Analysis of Investments
STAR Portfolio
Cantor Fitzgerald
There are two properties in the STAR Portfolio: One is in Shreveport, Louisiana and the other is in Orlando, Florida. They were both previously owned by the sponsor (Cantor Fitzgerald).
Investment Highlights
- Yr. 1 Cash-on-Cash 5.20%
- Initial Occupancy 94.90%
- Est. Time Horizon None YEARS
- Current Cash Flow
- Yr. 1 Cap Rate to Investor 5.27%
- Investor Purchase Price $65,370,250
- Total Offering Size $30,656,250
Loan Information
There is a loan for each property (not cross-collateralized). Both loans are on 10-year terms, maturing on 04/01/2028, with a 5-year interest-only period and a 30-year amortization schedule.
Prepayments cannot be made within the first 2-years of the term; defeasance can occur after that. The loan agreement describes certain reserve levels that must be maintained, and circumstances that would cause a cash sweep.
- Yr. 1 DSCR 2.02
- Loan-to-Offering 53.10%
- Hold Period DSCR 1.9
Tenant Information & Lease Terms
The lease term for residential tenants is typically 12-months.
Key Positives
Orlando’s market has experienced strong population and employment growth. The West Orlando submarket has been bolstered by a $100 million expansion to the area’s hospital.
The strong employment and population growth have increased the rent in the area.
Key Risks to Consider
The acquisition of the trust was not an arm’s length transaction: the current sponsor was the previous owner of the properties. This means that there is no official purchase price for the property, and the true market value may be difficult to acquire.
The properties will mostly rely on natural market rent growth to increase value. The properties have been professionally managed, and most of the units have been recently upgraded.
The Shreveport economy has lost 6,000 jobs in the last two years. Two of the major economic drivers (energy and casinos) have been struggling since the drop in energy prices, and only the Barksdale Airforce Base remains stable.
The Sponsor’s rent growth projection for the portfolio is 2.75%, which is above CoStar’s forecast for both markets: 2% for Orlando and 1% for Shreveport.
The Shreveport housing economy is buyer-driven. The low cost of housing can limit the potential for apartment rent growth.
The Stockwell Landing property’s rents are already above comparable rents, in what is already a struggling market.
The CAP rate drops to 5.24%, and the cost percentage jumps to about 11% when you include the reserves for taxes, insurance, and utilities.
Because of the complications with valuing the property, there is no guarantee what investors would receive if the exit strategy (a 721 sale to a REIT) is executed.
Investment Sponsor Information
Cantor Fitzgerald
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."