Melbourne, FL MSA Multifamily, DST

Rockledge, Florida

ASSET CLASS:  Class A Multifamily
OFFERING SIZE:  $29,944,929
MINIMUM INVESTMENT:  $100,000
LEVERAGE: 52.34%
# OF UNITS:  252
YEAR BUILT:  2008 
HOLD PERIOD:  7-10 Years
TARGETED YR.-1 RETURN:  4.94%

Opportunity to invest in a potentially attractive long-term investment due to its affordable rental profile, competitive positioning and strategic location near major employers, shopping, retail, and entertainment in the Melbourne MSA. The Property has potential to improve operational performance, and enhance underlying asset value through the execution of strategic capital improvements and other value-added strategies. The Property offers high-quality living spaces, a feature-rich amenity package and convenient access to dining, retail and entertainment venues, while maintaining competitive rental rates across a variety of one-, two-, and three-bedroom floorplans.

The Trust, through the Master Tenant, intends to make certain upgrades at the Property over the next three to four years in an effort to maintain its historic occupancy and to increase rent. In total, 150 units, or 60% of all units, are scheduled to receive interior upgrades with a total cost of approximately $1,500,000. The Sponsor does not anticipate making material structural upgrades to the Property.

Common areas/amenities: • New model unit furniture, fixtures and equipment • New shade sails at playground • Tree removal and trimming • Front fountain improvements • New Parcel Pending smart package locker system • Contingency for interior and amenity improvements

Exterior: • Roofing repairs and replacements as necessary • Landscaping enhancements • Storm sewer maintenance • Termite treatment • Repairs to fascia and brick molding • Gutter tune-up and repairs • Replace exterior doors as necessary • Full pressure wash and exterior paint • Dryer vent cleaning and chimney stucco repairs • Allowance to repair and replace HVAC units as needed

The Project is located in Brevard County, and within the Melbourne-Titusville-Palm Bay, Florida metropolitan statistical area (the “Melbourne MSA”). Located halfway between Jacksonville and Miami, Brevard County is the sole county within the Melbourne MSA and extends 72 miles from north to south. According to the United States Census Bureau, as of July of 2018, the population within the Melbourne MSA was 596,849, up approximately 1.18% per year over the 2010 census population of 543,376. The population growth within the MSA was below the population growth of the State of Florida, which has seen growth of 1.57% over the same period, and significantly above the United States population growth of 0.73%.

According to the US Bureau of Labor Statistics, the unemployment rate within the Melbourne MSA was 2.7% as of December of 2019. The unemployment rate within the Melbourne MSA was below the State of Florida unemployment rate of 3.0%, last reported for December of 2019, and below the national unemployment rate of 3.6%, last reported for January 2020.

According to a Performance Monitor Report from REIS.com containing 1st quarter 2020 information, the Melbourne MSA apartment market is extremely tight. The vacancy rate as of the fourth quarter, 2019 was 3.2%, while the national vacancy rate was 4.6% as of the fourth quarter of 2019. The vacancy rate within the Melbourne MSA has been tight for many years, with a five- year average vacancy rate of 2.9%. Asking rental rate growth has also been strong in the Melbourne MSA with a five-year average increase of 6.2%, as compared to the South Atlantic region of the US at 4.6% and the US five-year average growth rate of 4.7%. The five-year forecast calls for little change in market conditions with a five-year average vacancy rate at 3.6% and asking rent growth between 3.5% and 4.0% per year. The average rental rate is currently $1,073/unit per month. When broken down by unit type, one-bedroom units had an average rental rate of $933/unit per month ($1.31/SF), two-bedroom units had an average rental rate of $1,117/unit per month ($1.11/SF), and $1,467/unit per month ($1.13/SF).

The Sponsor will enter into a property management agreement with its substantial operating partner, BH Management Services, LLC (i.e., the Property Manager). BH Companies, the parent to the Property Manager, is a fully integrated apartment management platform that provides acquisition, apartment management, design, construction and other advisory services to the Sponsor. Together, our partnerships own and operate roughly 24,000 units across the Southeastern and Southwestern United States.

Founded by Harry Bookey in 1993, the Property Manager has become one of the 15 largest management companies in the United States, with over 1,700 employees, over 85,000 units under management and revenues surpassing $400 million annually. The Property Manager excels at understanding the market, serving the consumer, and creating living environments of exceptional quality. The Property Manager manages 22,474 units across the Sponsor’s real estate platform, including all 13,211 units for NXRT. For property owners, the Property Manager’s methods translate into higher occupancy, lower turnover and predictable ROI.

Targeted Yr.-1 Cash-on-Cash: 4.94%
Targeted Cash Range: 4.94% - 8.05%
Targeted Cash Average: 6.45%
Targeted Cash Range w/ Principal Paydown: Interest Only Loan
Targeted Cash Average w/ Principal Paydown: Interest Only Loan
Projected IRR (based on sale at purchase cap rate): 7.36%

All-In Price: $62,833,929
Purchase Price: $56,078,750
Appraised Value: $55,700,000
Loan Amount: $32,889,000
Equity Raise: $29,944,929
Total Trust Reserves: $3,003,720
Reserves to All-In Price: 4.78%
Reserves to Equity: 10.03%
Net Load: $3,751,459
Net Load to Equity: 12.53%
Net Load to All-In Ratio: 5.97%
Appraised Net Load: $4,130,209
Appraised Net Load to Equity: 13.79%
Appraised Net Load to All-In Price: 6.57%
All-In $/Ft.: $208.31
All-In $/Unit: $249,341

Net Operating Income: $2,850,000
Purchase Cap Rate: 5.16%
All-In Cap Rate: 4.53%
Breakeven Exit Cap: 5.76%
Breakeven Exit Cap Rate Spread: 60 bps
Appraised Cap: 5.12%
Appraised Cap Rate Spread: 64 bps

Loan Amount: $32,889,000
Term: 10 Years Fixed
Interest Only Period: None
Amortization Period: None
Interest Rate: 3.52%
Lender: Walker & Dunlop, LLC
LTV: 52.34%
Non-Recourse: Yes to Investor

DST Due Diligence & Advisory Services

(415) 336-9225

DISCLAIMER
The contents of this communication: (i) do not constitute an offer of securities or a solicitation of an offer to buy securities, (ii) offers can be made only by the confidential Private Placement Memorandum (the “PPM”) which is available upon request, (iii) do not and cannot replace the PPM and is qualified in its entirety by the PPM, and (iv) may not be relied upon in making an investment decision related to any investment offering by the issuing company, or any affiliate, or partner there of the issuer. All potential investors must read the PPM and no person may invest without acknowledging receipt and complete review of the PPM. With respect to the “targeted” goals and performance levels outlined herein, these do not constitute a promise of performance, nor is there any assurance that the investment objectives of any program will be attained. These “targeted” factors are based upon reasonable assumptions more fully outlined in the Offering Documents/ PPM. Consult the PPM for investment conditions, risk factors, minimum requirements, fees and expenses and other pertinent information with respect to any investment. These investment opportunities have not been registered under the Securities Act of 1933 and are being offered pursuant to an exemption therefrom and from applicable state securities laws. Past performance and statements regarding current occupancy and earnings are no guarantee of future results. All information is subject to change. You should always consult a tax professional prior to investing. Investment offerings and investment decisions may only be made on the basis of a confidential private placement memorandum issued by the issuer, or one of its partner/issuers. The issuer does not warrant the accuracy or completeness of the information contained herein. Some offerings are subject to a “cooling off” period and are not available to all investors. 
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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.