Analysis of Investments
Bluerock Big Creek is an investment in a Class A apartment complex located in Alpharetta, Georgia. Alpharetta is an affluent neighborhood just north of Atlanta. The property has a total of 372 units and includes resort style amenities.
- Yr. 1 Cash-on-Cash 5.38%
- Initial Occupancy 84.00%
- Est. Time Horizon 7 years YEARS
- Current Cash Flow
- Yr. 1 Cap Rate to Investor 4.91%
- Investor Purchase Price $84,455,103
- Total Offering Size $35,585,103
The total loan for this investment is $48,870,000 and is from KeyBank National Association under the Fannie Mae DUS program. The loan is for a term of 7 years with the first 5 years of the loan being interest only. When amortization begins it is based on a 30 year schedule. The interest rate is fixed at 4.140%.
- Yr. 1 DSCR 1.98
- Loan-to-Offering 57.87%
- Hold Period DSCR 2.02
Tenant Information & Lease Terms
Leases are signed on an individual basis at multifamily properties. The property manager will negotiate terms on a case by case basis. Leases are generally signed on a 12 month basis however this may differ for each tenant. At this property tenants will pay for their own utility costs.
The area is an affluent area that allows for the property manager to charge a premium on rents due to the location.
Newer built property which limits the amount of capital expenditures that may be needed at the property.
Key Risks to Consider
Bluerock is projecting economic occupancy at 93% during the hold period. This is aggressive as the submarket physical occupancy is only 92%.
The cap rate to investors is low (4.91%).
The property is currently occupied at only 84%. This is concerning as the sponsor projects occupancy of 93% during the hold term and this may affect distribution to investors as they need time to lease up to projected levels.
The underwriting assumptions of the sponsor for the hold term are aggressive. They project 5% rental income growth in year 2 of the investment, which may be hard to attain if the property is still experiencing lower than projected occupancy.
Investment Sponsor Information
According to the sponsor's website: "Bluerock is a national real estate investment firm headquartered in Manhattan with regional offices in Southfield, Michigan, Boise, Idaho and Newport Beach, California. Bluerock is a leading private equity real estate asset manager with a focus on Core-Plus, Value-Add, Opportunistic and Development investment strategies, and has transacted over 9 million square feet of residential and commercial real estate acquisitions since its inception in 2002. Bluerock's key principals have an average of 25 years investing experience, have been involved with acquiring over 30 million square feet of real estate with approximately $10 billion in value, and have helped launch leading real estate private and public company platforms."