Invest in a 94% occupied, 120-unit multifamily property with a compelling value-add business plan.
This highly experienced sponsor was able to acquire the property at a $4M discount to the broker’s original guidance, and to date they have realized 14 investments for an average deal level IRR of 25% and 2.1x multiple.Invest in The Metropolitan Multifamily
The Metropolitan Multifamily
Target Net Equity Multiple
Target Net Avg Cash on Cash
What to Know
The Metropolitan is a 94% occupied, 120-unit, Class A multifamily property located in Philadelphia, PA. The property was acquired at a purchase price of approximately $4M below the broker’s guidance, resulting in an excellent basis. The property was renovated in 2009 and the sponsor, Gelfund Real Estate Opportunities, plans to lift rents to market rates without making significant in-unit renovations.
The proposed plan also includes adding two units and charging for use of the amenities. The Sponsor has over 30 years of residential experience in the U.S, conducting over $900M across 40+ transactions.
- The Sponsor was able to acquire the Property at a $4M discount to the seller’s marketed price.
- The purchase price per unit of $250K represents a 19% discount to the comparable sales in the market.
- The all-in-basis of $283K per unit which includes closing costs, financing costs and capital expenditures represents an 8% discount to comparable sales in the market.
Rental Growth through Proactive Management
- The seller completed some of the necessary unit and amenity upgrades required for the Property to compete with Class A products in the market. However, the opportunity remains for the Sponsor to lift rents to market rates without making significant in-unit renovations.
- The Sponsor is proposing the addition of two units and increasing other income by charging for use of the amenities which include, the roof deck, basketball court, and fitness center to further capture returns. This will translate to a Year 1 and Year 3 NOI of $1.9M and $2.2M, respectively. The healthy NOI contributes to an average net cash-on-cash target to investors of 4.8%.
Attractive Debt Relative to NOI
- The fixed interest rate of 5.09% compares favorably to the forecasted 6.3% unlevered yield on purchase price based on Year 1 NOI, representing a 121 BPS positive. It is also a positive spread to the 5.4% cap rate based on estimated in place NOI at the time of purchase.
- The Property’s healthy NOI which increases from $1.9M to $2.2M from Year 1 to Year 3, translates to a debt-service-coverage-ratio (“DSCR”) of 2.1x, 2.3x, and 1.9x in Year 1, Year 2 and Year 3, respectively.
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