realized Case Study

The Edge at Lakewood

DJI_0590.jpg

Investment Snapshot


PROPERTY INFORMATION

Property Type
Multifamily

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

graceada-partners-section-background.jpg

Investment Overview


Deal Sourcing
Broker relationship with broker we have transacted with before

Property Type
196-unit multifamily

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

Background.png