Jamestown Apartments - Value Add Multifamily Deal

1534 James Patrick Lane  St Louis, MO 63138

Min. Invest
$40,000
Target Hold
72 mo
Annualized Returns
8.00%
Progress - 0% Pledged
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Deal Background & Investor Return Metrics

Deal Background:  We are acquiring a 1980s-built multifamily property with workforce clientele in a stable neighborhood of St Louis County at a very attractive price. This is a $1,000,000 total Equity deal, funded 10% by project sponsors and 90% by investors, and with a $2,237,500 Total Project Capitalization. The Seller of this property is an elderly gentlemen that has mis-managed the property over the past several years by having no full time staff on site, a limited marketing plan, and a revolving door of third party management solutions in place. We are acquiring this property off-market (without any broad marketing process), and for a very attractive price per door of $22,000 versus recent comparable property sales that are more expensive.

 

Investor Structure and Expected Return Details: Equity (including Sponsor equity) will receive an anticipated Preferred Return of 8% per annum and a waterfall structure for upside thereafter. If funds to pay the Preferred Return are not immediately available then the unpaid balance will accrue. The structure of the investment will provide for operating cash flows and cash flows from a capital event in the following priority:

--  0%-8% IRR: 100% to Equity Investors

--  8%-12% IRR: 70% to Equity Investors

--  >12% IRR:   50% to Equity Investors

Sponsors forecast Investor Equity Returns, net of all fees and promotes:

--  3-Year Project Hold: 1.60x Equity Multiplier & 18.3% IRR

--  6-Year Project Hold: 2.00x Equity Multiplier & 14.8% IRR

 

Subscriber Instructions: To subscribe to this deal you must be an Accredited Investor.  If you meet the criteria for an Accredited Investor then you will:

A) Complete the Subscription Agreement, specifically pages 13-17, and return to Sponsor Craig Berger at Craig@ARealtyCap.com, or to the mailing address listed in the Subscription Agreement on Page 1; 

B) Sign and return the last page of the Operating Agreement (page 48); and

C) Wire Subscription Funds to: 

    North County Apartment Holdings LLC

    c/o Simmons Bank, 8151 Clayton Road, St Louis MO 63117

    Account Number: 132635722

    Routing Number: 082900432

Investment Type Equity
Anticipated Term 72 Months
Raise Amount $1,000,000
Anticipated Investor IRR 14.4%

Financial Summary

Investor Structure and Expected Return Details: Equity (including Sponsor equity) will receive an anticipated Preferred Return of 8% per annum and a waterfall structure for upside thereafter. If funds to pay the Preferred Return are not immediately available then the unpaid balance will accrue. The structure of the investment will provide for operating cash flows and cash flows from a capital event in the following priority:

--   0%-8% IRR: 100% to Equity Investors

--   8%-12% IRR: 70% to Equity Investors

--   >12% IRR:   50% to Equity Investors

 

We forecast Investor Equity Returns, net of all fees and promotes:

  • 3-Year Project Hold: 1.60x Equity Multiplier & 18.3% IRR
  • 6-Year Project Hold: 2.00x Equity Multiplier & 14.8% IRR

Financial Sources

Investor Equity $1,000,000
First Mortgage $1,237,500

Financial Uses

Purchase price $1,625,000
Closing Costs and Fees $138,093
Property Renovations and Upgrades $166,854
Working Capital and Interest Reserve $307,552

Property Summary


This Value-Add Opportunity has a Heavy Operational Improvement Component: Currently there is no full time property manager on site, which hurts rent collections, apartment showing and lease-up activities, and other aspects of the business. Thus, the acquisition of Jamestown Apartments is an operational improvement and execution play as we work to install a quality property staff, and increase occupancy from about 70% currently to a market rate of 93%. If these things happen, we expect project-level cash-on-cash returns will ramp quickly to 11% annually or better. This is a compelling turnaround opportunity with significant cash-generation potential sourced off-market.

 

Marketing is key to the Turnaround Plan: Current Management has NO full time property manager to show apartments or collect rent, NO marketing plan in place, NO rent specials, NO professional management ensuring these things get done, and allows NO pets at the property. Here is our Turnaround Plan:

  •   Rebrand the Property with a new name; Enhance signage;
  •   Hire a full-time property manager to collect rent, show apartments, and 
  •  Advertise on Apartments.com, Zillow.com, Rent.com, Craigslist.org, and others;
  •   Pay Locator Fees to fill up with clients in early stages;
  •   Market with area employers and offer specials to employees, attracting higher quality clientele;
  •   Host 6-8 on-site Community Events per year: ‘Meet Your Neighbor’, Outdoor BBQ cookouts, a Holiday Party, Pet Parties, and More;
  •   Allow Pets at the Property and charge Pet Rent.

 

Beautifully Renovated Apartment Interiors and Affordable Rent are Attractive to Renters: The Property’s interiors are in excellent condition, and we anticipate only limited Capital Spending on interiors apart from the two or three down units we have contracted for with Sellers. We are pleased with the value proposition these interiors present to us as Buyers and to our Renter Customers. All apartments are 2-bedroom and 1-bathroom units with 780 square feet of living space. At current market rent of roughly $625, and given the current high level of renovations, we think these units apartments present a strong value to current and prospective rental customers.

 

Capital Spending and Improvement Plan is Noticeable, but Not a Heavy Lift. We are budgeting a modest $167,000 in total Capital Improvements at Jamestown Apartments, with some give or take possible. We expect to invest in some Air Conditioning units, a number of which are nearing the end of their useful lives. We will spend on some modest balcony remediation work (only 38 balconies exist and most are in good shape). We plan to invest in low flow toilets and showerheads to drive water/sewer cost savings. We will likely install a Storage Shed so that we can bring one more unit back online, bringing total rentable units up to 75. We expect to add a large property sign out front, and add a grilling station with picnic tables as Resident Amenities.

 

Location is stable and Convenient to Employment: The Spanish Lakes neighborhood has reasonably strong demographic and median income levels. According to City-Data.com, the median household income in this zip code (63138) was $38,604 in 2016.  This area is stable with respect to population levels and offers convenient access to Boeing's Defense & Security unit, Lambert St. Louis Airport, and Emerson Electric, among others. According to Wikipedia, “Public transportation has been beneficial to North County and it was the first area of Metro St. Louis served by the metropolitan rail system MetroLink.”  North County includes the neighborhood of Spanish Lake.  The property is also roughly 200 yards away from Spanish Lake Park, which offers a large lake, playground, picnic areas, nature hikes, and is a substantial amenity, in our view.

Address Property Type Units Buildings Current % Occupied Avg. Unit Size
1534 James Patrick Lane
St Louis, MO 63138
Multi Family 74 6 70.00 780

Market Summary

Location is stable and Convenient to Employment: The Spanish Lakes neighborhood has reasonably strong demographic and median income levels. According to City-Data.com, the median household income in this zip code (63138) was $38,604 in 2016.  This area is stable with respect to population levels and offers convenient access to Boeing's Defense & Security unit, Lambert St. Louis Airport, and Emerson Electric, among others. According to Wikipedia, “Public transportation has been beneficial to North County and it was the first area of Metro St. Louis served by the metropolitan rail system MetroLink.”  North County includes the neighborhood of Spanish Lake.  The property is also roughly 200 yards away from Spanish Lake Park, which offers a large lake, playground, picnic areas, nature hikes, and is a substantial amenity, in our view.

 

Sponsor has Experience in St Louis with this Product Type:  Project Sponsor Craig Berger has experience owning multifamily apartments in the St Louis market. In 2015 he led the purchase of a 95-unit apartment property in a the City of St Louis with a customer base that had a more challenging demographic than what is found at Jamestown Apartments. In that project, Craig and his team grew rents by more than 40% in a span of two years by upgrading the property, increasing tenant underwriting standards, and utilizing enhanced marketing strategies. In early 2018, Craig and his Team successfully refinanced the property, resulting in a more than 2.9x total Equity Multiplier and a 40% IRR in less than three years.  While past performance is not indicative of future successes, this prior experience will prove invaluable in the attempted operational improvement of Jamestown Apartments.

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Investor Tutorial

CERTAIN INFORMATION REGARDING THIS OFFERING

THESE UNITS ARE BEING OFFERED WITHOUT REGISTRATION UNDER ANY FEDERAL OR STATE SECURITIES LAWS, BUT ARE BEING OFFERED UNDER AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND UNDER COMPARABLE EXEMPTIONS UNDER VARIOUS STATE SECURITIES LAWS. HOWEVER, THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”) HAS NOT DETERMINED THAT THESE UNITS ARE EXEMPT FROM REGISTRATION. THESE UNITS HAVE NOT BEEN REVIEWED, APPROVED OR DISAPPROVED BY THE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY, ADEQUACY, COMPLETENESS OR MERITS OF THIS MEMORANDUM, AND ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THIS MEMORANDUM DOES NOT CONSTITUTE AN OFFER TO SELL TO, OR A SOLICITATION OF AN OFFER TO BUY FROM, NOR SHALL ANY OF THE UNITS BE OFFERED OR SOLD TO, ANY PERSON IN ANY JURISDICTION IN WHICH SUCH AN OFFER, SOLICITATION, PURCHASE, OR SALE IS UNLAWFUL OR UNAUTHORIZED UNDER THE SECURITIES LAWS OF SUCH JURISDICTION.

THE STATEMENTS MADE HEREIN ARE MADE AS OF THE DATE ON THE COVER OF THIS OFFERING MEMORANDUM. THIS OFFERING MEMORANDUM CONSTITUTES AN INVITATION TO THE PROSPECTIVE INVESTOR TO SUBMIT AN OFFER TO SUBSCRIBE. NO PERSON MAY PURCHASE THE UNITS OFFERED HEREBY EXCEPT PURSUANT TO AN EXECUTED SUBSCRIPTION AGREEMENT IN THE FORM PRESCRIBED BY THE FUND, AND THEN ONLY FROM A PERSON TO WHOM THE FUND OR ITS DESIGNATED AGENT HAS DELIVERED A COPY OF THIS OFFERING MEMORANDUM.

THESE UNITS ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED BY THE FUND. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THERE IS CURRENTLY NO PUBLIC MARKET FOR THESE UNITS.

IN MAKING A DECISION TO PURCHASE UNITS HEREUNDER, PROSPECTIVE INVESTORS MUST CONDUCT THEIR OWN INDEPENDENT INVESTIGATION OF THE FUND AND THE TERMS OF THIS OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED, AND ARE ENCOURAGED TO CONSULT WITH THEIR ADVISORS AS THEY WILL BE REQUIRED TO REPRESENT THAT THEY ARE ABLE TO BEAR THE ECONOMIC RISK OF THEIR INVESTMENT AND THAT THEY ARE FAMILLIAR WITH AND UNDERSTAND THE FUNDAMENTAL RISKS AND TERMS OF THIS OFFERING.

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION WITH RESPECT TO THE OFFERING OF THE UNITS WHICH IS NOT CONTAINED OR REFERENCED HEREIN, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. POTENTIAL INVESTORS MAY, IF THEY SO DESIRE, MAKE INQUIRIES OF THE FUND WITH RESPECT TO THE FUND’S BUSINESS OR ANY OTHER MATTERS SET FORTH HEREIN, AND MAY OBTAIN ANY ADDITIONAL INFORMATION WHICH SUCH PERSON DEEMS TO BE NECESSARY IN ORDER TO VERIFY THE ACCURACY OF THE INFORMATION CONTAINED IN THIS MEMORANDUM (TO THE EXTENT THAT THE FUND POSSESSES SUCH INFORMATION OR CAN ACQUIRE IT WITHOUT UNREASONABLE EFFORT OR EXPENSE).

July 13 2020

Confidential Offering Memorandum: Avid Realty Partners

PROSPECTIVE INVESTORS ARE CAUTIONED NOT TO CONSTRUE ANY CONTENTS OF THIS OFFERING MEMORANDUM OR ANY PRIOR OR SUBSEQUENT COMMUNICATIONS, AS CONSTITUTING INVESTMENT, LEGAL OR TAX ADVICE; RATHER THEY SHOULD CONSULT THEIR OWN ADVISORS OR COUNSEL WITH THE CAPACITY TO ADVISE AND PROTECT THEIR INTEREST IN CONNECTION WITH ALL MATTERS CONCERNING THIS OFFERING MEMORANDUM.

THIS OFFERING MEMORANDUM DOES NOT KNOWINGLY CONTAIN ANY UNTRUE STATEMENT OF A MATERIAL FACT OR OMIT A MATERIAL FACT, AND ANY SUCH MISSTATEMENT OR OMISSION IS DONE WITHOUT THE KNOWLEDGE OF THE PREPARERS OF THIS DOCUMENT OR THE FUND. AS SUCH THE FUND BELIEVES THAT THIS OFFERING MEMORANDUM CONTAINS A FAIR SUMMARY OF THE MATERIAL TERMS OF ALL MATTERS, DOCUMENTS AND CIRCUMSTANCES MATERIAL TO THIS OFFERING. WHILE THE DATA AND STATEMENTS CONTAINED HEREIN ARE BASED UPON INFORMATION BELIEVED TO BE RELIABLE, NO WARRANTY CAN BE MADE AS TO THE ACCURACY OF SUCH INFORMATION OR THAT CIRCUMSTANCES HAVE NOT CHANGED SINCE THE DATE SUCH INFORMATION WAS SUPPLIED. THIS MEMORANDUM CONTAINS SUMMARIES OF CERTAIN PROVISIONS OF DOCUMENTS RELATING TO THE BUSINESS OF THE FUND AND THE UNITS OFFERED HEREBY, AS WELL AS SUMMARIES OF VARIOUS PROVISIONS OF RELEVANT STATUTES AND REGULATIONS. SUCH SUMMARIES DO NOT PURPORT TO BE COMPLETE AND ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO THE TEXTS OF THE ORIGINAL DOCUMENTS, STATUTES AND REGULATIONS.