Investment Snapshot
PROPERTY INFORMATION
Property Type
Apartment
Size
196 Units
Year Built
1985
Market
Modesto, CA
Sourcing
Off-Market
Acquisition
Acquisition Date
April 2021
Purchase Price
$33,300,00
Invested Equity
$10,660,947
Debt (% LTC)
68%
Type of Debt
Fannie Mae loan assumption with a rate of 4.7%, interest-only for four years and term of nine years
Going in Cap Rate
5.4%
In-Place Rent
20% below post-renovation rent
Disposition
Hold Period
33 Months
Disposition Date
December 2023
Sale Price
$42.7 million
Exit Cap Rate
6.0%
Realized Gross IRR
26%
Realized Equity Multiple
1.78x
Investment Overview
Deal Sourcing
Broker relationship with broker we have transacted with before
Property Type
196-unit apartment
Year Built
1985
Occupancy at Acquisition
94%
Location
Located in northeast Modesto, in one of the best school districts in Modesto. The property has 14, two-story buildings on 7.6 acres with a pool, spa and fitness center.
Attractive Opportunity
Average in-place rents were 20% below market. Exterior capital improvements were needed to modernize the property.
Value-Add Strategy
CapEx Requirements
Over $600,000 of renovations were completed including extensive updates of the clubhouse, fitness center, leasing office and laundry room. In addition, new property signage was installed, upgraded landscaping, asphalt seal coating, pool resurfacing along with new interior and exterior furniture.
Anticipated Hold/Actual Hold
Five year anticipated hold, 33 month actual hold period.
Additional Revenue Sources
During the hold period, the average in-place rent increased from $1,284 to $1,655 per month. As a result, the NOI was increased from $1.8 million at acquisition to $2.5 million at disposition, an increase of 40%
ESG Opportunities
Installation of drought tolerant landscape material, upgrades to pool furniture and the office/clubhouse remodel, energy efficient appliances, LED lighting and low VOC paint and flooring.
Exit Information
The exit cap rate achieved was 6.0% during a time period of fluctuating interest rates and market uncertainty. We received 13 offers from a diverse pool of institutional, syndicators and private buyers. Ultimately, a high-net worth 1031 buyer was identified that committed a non-refundable deposit upon going under contract with a 14- day due diligence period.
Achieved Returns
Acquisition Price $33,300,000 ($170,000 per unit)
• Sale Price $42,700,000 ($218,000 per unit)
• Gross IRR 26% / Net IRR 19%
• Gross MOIC 1.78x / Net MOIC 1.52x
