downey park apartments trojan partners acquisition downey, california * 104 apartment homes...
TRANSCRIPT
DOWNEY PARK APARTMENTS
TROJAN PARTNERS ACQUISITION
DOWNEY, CALIFORNIA * 104 APARTMENT HOMES
$11,000,000
PROPERTY PROFILE
PROPERTY FINANCES
LOCATION
MAP VIEW SATELLITE VIEW
Centrally located amid three submarkets
• South Bay
• East Los Angeles
• North Orange County
Jobs: 6,780,000 within twenty-mile radius
Unemployment Rate: CA (12.3%)
Unemployment Rate: Downey (9.8%)
Employment Projection:
2015: 52,588
2010: 48,221
2000: 44,197
EMPLOYMENT
U.S. Census Bureau: LA has second largest population in the United States
Median Income: $59,955
Median Age: 31
Median House Value: $452,000
Average Household Size: 3.1 people
DEMOGRAPHICS
TRAVEL TIME TO WORK
AVERAGE COMMUTE: 25 MINUTES 75% DRIVE ALONE
TRANSACTION SUMMARY
Purchase Price: $11,000,000
Acquisition Cost: $330,000
Price Per Unit: $105,769
Total Units: 104
Price Per Square Foot: $91
Livable Square Feet: 120,700
Avg. Square Feet Per Home: 1,161
High Entry Cap Rate Valuation
• 10%
Year one Cash on Cash Return
• >14%
Value Add Upside
• Cap Rate reduction
• 10% expected rent increase
Oversized Apartment Homes:
• 37% larger than East LA submarket
Low Interest Rate Financing
RATIONALE
DOWNEY AVERAGE RENTS
AVERAGE RENT 1X1 UNITAVERAGE RENT 2X2 UNIT
ASSUMPTIONS
• Purchase Price: $11,000,000
• Acquisition Cost: $330,000
• Loan Fee:
$71,500
• LTV%:
65%
• Loan Amount:
$7,150,000
• Equity:
• 3,850,000
• Interest Rate:
• 5%
• # Units:
104
• General Vacancy:
5%
• Concessions:
4.17%
• Non-Rev Units:
2%
• Other Income:
$63,267
• Capital Reserves:
• $300
• Entry Cap:
• 10%
• Exit Cap:
• 7%
• Value Add Cost: $700,000
• # Units Complete/yr:
24
• Renovation Term: 51 months
• Rental Increase: 10%
• Hold Period: 5 yrs.
• Hurtle Rate: 6%
PROMOTE SPLIT
Trojan Partners Initial investment:
• $637,725
• 15% of Equity $4,251,500
Preference Rate: 6%
Promote Split: 70 Equity / 30 Sponsor
Acquisition Fee Charged: $110,000
• Fee covers operating overhead
• $10,000 bonuses awarded to each partner
PRO-FORMA VALUE ADD
Going in cap 10%
Exit cap 7%
Renovation cost $700,000 or $6,000 a door
Property leveraged IRR (65% LTV) 41%
Sponsor leveraged IRR (65% LTV) 62%
5 year sale profit $15,099,814
Returns (5 year hold with Value Add)
JUSTIFICATION
SALES COMPARABLES REPORT
Complex # Units Age Sales Price Cap Rate
Closed
Downey Park
104 1964 N/A N/A N/A
Cypress Village
88 1964 $15,000,000 5.8% 2010
Pinewood 124 1972 $20,400,000 4.8% 2010
Mariposa 286 1970 $43,000,000 4.8% 2010
VALUE ADD CAPITAL EXPENDITURES
THE CAPITAL STACK
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
$7,150,000
$3,613,775.00
$637,725.00
sponsor
equity
lender
Sponsor: $637,725
Equity:$3,613,775
Lender:$7,150,000
Total Property Cost:
$11,401,500
(Property + Acquisition Cost + Loan Fee)
DEBT COVERAGE RATIO
ASSUMING 3% RENT GROWTH & 2% EXPENSE GROWTH
Year 1: 2.85
Year 2: 3.11
Year 3: 3.37
Year 4: 3.64
Year 5: 4.15
ASSUMING RENT FALLS 50%
Year 1: 1.42
Year 2: 1.55
Year 3: 1.69
Year 4: 1.82
Year 5: 2.07
Loan Terms: $7,150,000, 65% LTV, 5% FRM, 10yr., Interest Only
CASH ON CASH RETURN
PROPERTY CC ON
Year 1: 14.81%
Year 2: 16.97%
Year 3: 19.16%
Year 4: 21.38%
Year 5: 382.85%
SPONSOR CC
Year 1: 19.43%
Year 2: 23.74%
Year 3: 28.12%
Year 4: 32.56%
Year 5: 755.49%
SPONSOR CC IF RENTS DROP 50%
Year 1: 9.71%
Year 2: 11.87%
Year 3: 14.06%
Year 4: 16.28%
5 YEAR VALUE ADD SCENARIO
Year 0: -$637,725 0
Year 1: $123,886 19.43%
Year 2: $151,392 23.74%
Year 3: $179,298 28.12%
Year 4: $207,616 32.56%
Year 5: $4,817,965 755.49%
CASH FLOWS CASH ON CASH
EXIT CAP COMPARISON
7 CAP
Sale: $22,337,377
Net: $15,099,814
IRR: 41%
8 CAP
Sale: $19,545,205
Net: $12,307,642
IRR: 37%
9 CAP
Sale: $17,373,515
Net: $10,135,953
IRR: 33%
10 Cap
Sale: $15,636,164
Net: $8,398,601
IRR: 29%
Assuming 5 Year hold @ 3% Growth
5 YEAR PRO-FORMA