Analysis of Investments

NP Gathering

Nelson Partners

The offering is a Class A Student Housing community complex near Western Washington University, built in 2017. On 2.85 acres, the property has an eight-story apartment building and a single-story pool building.  There is 133-units with 417 beds. The complex’s amenities include a fitness center, a lounge with billiards and games, a study lounge, a video game lounge, a computer center, bike storage, and a rooftop terrace.

Investment Highlights

  • Yr. 1 Cash-on-Cash 6.50%
  • Initial Occupancy 98.90%
  • Est. Time Horizon None YEARS
  • Current Cash Flow 6.50%
  • Yr. 1 Cap Rate to Investor 5.37%
  • Investor Purchase Price $55,988,000
  • Total Offering Size $23,708,000

Loan Information

For the first 138 months of the loan the prepayment penalty is the greater of a yield maintenance premium or 1% of the outstanding principal for the loan. After 138 months, the penalty is 1% of the outstanding loan balance. There will be no prepayment penalty with the last three months of the term.

  • Yr. 1 DSCR 2.06
  • Loan-to-Offering 57.66%
  • Hold Period DSCR 1.93

Tenant Information & Lease Terms

Generally, Student Housing residential leases are 12-months.

Key Positives

  • High demand for Student Housing should lead to organic rent growth.

  • The Sponsor has set projections at a reasonable growth rate, similar to both CoStar and an appraiser.

Key Risks to Consider

  • The CAP rate for investors is low (5.37%).

  • Growth for this brand-new Class A building must be organic.

  • There is a high fixed disposition fee (4%).

  • The underwriting shows that the property will fall short of year-1’s projected cash flow.

  • The rents are on average 15-20% higher than others in the market. (*The property is the newest in the market and has the best amenities.)

  • The University is a non-division 1 school, with a moderate enrollment of 15,915. (* enrollment has had stable year-over-year growth (0.76%) for the past eight)

  • The Tax abatement expires in 2025, which will negatively affect the NOI.

Investment Sponsor Information

Nelson Partners

None