A New Value-Add Multifamily Investment
Uniquely offers a tax shield for the hold period, with current pay options and a co-investor, Stolar Capital.
Save Your SpotOffering Overview
Captiva Club Apartments
Net Preferred Current Return
7.0%
Minimum Investment
$20,000
Asset Type
Multifamily
Target Hold
36 Months
13%
Target Net Preferred Return
*See “Important Risk Disclosures,” including “Estimates/Targets.”
What to Know
Invest in a 93% occupied, 361-unit multifamily property in the Westshore submarket of Tampa Bay, FL. This preferred equity investment will comprise EM's $3M investment alongside Stolar Capital who will co-invest $8M. The Sponsor, Sinatra & Co, is focused on renovating 268 units and marking rents to market.
Tax Shield
Captiva Club Apartments offers the potential for a tax shield at the investor level. The mitigating factors to taxable income are known as tax shields. A tax shield is a reduction in taxable income by claiming allowable deductions.1 The Sponsor has structured a favorable tax structure which can offset all revenue with depreciation from the asset. The Investment will receive first priority of the taxable depreciation deductions until the depreciation deductions fully offset the amount of income or gain allocated to the preferred equity members.
The implied tax-adjusted yield on current return assumes the value attributed to the building is 80% of the purchase price. Further, it assumes a maximum allowable annual depreciation expense calculation based on an estimated useful life of 27.5 years and an investor tax bracket of 35%. It is strongly advised you consult a tax professional for how real estate depreciation benefits would affect your individual returns.
- The Senior Loan combined with the Investment represents a 77% LTC based on the total project cost of $75.8M. The Investment’s last dollar basis of $161K per unit represents a 21% discount to comparable transactions. The Investment’s breakeven cap rate on sale is 8.1% and 5.8% on a refinance assuming an LTV of 72%. The Investments last dollar basis represents an 11% discount to the appraised value of $64.9M and 36% discount to the stabilized value of $90M.
- The submarket is supply constrained, having already been largely developed in the 1970s/1980s leaving limited opportunity for new development.
- The MSA ranked #1 Best Place to Live in Florida, 3rd Most Popular City to Move To, and 3rd in U.S Metro Where Pay is Rising Fastest according to Forbes, Redfin and SmartestDollar. Tampa gained the highest number of private sector jobs over the year in Q1-2023 in the country, growing by 67.4K jobs over the year, an increase of 5.2%.
- The Property itself is well located and is a short drive to several demand drivers, including the Westshore business district (3.1 miles) and Downtown Tampa (7.0 miles) and Tampa International Airport (5.7 mi).
- The Property is currently 93% occupied. The Borrower plans to renovate the units and lift rents to market. Additionally, the Borrower has the added benefit to take advantage of leasing newly renovated units by the seller that were damaged in a fire.
- The net operating income at the Property is forecasted to increase from Year 1 to Year 3 from $3.2M to $5.0M. The Year 1 and Year 3 forecasted NOI generates a debt yield on the Investment of 5.5% and 8.5%, respectively. The Year 3 debt yield represents a 470 basis point spread (“BPS”) spread above the average market cap rate of the comparable properties.
- EM is offering investors a net return of 13% consisting of a 6% annualized current return and a 7% accrued return. The Investment will be senior to and have full payment and principal repayment priority to the Borrower’s equity.
- The Sponsor has structured a favorable tax structure which can offset all revenue with depreciation from the Property. The Investment will receive first priority of the taxable depreciation deductions until the depreciation deduction fully offsets the amount of income or gain allocated to the preferred equity members. Assuming the tax shield, the Year 1, Year 2, and Year 3 implied gross tax-adjusted yield on current return is 9.5%, 10.1%, and 10.8%, respectively. Please refer to the Financial Overview for additional details (requires login).
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