing projects would be retrofitted to provide this valuable service. The Royal Tucson Limited Partnership was established with $2,250,000 of limited partnership equity.
1999–2001: All of Royal Properties’ Illinois properties were sold, and the partnerships were dissolved. There were a total of six partnerships formed involving these properties. Five of the six partnerships outperformed initial projections, while one fell short of expectations. Royal Court investors did not receive the cumulative investment results projected. Henneman, Schmidt and Worner traded part of their interests in four of the partnerships to acquire 100% of the Royal Oak and Royal Crest properties.
2001: Royal Texas Tennessee Limited Partnership was Royal Properties’ first multi-state, multi-year project. The project included two apartment complexes. The first complex, located in Murfreesboro, Tennessee, was completed in August of 2001 and is comprised of 78 units near Middle Tennessee State University. The development consists of 36 three-bedroom units and 42 four-bedroom units. The second complex is located in Lubbock, Texas, and was completed September 1, 2002, with a second phase completed in the summer of 2003. The Texas complex has 72 two-bedroom, 84 three-bedroom and 108 four-bedroom units. The partnership was established with contributions of land and capital totaling $4,000,000. The Lubbock project, located just across the street from Texas Tech University, set all records for pre-leasing to 100% occupancy.
2002: Royal Texas Tennessee II Limited Partnership included two apartment complexes. Raider Crossing, located in Murfreesboro, Tennessee, was completed in August of 2002. This modern complex contains 96 dwelling units, capable of housing 276 occupants. Aggie Station, the second project for the partnership, is located in College Station/Bryan near Texas A&M University. This comfortable, 156-unit complex houses 450 “Aggies.” This dual-property partnership was established with $3,500,000 of limited partnership equity. Both Texas and Tennessee partnerships were formed with the original four Royal Properties partners with Rodney Poole, Mike Sheppard and Chad Worner as additional general partners.
2003: Royal San Marcos Limited Partnership was positioned to take advantage of the burgeoning growth of the student population in Texas, starting with The Outpost apartment complex in San Marcos. In October of 2003, construction began on this luxurious, five-building apartment complex, located less than a mile from Bobcat Stadium at Texas State University. This modern complex surrounds a generous and community area, complete with a basketball court, pool, hot tub, fitness center clubhouse and a movie-viewing theater. The complex will house 486 bedrooms in 162 apartment units. Annual revenues from the project are expected to exceed $2,400,000. The partnership was formed, with land and cash contributions equaling this amount, by the original four Royal Properties partners, plus Rodney Poole, Mike Sheppard and Chad Worner as additional general partners.
2005: Royal San Antonio Limited Partnership was formed to capitalize on the expansion of the University of Texas’ (Austin) remote campus program. Since all honor students in high schools in Texas (UT) are “vested” in the University of Texas System (by virtue of their grades and class ranking) the UT system is absorbing satellite campuses to provide an academic home for the growing number of students. The University of Texas San Antonio (UTSA) is one of those locations. The 828-bed community was completed in August 2005 and opened fully occupied to an anxious group of student residents. This new complex, by far, was the crown jewel of the UTSA housing market.
2006: Royal Properties transferred ownership (by deed or partnership transfer) to ACC for a total purchase price of $244,250,000. The purchase price was received in the form of cash, common share operating units and preferred share operating units. This sales mechanism provided total tax-sheltering protection for all investors who wanted it. It also provided cash to those investors who chose to liquidate. In addition to becoming a major shareholder of the ACC Company, Royal Properties gained a position on the ACC Board of Directors. At the April meeting of the Board, Michael Henneman was installed as a Director to the ACC Board. Mr. Henneman had been the Chairman of the Board of Royal Properties since its beginning.
During its 20-year history Royal Properties had been approached on numerous occasions to sell all (or any part) of its portfolio. In 1999 it had been prudent to sell the Illinois portfolio due to appreciation and to the diminishing tax advantages as properties age. Other than price, the most important criteria in the sale was that of protecting the owner’s tax sheltering mechanisms. That was accomplished through tax-deferred 1031 exchanges. Between 2001 and 2005, Royal’s portfolio grew (through appreciation and new development) by 400%. Several serious buyers for the portfolio were considered during that time. None, however, could provide both acceptable price and tax-sheltering capabilities. During 2005 key executives from American Campus Communities (ACC) contacted Royal Properties about the acquisition of the Royal Properties portfolio. It was determined after several meetings that both the price and tax sheltering criteria of Royal Properties could be met and a deal was made. In addition to the portfolio sale, Royal Properties has entered into an agreement with ACC to provide to them Right of First Refusal on all student properties that Royal develops in the future.
2006: Royal Waco Limited Partnership was formed to capitalize on the increasing population of Waco and expected enrollment growth to the Baylor 2012 plan. Due to parking shortages many students are increasingly moving closer to campus in order to walk to class or utilize the campus bus system. The property is located approximately .3 miles east of the Baylor University campus and within one mile of most of the university’s academic facilities. The Outpost Waco was scheduled to open August 2006; due to early completion some residents were able to begin move-ins as early as July 27, 2006. This beautiful site contains six apartment buildings containing 195 units and 548 beds. This complex includes two new bedroom floor plans with large walk-in closets.
2007: The Royal San Antonio Phase II LLC was established to continue to utilize the consistent growth of the UTSA campus. The project is comprised of 753 bedrooms in 249 two-, three-, and four-bedroom units. The Reserve will have a “spa-like” feel and was scheduled to open in August 2007. It is expected to be leased to capacity with revenue exceeding $4,342,000. Due to the natural topography of the land this site is separated into two sections with an office/clubhouse including gym, theater room, game room and tanning bed as well as pool, volleyball court and a basketball court with additional pavilion.
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