Analysis of Investments
CF Towson Multifamily
The offering is for a class A multifamily complex with 430 units in Towson, Maryland.
A joint venture between Cantor Fitzgerald and Hamilton Zanze. Cantor will be the Sponsor and Zanze will own 23% of the DST and operate as the Property Manager.
- Yr. 1 Cash-on-Cash 5.10%
- Initial Occupancy 96.00%
- Est. Time Horizon None YEARS
- Current Cash Flow 5.10%
- Yr. 1 Cap Rate to Investor 5.09%
- Investor Purchase Price $112,077,922
- Total Offering Size $52,077,922
The property's loan has a fixed interest rate at 3.37%; interest-only until November 1, 2022. Prepayment of the loan can be paid with these conditions: - If paid before 11/1/22: a penalty of whichever is greater, a yield maintenance premium or one-percent of the loan's outstanding principal. - If paid after 11/1/22, but before 8/1/2025: a penalty of one-percent of the loan's outstanding principal. - If paid after 8/1/25: no penalty for prepayment.
- Yr. 1 DSCR 2.72
- Loan-to-Offering 53.53%
- Hold Period DSCR 2.24
Tenant Information & Lease Terms
Although generally 12 months, lease terms can be negotiated on a tenant by tenant basis.
Fixed interest rate (3.37%).
A high Debt Service Coverage Ratio of 2.24, due to an interest-only loan which will begin to amortize in 4 years.
Strong reserve to cover the property.
Strong demographics: a large population with an above average income.
Key Risks to Consider
The NOI provided by the sponsor is at 5.09% but is even lower (3.75%) when taxes and expenses and taxes are included. (*The CAP rate provided by the sponsor is also inflated because of the removal of certain line items to their analysis.)
A portion of the property has a a ground lease.
The year one master tenant will receive a hefty 19% (or, $622k) of the cash flow from the property.
The sponsor has an aggressive assumption of NOI growth (12% above what was estimated by the appraisal).
The Baltimore market has seen a steady decline in rental rates and an increase in the available unit supply.
The property is occupied above a stable projected value; market rents for all unit types for this property are above the market average.
Investment Sponsor Information
According to the sponsor's website: "Cantor Fitzgerald is a leading global financial services firm, serving clients from over 30 offices around the world. Founded in 1945 as a securities brokerage and investment bank, the firm pioneered computer-based bond trading, built one of the broadest distribution networks in the industry and became the market's premier dealer of government securities.
Today, Cantor Fitzgerald is known for its strength across a diverse array of businesses, including equity and fixed income capital markets, investment banking, commercial real estate finance and services, prime brokerage, asset management and wealth management, and e-commerce and online ventures. In all its businesses, the firm is an acknowledged leader in developing advanced technologies to expand market access, and help clients achieve their most important financial and strategic objectives. This commitment to client-centered innovation has led to enduring relationships with many of the world's most demanding institutional investors and corporations."