Albany, NY 55+ Adult Multifamily, DST

Albany, New York

ASSET CLASS:  Class A 55+ Active Adult Multifamily
OFFERING SIZE:  $14,260,000
LEVERAGE:  56.10%
# OF UNITS:  148
HOLD PERIOD:  7-10 Years

A multifamily residential complex containing 148 residential apartment units. The property is located on 13.11 acres and contains two four-story apartment buildings, one one-story clubhouse, and seven garage buildings that include 48 rentable spaces. The covered spaces are available for lease for an extra monthly fee. The clubhouse is centrally located and contains a leasing office, outdoor patio, beauty salon, theater room, restrooms with lockers and showers, swimming pool, fitness room, small kitchen and mechanical room. Apartment units are equipped with a private balcony or patio, full kitchen (including granite countertops and full-sized appliances), a washer/dryer in each unit, and spacious closets.

The apartment complex limits its renters to age 55 and up, but most renters are 15 years older. Neither food or assisted living services are provided, but the community clubhouse offers a wide variety of social activities, which has built a strong sense of community. The rental retention rate of 55+ facilities is significantly higher than typical multifamily complexes. This lower turnover rate makes the property less reliant on new infusions of tenants on a year-to-year basis to maintain profitability.

The Trust plans to continue to maintain the Property’s high occupancy and to increase rents as the market permits. The sponsor will be pursuing possible licenses and/or leases with telecommunications and alternative energy providers. Discussions have not yet begun and revenue from these sources is not included in the pro forma. The ultimate goal is to dispose of the Property within the 10-year hold period for an amount that maximizes value to the Investors.

The Property is located in Glenmont, New York (upstate New York; suburb of Albany), a hamlet in the town of Bethlehem, Albany County, New York. Glenmont is in the northeastern corner of the town. According to independent data from S&P Global Market Intelligence demographics within one-, three-, and five-mile radii of the Property suggest that the local area is characterized by upper-middle-income demographics and some population growth. The Property appears to be a small area of greater wealth as compared with the areas three and five miles away.

According to the September 2018 Moody’s Analytics Précis report for the Albany Region included in the appraisal, the population of the Albany-Schenectady-Troy metropolitan statistical area (Albany MSA) was expected to increase 0.2% from 886,200 in 2016 to 888,300 in 2018. According to the appraisal, an outsized share of the residents in the Albany region are employed by the government or in the education/health sector. Additionally, the Albany region also has a sizable services industry with employment concentrated in the STEM (science, technology, engineering, and math) fields. The strong technical skills from graduates of local universities are expected to help continue to grow what is a global semiconductor production hub due to the presence of universities and major employer GlobalFoundries. The expansion of the high-tech industry is expected to continue to bring high-paying jobs and younger employees to the region.

Despite the slightly increasing trend in vacancy rates, asking rents for the Albany MSA have steadily increased from a low of $1,089 per month at the end of the first quarter 2014 to a high of $1,194 per month at the end of the fourth quarter 2018, representing a 9.6% increase.

The Albany market has a high level of government employment. However, city planners hope to move from significant public-sector employment and are relying on investments made by the state to develop a robust private sector. The Albany MSA has received $30+ million from the state to cultivate a “tech valley,” using the funding to provide startup cash and tax breaks to entice research and development and other technology companies to invest in the area. In addition, analysts anticipate increases in high-tech payrolls for companies located within the Albany NanoTech research site as a result of funding and tax breaks. The number of colleges and universities based in the area is an attractive selling point to potential private sector investors.

The appraisal provided data related to the senior population and its growth rates, as the Property is an age-restricted facility for ages 55+ residents only. The data show that the senior population in the area is growing moderately in terms of absolute numbers and as a percentage of total population. In 2018, 5.5% of the Property’s primary area total population was above the age of 75 (below the national average of 6.4%), and this age segment is projected to grow at an annual rate of 2.1% (below the national rate of 3.5%.) Over the next five years, the total ages 75+ population growth is expected to be 11.1% in the Property’s primary area compared with 18.9% nationally. While below the national average, the 75+ age group is nonetheless expected to show steady growth. The appraisal also analyzed data related to the growth rates for adult children within the Property’s primary area. Overall, adult children are expected to contribute positively toward living options for the Property and its market area.

Overall, the fundamental characteristics of the market and asset-class submarket within which the Property is located appear stable for multifamily demand.

Prior Syndication: 7
Properties Currently Managed: 7
Leadership Team Experience: 75 Years
Leadership Team Total Past Transaction Volume: $20 Billion
Year of Formation: 2016

Management Company: United Plus Property Management, LLC
Properties Managed: 36
Units Managed: 3,893
Rentable Square Feet: 335,361
Date Founded: 2001
Headquarters: Troy, NY

Targeted 1st-Year Cash-on-Cash Return: 6.00%
Targeted Cash Range: 6.00% - 6.30%
Targeted Cash Average: 6.11%
Targeted Cash Average w/ Principal Paydown: 7.26%
Projected Internal Rate of Return: 6.88%

All-In Price: $32,460,000
Purchase Price: $27,500,000
Appraised Value: $27,500,000
Loan Amount: $18,200,000
Equity Raise: $14,260,000
Reserves: $1,280,000
Reserves to All-In Price: 3.94%
Net Load: $3,680,000
Net load to Equity: 25.81%
Net Load to All-In Ratio: 11.34%
Appraised Net Load: $3,680,000
Appraised Net Load to Equity: 25.81%
Appraised Net Load to All-In Price: 11.34%
All-In $/Ft.: $251,85
All-In $/Unit: $219,324

Net Operating Income: $1,652,750
Purchase Cap Rate: 6.01%
All-In Cap Rate: 5.09%
Breakeven Exit Cap: 6.39%
Breakeven Exit Cap Rate Spread: 38 bps
Appraised Cap: 6.01%
Appraised Cap Rate Spread: 38 bps

Loan Amount: $18,200,000
Term: 10 Years Fixed
Interest Only Period: 5 Years
Amortization Period: 30 Years
Interest Rate: 4.04%
Lender: Société Générale Financial Corporation
LTV: 56.07%
Non-Recourse: Yes, non-recourse to Investors

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