San Antonio MSA, TX Multifamily, DST

New Braunfels, Texas

ASSET CLASS:  Class A Multifamily
OFFERING SIZE:  $23,825,000
LEVERAGE:  56.96%
UNITS:  315
HOLD PERIOD:  7-10 Years
CURRENT OCCUPANCY:  96.49% (9/26/19)

The Project consists of eight, three-story residential buildings, a leasing/clubhouse building, and 66 parking garages, all located at 2909 Sundance Parkway, New Braunfels, Comal County, Texas. Constructed in 2018, the Project is in generally “good” condition pursuant to the PCR (defined below). The Project site includes 14.591 acres of land improved with a total of 280,984 square feet (“SF”) of net rentable area with an average unit size of 898 SF, and a development density of 21.45 units per acre. Parking is provided by 589 total parking spaces including surface stalls, carports and garages. According to the PPM, as of September 26, 2019 the Project was 96.49% leased.

Maximize revenue and occupancy over the holding period. Distribute monthly cash flow. Sell in approximately 7-10 years, or when the market dictates.

The Project is located in the San Antonio – New Braunfels, Texas metropolitan statistical area (the “San Antonio MSA”). The San Antonio MSA is located in South-Central Texas and includes Atascosa, Bandera, Bexar, Comal, Guadalupe, Kendall, Medina, and Wilson Counties. The San Antonio MSA is the third-largest metro area in Texas after Dallas-Fort Worth-Arlington and Houston-The Woodlands-Sugarland. Austin-Round Rock lies approximately 80 miles to the northeast of the San Antonio MSA via Interstate 35. According to the 2010 Census, the San Antonio MSA had a population of 2,142,508 residents. The San Antonio MSA population is estimated to have grown to 2,518,036 residents as of July 1, 2018, up approximately 2.33% per year over the 2010 census. The rate of population growth within the MSA exceeds the State of Texas growth rate of 1.91% and the national growth rate of 0.83% over the same period.

The unemployment rate within San Antonio MSA was 3.0% as of September 2019. The unemployment rate within the metro was below the State of Texas unemployment rate of 3.4% and below the national unemployment rate of 3.6%, each reported as of September 2019 and October 2019, respectively.

New Braunfels was recently named the second fastest growing city in America, according to the U.S. Census Bureau. New Braunfels’ growth rate rose 7.2% between July 2017 and July 2018. The commute to the San Antonio Business District is approximately 40 minutes and Austin is approximately 45 minutes. New Braunfels is home to several tourist attractions including Schlitterbahn, the nation’s number one water park, and the Guadalupe River, Comal River, Natural Bridge Wildlife Ranch, Natural Bridge Caverns, and Dry Comal Creek Vineyards. PNC Bank is opening an operations center next to the property that will employ more than 550 people. New employers adding to the job base include Amazon, Caterpillar and IBEX Global.

Our market analysis was based on a Performance Monitor report for the San Antonio MSA apartment market containing 3rd quarter 2019 information. According to the report, despite a development boom, the multifamily vacancy rate is still fairly moderate. The overall San Antonio vacancy rate is 5.9%, unchanged from the year prior. New development is anticipated to total 3,392 new units (1.9% growth) in 2019, with another 3,532 new units forecast to come online in 2020. New development will slow in 2021 and beyond, however, will remain relatively strong. Despite the level of development, absorption is expected to keep pace. As a result, the vacancy rate within the market is anticipated to remain nearly constant over the five-year horizon. According to the report, the average rental rate within the San Antonio multifamily market is currently $966/unit per month. The average rental rate increased by 3.6% in 2017, and by another 4.3% in 2018. Rental rates are forecast to gain 2.7% in 2019 and gain an average of 2.56% over the next five years.

Pursuant to the First Half 2019 CB Richard Ellis Cap Rate Survey, on a national basis cap rates for suburban multifamily fell slightly during the second half of 2018. The average suburban multifamily cap rate was 5.49%, down six basis points from the second half 2018 cap rate. Cap rates changes were marginal across all classes; Class C cap rates fell by the greatest margin, down 10 basis points to 6.12%, while Class B cap rates were down two basis points and Class A cap rates were down by six basis points. The cap rate spread between Class A and Class B cap rates is just 38 basis points, the lowest level ever reported by the CBRE Cap Rate Survey.

Investor buying activity also would indicate a preference towards secondary and tertiary markets. Tier I cap rates were up slightly, while Tier II and Tier III cap rates were all down. The cap rate spread between Tier I and Tier II markets fell to 15 basis points, another historic low reported by the CBRE Cap Rate Survey.

According to CBRE, suburban multifamily pricing is anticipated to remain stable in the 2nd half of 2019 by 82% of survey respondents, up sharply over the year-end 2018 responses. Another 14% expect modest cap rate decreases during the second half of 2019.

Targeted Yr.-1 Cash-on-Cash: 4.80%
Targeted Cash Range: 4.05% - 5.47%
Targeted Cash Average: 4.90%

DST Due Diligence & Advisory Services

(415) 336-9225

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.