Charlotte, NC, Multifamily, DST

Charlotte, North Carolina

ASSET CLASS:  Class A Multifamily
OFFERING SIZE:  $41,360,000
LEVERAGE:  44.13%
UNITS:  292
HOLD PERIOD:  7-10 Years

The Property is located within the Charlotte, North Carolina Metropolitan Statistical Area (“MSA”), which is the fourth largest metropolitan area in the Southeastern region of the United States behind Miami, Atlanta, and Tampa. More specifically, the Property is located in the dynamic North Charlotte submarket Prosperity Village Square, a separate mixed-use master planned “community within a community” formed from the pedestrian orientated Prosperity Hucks master planned development. Prosperity Village Square was created with the primary goal of providing neighboring residents with walkable, pedestrian- friendly access to all the amenities the community has to offer. Residents of the Property are within walking distance to several retailers, grocery stores and restaurants. Additionally the Property is located within a short drive to several major employment centers. This is all made possible by the Property’s prime access to the I-485, which encircles the entire Charlotte MSA and offers exceptional connectivity to over 215,000 jobs. In addition, the property is a few exits from I-77, which is the primary north-south artery for those commuting to Uptown Charlotte.

As a newly developed multifamily complex, the Property is not in need of significant capital upgrades. Update marketing plan/branding, maintain stabilized occupancy levels. Landscaping, common area, and amenity enhancements.

The Charlotte metropolitan area is comprised of ten counties across portions of both North and South Carolina and is home to over 2.5 million residents, a 13.9% increase over population levels observed during the 2010 census. Affectionately referred to as the “Queen City” in a nod to the city’s noble namesake, Queen Charlotte, the area has transformed from a reliance on the financial sector to a thriving economy with a diverse business foundation.

The region’s attractive business climate, established infrastructure, and unparalleled quality of life has generated unprecedented growth in the urban and suburban cores, and Charlotte currently enjoys the distinction of being the 2nd largest city in the Southeast and the 17th largest city in the United States. Recognized as a global hub for banking, energy, healthcare, and transportation, Charlotte is home to six Fortune 500 headquarters and 12 Fortune 1,000 headquarters.

Neighborhood demographics appear to be conducive to multifamily demand ,as annual population and household formation rates within one mile of the Property are expected to exceed those of the Charlotte MSA and be more than double the national average through 2024. The appraiser noted that existing competition from multifamily properties is limited in the immediate subject area. FactRight’s site inspector represented that rents for Class A apartments in North Charlotte, where the Property is located, are 40% lower than in the Uptown section of Charlotte, which is making the area “a hot spot” for renters.

While the Property’s market appears conducive to investment success, new supply in the submarket will likely moderate rent growth as vacancy ticks up. Population growth in the Charlotte MSA will eclipse the national average over the next several years, and the area should continue to attract highly educated workers. The overall market has experienced favorable supply/demand trends recently, with 12 of 14 submarkets experiencing positive net absorption over the period from February 2018 to February 2019. Vacancy rates in the submarket improved from 5.1% in February 2018 to 4.7% in February 2019. This is lower than the 6.2% for the Charlotte market overall in February 2019. The appraiser believes vacancy rates are leveling off and could face pressure from new supply. While local construction trends and vacancy rates should be monitored over the duration of the investment, the appraiser expects relatively stable rental prices. Axio and CoStar project submarket rent growth over the next few years—just not quite at the same level as the past few years.

Prior Syndications: 121
Assets Under Management: $681 million
Properties Currently Managed: 18
Years In Business 42 Years
Full-Cycle Multifamily Offerings: 54 (Since 2004)
Average ARR: 15.01%
Average Hold Period (Months): 102
Average Annual Internal Rate of Return: 12.35%
Market Share: 2%

The property is managed internally by the Sponsor.

Targeted Yr.-1 Cash-on-Cash: 4.10%
Targeted Cash Range: 4.10% - 5.47%
Targeted Cash Average: 4.54%
Projected IRR: 5.36%

All-In Price: $74,034,000
Purchase Price: $64,000,000
Appraised Value: $64,200,000
Loan Amount: $32,674,000
Equity Raise: $41,360,000
Trust Reserves: $1,849,204
Reserves to All-In Price: 2.50%
Reserves to Equity: 4.47%
On-Going Reserves: $907,000
Total Reserves to All-In Price: 3.72%
Total Reserves to Equity: 6.66%
Net Load: $8,184,796
Net load to Equity: 19.79%
Net Load to All-In Ratio: 11.06%
Appraised Net Load: $7,984,796
Appraised Net Load to Equity: 19.31%
Appraised Net Load to All-In Price: 10.79%
All-In $/Ft.: $177.13
All-In $/Unit: $253,541

Net Operating Income: $3,110,400
Purchase Cap Rate: 4.86%
All-In Cap Rate: 4.20%
Breakeven Exit Cap: 5.16%
Breakeven Exit Cap Rate Spread: 30 bps
Appraised Cap: 4.84%
Appraised Cap Rate Spread: 32 bps

Loan Amount: $32,674,000
Term: 10 Years Fixed
Interest Only Period: 10 Years
Amortization Period: None
Interest Rate: 4.20%
Lender: KeyBank
LTV: 41.13%
Non-Recourse: Yes to Investor

DST Due Diligence & Advisory Services

(415) 336-9225

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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.