Aurora, IL Multifamily, DST

Aurora, Illinois

ASSET CLASS:  Class A Multifamily
OFFERING SIZE:  $37,630,000
MINIMUM INVESTMENT:  $100,000
LEVERAGE:  57.43%
YEAR BUILT:  Built in phases from 1999-2004 / Renovated in 2016
UNITS:  368
HOLD PERIOD:  7-10 Years
TARGETED YR.-1 RETURN:  4.50%
REMAINING EQUITY:  $0

368-unit, garden-style apartment community renovated in 2016. Renovations included full roof replacement, asphalt resurfacing, siding replacement, exterior paint, and appliance replacements. The Property is located in Chicago’s Aurora/Naperville submarket offering convenient access to major employment centers, including the I-88 Research and Technology Corridor and the I-55 Manufacturing and Distribution Corridor, as well as numerous retail and entertainment options. The Aurora Metra train station is conveniently located four miles from the Property offering residents direct rail access to the greater Chicago metropolitan area. The Property is within the Oswego High School district, ranked within the top 17th percentile of all public high schools in Illinois.

In addition to the $1.09 million in repair and maintenance items from the PCA, the Reserve Accounts will be used for capital expenditures at the Property, including upgrading 50% of the Unit interiors, installation of in-unit technology packages in all Units, and enhancements to the clubhouse and pool area, and for working capital needs. An investment summary prepared by the BH Sponsor projected that the Unit upgrades would average $6,600 and garner $75 monthly rental premiums, resulting in a 13.5% return-on-investment. The technology packages were projected to cost an average of $1,200 per Unit and garner $40 monthly rental premiums, resulting in a 40.0% return-on-investment.

The Property is located in Chicago’s Aurora/Naperville submarket offering convenient access to major employment centers, including the I-88 Research and Technology Corridor and the I-55 Manufacturing and Distribution Corridor, as well as numerous retail and entertainment options. The Aurora Metra train station is conveniently located four miles from the Property offering residents direct rail access to the greater Chicago metropolitan area. The Property is within the Oswego High School district, ranked within the top 17th percentile of all public high schools in Illinois.

Aurora is the second largest and one of the fastest growing cities in Illinois, along with Naperville to the east. Recent population patterns show an outward migration to the local suburbs with the largest estimated growth between 2010 and 2019 of 10.6% forecasted for Kendall County, where the Property is located. The Property is located just south of the I-88 technology corridor and four miles from the Aurora commuter rail station, providing convenient access to major employment centers and lifestyle amenities across the greater Chicago metroplex. The Property is also conveniently located near a wide variety of local retail and entertainment options, with the largest retail concentration located along Route 59 in the neighboring community of Naperville.

According to CoStar, absorption in the submarket has outpaced new construction, resulting in decreased vacancy. No new units are expected to be delivered by the end of 2019. Demand for apartments in the submarket is supported primarily by the desirability of the area, driven by low cost of living and concentration of high-quality education. Positive economic developments and demographic trends have supported steady absorption. According to Axiometrics data, over the next four years (2020-2023), effective rent growth and occupancy are projected to average 2.8% and 93.8%, respectively, for the Aurora, IL apartment submarket.

The Property Manager, BH Management Services, LLC, was formed in Iowa on June 5, 2012. As of September 20, 2019, it managed 289 apartment properties, with an aggregate of over 84,000 units. BH Equities owns interests in 63.9% of the managed units with the remaining 36.1% of the units owned by third parties. As of December 31, 2018, the Property Manager had $17.8 million in assets, members’ equity of $6.0 million and recorded net income of $5.8 million for the year then- ended. According to the National Multifamily Housing Council, the Property Manager was ranked #8 on the 2019 Top 50 Largest Apartment Managers list, up from #9 in 2018.

Targeted Yr.-1 Cash-on-Cash: 4.50%
Targeted Cash Range: 4.50% - 5.90%
Targeted Cash Average: 5.26%
Targeted Cash Range w/ Principal Paydown: 5.05% - 8.67%
Targeted Cash Average w/ Principal Paydown: 6.45%
Projected IRR: 8.34%

All-In Price: $88,405,000
Purchase Price: $78,150,000
Appraised Value: $78,800,000
Loan Amount: $50,800,000
Equity Raise: $37,630,000
Trust Reserves: $3,883,035
Reserves to All-In Price: 4.00%
Reserves to Equity: 9.39%
Net Load: $6,371,965
Net Load to Equity: 16.93%
Net Load to All-In Ratio: 7.21%
Appraised Net Load: $5,721,965
Appraised Net Load to Equity: 15.21%
Appraised Net Load to All-In Price: 6.47%
All-In $/Ft.: $212.18
All-In $/Unit.: $240,231

Net Operating Income: $4,065,020
Purchase Cap Rate: 5.20%
All-In Cap Rate: 4.60%
Breakeven Exit Cap: 6.29%
Breakeven Exit Cap Rate Spread: 109 bps
Appraised Cap: 5.16%
Appraised Cap Rate Spread: 113 bps

Loan Amount: $50,775,000
Term: 10 Years Fixed
Interest Only Period: 5 Years
Amortization Period: 30 Years
Interest Rate: 3.90%
Lender: Newmark Knight Frank
LTV: 57.43%
Non-Recourse: Yes to Investor

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Securities offered through Emerson Equity LLC Member: FINRA/SIPC. Only available in states where Emerson Equity LLC is registered. Emerson Equity LLC, and the issuer are not affiliated.