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Nelson Partners

Investment Highlights

Overview

The offering is a Class A Student Housing community complex near Western Washington University, built in 2017. On 2.85 acres, the property has an eight-story apartment building and a single-story pool building.  There is 133-units with 417 beds. The complex’s amenities include a fitness center, a lounge with billiards and games, a study lounge, a video game lounge, a computer center, bike storage, and a rooftop terrace.

  • Year 1 Cash Flow 6.50%
  • Initial Occupancy 98.90%
  • Est. Time Horizon None
  • Yr 1. Cap Rate to Investors 5.37%
  • Investor Purchase Price $55,988,000
  • Total Offering Size $23,708,000

Loan Information

For the first 138 months of the loan the prepayment penalty is the greater of a yield maintenance premium or 1% of the outstanding principal for the loan. After 138 months, the penalty is 1% of the outstanding loan balance. There will be no prepayment penalty with the last three months of the term.

  • Yr. 1 DSCR 2.06
  • Loan-to-Value 57.66%
  • Hold Period DSCR 1.93

Key Benefits

High demand for Student Housing should lead to organic rent growth.

The Sponsor has set projections at a reasonable growth rate, similar to both CoStar and an appraiser.

Key Risks

The CAP rate for investors is low (5.37%).

Growth for this brand-new Class A building must be organic.

There is a high fixed disposition fee (4%).

The underwriting shows that the property will fall short of year-1’s projected cash flow.

The rents are on average 15-20% higher than others in the market. (*The property is the newest in the market and has the best amenities.)

The University is a non-division 1 school, with a moderate enrollment of 15,915. (* enrollment has had stable year-over-year growth (0.76%) for the past eight)

The Tax abatement expires in 2025, which will negatively affect the NOI.

About Nelson Partners

None