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High Ridge Apartments

Capital Square Realty Advisors

Investment Highlights

Overview

High Ridge Apartments from Capital Square Realty Advisors is a garden style multifamily apartment complex in Athens, Georgia. The property has a total of 160 units and 135 of those have been previously upgraded. This leaves 25 units that have yet to be upgraded. The sponsor has planned upgrades to these remaining 25 units as well as completing upgrades to the clubhouse, pool, and other property amenities.

  • Year 1 Cash Flow 6.20%
  • Initial Occupancy 98.10%
  • Est. Time Horizon None
  • Yr 1. Cap Rate to Investors 5.67%
  • Investor Purchase Price $18,695,000
  • Total Offering Size $8,555,000

Loan Information

The total loan is for $10,140,000 and is from Walker and Dunlop. They have secured this loan at an interest rate of 3.73% under the Fannie Mae DUS Green Financing Program. The loan is for a term of 10 years with 5 of those years being Interest Only. Due to the Green Financing Program the sponsor will be using environmentally friendly materials to upgrade the property.

  • Yr. 1 DSCR 2.6
  • Loan-to-Value 54.24%
  • Hold Period DSCR 2.4

Key Benefits

Low interest rate of 3.73% due to the sponsor using Fannie Mae Green Financing Program. The sponsor intends to use environmentally friendly materials during their upgrades in order to comply with the terms of the loan program.

The property as a Value-Add component, however it is limited to only 25 of 160 units (16%).

Economic occupancy is underwritten at 86.85% during the hold period. This allows for 8% bad debt and other rent loss if the property is occupied at stabilized value (95%). The property is currently occupied at 98%.

The rents at the property are below average market. The 1 bedroom units are about 15% below average, the 2 bedroom units are about 20% below average, and the 3 bedroom units are about 11% below average.

Key Risks

Although there is a Value-Add component built into this investment, most of the upside has been taken out by the previous owner as there are only 16% of units still left to upgrade.

Capital Square has underwritten their rent growth at 3.0% each year. The local Athens market has been achieving between 1% and 2% rent growth per year in the recent few years.

Capital Square has underwritten their Year 1 Effective Gross Revenue at 8% above the trailing 12 months. This is aggressive, however compared to the trailing 3 month annualized they are decreasing their expected Effective Gross Revenue.

About Capital Square Realty Advisors

Capital Square 1031 is a national real estate investment and management company. The firm sponsors institutional-quality real estate exchange programs that qualify for tax deferral under Section 1031 of the Internal Revenue Code. Capital Square uses the Delaware Statutory Trust (DST) structure to make quality real estate available to a larger number of investors.