Passive investors may hear the team stabilized when investors are describing an apartment’s occupancy. Stabilized assets simply refers to the level of occupancy. Although lenders, brokers and syndicators may all have their own ideal for what is considered stabilized and that term can vary even further by the investment asset relative to the market for unit size, class and other variables, usually, a property is considered stabilized if its occupancy is at or greater than 85%.
The Importance of Stabilization
The importance of stabilization may center on a lender’s criteria and the type of loan that the investor can obtain. A property under 85%, for example, may not be able to qualify for the same loan terms as one with 90% occupancy. Further importance of stabilization involves the syndicators business plan and how soon those financial objectives can be met. For example, in order to achieve the targeted net operating income growth, the sponsor and team seeks 90% occupancy within the next year, and this level of occupancy is what the team refers to as stabilized.
For Passive Investors
In summary, stabilization can be a general description of a property that is sufficiently occupied. When using this term, the targeted level of occupancy will usually vary, so when considering an investment opportunity, passive investors should understand and receive clarification from the sponsor with regards to what the team considers is stabilized.
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Rodney Robinson II