Investment Snapshot
Property Information
Property Type
Apartment
Size
175 Units
Year Built
1964
Market
Sacramento, CA
Sourcing
Off-Market broker relationship
Acquisition
Acquisition Date
June 2021
Purchase Price
$23,750,000
Invested Equity
$9,100,000
Debt (% LTC)
68%
Type of Debt
Debt fund bridge loan with floating rate of 3.25% above SOFR (with rate cap) and future funding of $2.2 million
Going in Cap Rate
3.0%
In-Place Rent
30% below market
Disposition
Anticipated Hold Period
Five Years
Anticipated Sale Price
$34,022,698 ($194,415 per unit)
Anticipated Gross IRR
18.33%
Anticipated Equity Multiple
2.22x
Investment Overview
Deal Sourcing
Marketed by a broker for more than one year with a seller that had unrealistic pricing expectations, we were able to negotiate directly with the seller and provided certainty of closure in exchange for optimal pricing
Property Type
175 unit apartment
Year Built
1964
Occupancy at Acquisition
100%
Location
Located 10 miles northeast of Downtown Sacramento in the Arden/Arcade submarket
Attractive Opportunity
The property had been owned by an out-of-town individual for almost 30 years and had been neglected. The in-place rents were 30% below market and there was also the opportunity to add RUBS
Value-Add Strategy
CapEx Requirements
Exterior capital of $1.4 million has been spent including new roofs, exterior painting of all buildings, pool in-fill, landscaping and irrigation upgrades, entrance gate and carport repairs
Anticipated Hold/Actual Hold
Underwritten hold period of five years but anticipate to sell in two years
Added Amenities
BBQ and picnic space added
Additional Revenue Sources
RUBS have been implemented for all tenants
Rent Strategy
Rents were underwritten at 30% below market but trade out rents are now being achieved 70% above in-place rents at acquisition. 40% of the units have achieved market rent in the first 18 months of ownership.
ESG Opportunities
Outdoor amenities, EV charging, energy efficient appliances, LED lighting and low VOC paint and flooring
Anticipated Returns
Anticipated Gross IRR 18.33%
Anticipated MOIC 2.22x
