Analysis of Investments

Richmond VA Apartments

Capital Square Realty Advisors

The offering is a Class B multifamily property in the Richmond, VA area. The Sponsor’s value-add plan includes renovate and update amenities to 149 of the 296 units to increase rents.

Investment Highlights

  • Yr. 1 Cash-on-Cash 5.55%
  • Initial Occupancy 95.60%
  • Est. Time Horizon None YEARS
  • Current Cash Flow 5.55%
  • Yr. 1 Cap Rate to Investor 5.47%
  • Investor Purchase Price $46,807,000
  • Total Offering Size $20,970,000

Loan Information

The loan is a 10-year term (5-years interest-only) with a fixed-interest-rate of 4.29%. Until March 31, 2028 a prepayment on the loan will incur the larger of a yield maintenance fee or 1% of the principal.

  • Yr. 1 DSCR 2.12
  • Loan-to-Offering 55.20%
  • Hold Period DSCR 2.14

Tenant Information & Lease Terms

The residential tenants typically sign a 12-month lease, but the property manager has the discretion to negotiate terms case by case.

Key Positives

  • The surrounding area has a large population with a strong average income.

  • The Sponsor is well prepared to implement the value-add strategy with over $3 million in reserves, by using an in-house construction team to decrease costs, and an agreement that any amount spent over the budget will be the contractor’s responsibility.

  • The units to be renovated are 5-6% under market comparable units, which shows the room to increase rents.

Key Risks to Consider

  • The CAP rate for investors is low (5.47%).

  • The Sponsor is assuming an aggressive increase in EGR: 6% above the trailing 12-months. The ongoing growth in EGR is 3.4%.

  • The fixed disposition fee does not depend on the performance of the investment.

  • Capital is being raised using rule 506(c); additional discovery on the other investors may be needed.

Investment Sponsor Information

Capital Square Realty Advisors

Capital Square 1031 is a national real estate investment and management company. The firm sponsors institutional-quality real estate exchange programs that qualify for tax deferral under Section 1031 of the Internal Revenue Code. Capital Square uses the Delaware Statutory Trust (DST) structure to make quality real estate available to a larger number of investors.