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• Strong Local Apartment Market: This acquisition represents an opportunity to acquire an un-renovated asset in a 96% occupied workforce submarket market that is expected to see strong rent growth over the next five years, driven by employment growth and continued population shift from high cost of living coastal markets.
• Conservative business plan: By keeping the rents affordable and in the middle of the competitive set, we are reducing the risk profile of the investment.
• Convenient Access/ Proximity Demand Generators: The Property is well‐positioned to benefit from its proximity to major highways, including I‐17 and its central location in the Phoenix metro area.
• Favorable Price Point: The Seller has agreed to a $6.00MM (20.00%) price reduction from the original $30.00MM contract price. The $160k/ door basis represents a 39% discount to Raystone which was the most recent trade in the market and is a direct comparable.
• Moderate Leverage & Favorable Financing: The total leverage of the senior debt + mezzanine debt is 53% LTC. In addition to the price reduction, Sponsor negotiated for the seller to carry $14.00MM (58% LTV/ 48% LTC) at 6.00% fixed, 30-year Amortization for Yr. 1 & 15-year Amortization for Yrs. 2 & 3. This represents a financing savings of $1.00MM-$1.50MM.
• Below Market Rents/ Strong Organic Growth Potential: The Property is 98% leased with average effective rents of of $770/mo / $1.25/SF, significantly below the comp set. Seller is long-term, having acquired in 2005. Despite the large size of the project at 150 units, there is no website.

• Accretive Value- Add Program: The business plan includes renovating 100% of the units over a 12-to-15-month period at an average cost of $24,198/unit to realize $507 rent premiums on rehabbed units. Additionally, amenities will be improved, common areas will be upgraded, and the Property will be rebranded and utilize technology for ease of tenant living. Inclusive of interior and amenity renovations, the blended return on investment for the renovation program is 30%.
• Conservative Underwriting: 5‐year rent growth is now underwritten at an average of 3.0 which is below Axiometrics’ rent projections for the submarket. The refinance is underwritten to a lower proceed overall than LTV would indicate by using a 1.25x DSCR on a 5.50% rate and 30-year amortization. Further, baseline controllable operating expenses are budgeted at 18% above the T12 level, reflecting our planned investment in staffing and R&M.
• Highly experienced Sponsorship: The Sponsor is experienced in business plans of this type having invested in a similar properties in Arizona. PCI’s renovated 90% of an 88-unit apartment acquired in October 2021 (southbankapthomes.com). Sponsorship has a liquidated damages provision in its construction contract to ensure timely delivery of units on budget.
• Near-Term Cash out Opportunity: Rightsizing of leverage at the end of Year 3 is expected to result in a significant cash out distribution to investors.
• Outsized Expected Returns: Base Case investor returns are projected to be substantially higher than typical multifamily investments of this type, partly driven by the opportunistic price reduction achieved because of the current market dislocation.

• Unit Upgrades: Renovate 100% of the units at $24,198/unit to bring them up to the current market spec. Competitive market analysis supports our
  $507 targeted rent premiums. Unit upgrades are assumed to commence 4 months after closing
• Exterior Improvements: Exterior painting of all buildings, new pool furniture, refreshed BBQ/picnic areas, and improved signage
• Amenity Enhancement: Leasing Office renovation
• Other Income: Implementation of utility billback, and pet fees
• Proactive Marketing: Creation of the Property’s online presence, outbound marketing and increased leasing staff
• We expect the above to drive rent growth, occupancy, and retention, as well as an improved tenant profile

Within 1 year, 90% of units had been permitted & fully remodeled, including adding W/D.

Southbank Apartments had a similar story as the Subject with average in-place rents of $1,039. Our newly renovated units are achieving $1,700-$1,850 + Utility Billback.

The transformation was so remarkable, Southbank was a finalist for the Arizona Apartment Association’s prestigious tribute awards.