Highlights

Experienced Real Estate Company
The Real Estate Company is locally based and has prior experience purchasing and adding value to rent stabilized multifamily properties in Brooklyn. RM has transacted with the Real Estate Company on three previous occasions.

Significant Owner Equity
The Real Estate Company invested over $3.7 million in the Portfolio.

Well Located
The Portfolio is located in several gentrifying neighborhoods of Brooklyn, NY, within the Bedford-Stuyvesant/Bushwick, Crown Heights and Ditmas Park/Flatbush submarkets.

Highlights

Experienced Real Estate Company
The real estate company owns and manages over $270 million in multifamily assets overall, comprising approximately 4,600 units, and Novel Realty.com has invested with the real estate company on four previous transactions

Attractive Basis
The real estate company is purchasing two properties which collectively account for $67,308 per unit and compare favorably to comparable transactions in the market

Well Located
The Properties are situated in a major market with favorable fundamentals; in close proximity to retail amenities, public transportation and public facilities

Highlights

Value Add

There is an opportunity to renovate the property and increase rental income. $8,109 is budgeted per unit for renovations which is anticipated to increase rents an average of $132 per unit upon completion. The Property is also being purchased at a basis below its comparative set and represents a discount to pre-COVID pricing.

Dynamic Market

The Property benefits from its close proximity to the Telecom Corridor. More than 5,700 companies have a presence in the area, including AT&T, Ericsson, Verizon, Texas Instruments and MetroPCS. The area also features a tight multifamily market, with 6.2% vacancy in June 2020 according to Axiometrics.

Repeat Sponsor

The Real Estate Company is a repeat sponsor of Realty Novel Realty Co. A previous transaction between the two companies recently completed its renovation plan, achieved 95% occupancy and is anticipated to be marketed for sale in September 2020.

Highlights

Location

With a $1.3 billion asset value and over 15,000 apartments, Northwest Oakland County is the fifth largest submarket in Detroit that appeals to baby boomers and empty nesters seeking a more rural environment. The market takes advantage of strong suburban population growth, which captures workers who are employed in the suburbs of Detroit and allows for a greater market share of renters than in other parts of Michigan.

Market Rent Growth

The submarket had strong year-over-year rent growth of 7.2%. Per AxioMetrics, rent is forecasted to grow by 3.5% annually and vacancy to stay below 5% in the next five years.

Recent Performance

As of the acquisition date, the property was 98% occupied. The property has been at least 96% occupied since April 2020. Since September 2020, new lease rents were 10% above in-place rents, signaling an attractive upward trajectory.

Highlights

Off-Market

The Real Estate Company reapproached a national brokerage firm following a broadly marketed process, due to the previous buyer's seeming uncertainty of execution. Following 6 months of consistent tracking, and the transaction ultimately falling through, the Real Estate Company contractually stepped in as the buyer at a lower price, with terms and a track record that ensures the ability to close.

Market

Austin has been named the #1 fastest-growing major metro area for population growth for nine straight years. Austin has also ranked the #1 place to live in the United States, for the third consecutive year in 2019. The Austin area consists of several Fortune 500 companies, including Apple, Facebook, Amazon, Dell, IBM, Oracle, and soon Tesla's new Gigafactory. Through the COVID-19 pandemic era, Austin added over 37,000 new jobs, marking 3.5% growth and making the city the 2nd fastest-growing metro in the United States. The City recently approved the Orange Line, a new metro rail that will be passing just two blocks from the Property and will provide commuters with convenient access to the Tech Ridge and Downtown Austin. The submarket has averaged 4%+ rent growth and 95%+ occupancy over the past 10 years. 

Value-Add

Though built in 2012, the Real Estate Company has an opportunity to enhance all 222 units at Lotus Village, while also further enhancing amenities and exterior spaces. The Real Estate Company has the ability to raise the average current rents of $1.33 per square foot to $1.51 per square foot, which results in a $172 premium over in-place rents and assumed stabilized occupancy at 92%.

Highlights

Desirable Product Type

Sherwood Oaks stands out amongst its competitors with its unique, predominantly single-story construction, a feature that is highly desirable with tenants, and a huge competitive advantage over nearby apartment properties. The low-density grounds feature abundant, mature oak trees, which create a shade canopy over the property, providing temperature control and natural curb appeal.

Renovated

Since 2020, the Property has received over $3MM/$15K+ per unit in capital improvements. This includes a complete roof replacement, exterior paint, dog park, landscaping enhancements, and unit interior renovations.

Market

According to research from Yardi Matrix, the Tampa metro saw the third biggest year-over-year increase in apartment rental rates growing 15.1% between June 2020 and June 2021. That rate is more than twice the national average. In the Southeast Tampa submarket where this asset is located, quarter-to-date year-over-year asking rent growth is 25%.

Highlights

Basis

At $82K/unit, this basis is over $12K/unit below any of the Property’s sales comparables.

Renovated

Since 2021, the Property has received over $11mm, or $33K/unit in capital improvements, including stainless steel appliances, new hardware, new vinyl plank flooring, new lighting, and new in-unit washer and dryers.

Sponsor

The real estate company sponsoring this transaction is a Colorado-based real estate investment company that has acquired more than 6,000 units of multifamily property with an aggregate value of over $1 billion. The real estate company is vertically integrated with in-house property management operations.  Novel Realty has invested with the real estate company on two previous transactions, both of which went full cycle.

Highlights

Basis

The real estate company sponsoring this transaction was able to identify the Property off-market through their relationship with the seller-developer. The seller's original asking price was 22% higher than the ultimately negotiated net purchase price of $356,000/unit.

Market

The Property is in Vancouver, a city just north of Portland, Oregon on the Washington State side of the metro. The submarket of Vancouver offers additional benefits given its location in the State of Washington. Residents in Washington benefit from no personal state income tax and Clark County, Washington allows for no personal county income tax. Additionally, there are no city/county business taxes in Clark County, Washington. On top of that, per Costar, Vancouver's cumulative rent growth over the last 10 years is above the national total over the same amount of time and since 2010, vacancy in the Vancouver submarket has been consistently below the national average.  

Desirable Product Type

The Property is a brand new, 2022 built property comprised of 50 four-bedroom townhome style units. Interior finishes include stainless steel appliance packages, luxury vinyl plank flooring, in-unit washers and dryers, and select units have private fenced-in yards and decks amongst various other design touches which allow the property to outperform the market. The Property also features central air which is a unique feature for apartments in the Pacific Northwest. Each unit is 1,426 square feet and is ideally suited for a growing work from home tenant base.  

Highlights

Market

The Property is exceptionally located inside the I-440 Beltline in the highly rated Mordecai Historic District, situated minutes from Downtown Raleigh in a neighborhood where single-family homes are listed as high as $1.6 Million according to Zillow. Raleigh is one of the fastest growing metros in the U.S. and was recently projected to be the second fastest-growing large city in the U.S. between 2015 and 2030, according to the United Nations Population Division.

Affordable Stabilized Rents

Underwritten post-renovation market rents of $1,426 per month offer a 17.1% rent to income ratio given the average household income within a two-mile radius of the Property is just under $100,000 according to CoStar. This is also an affordable price point in relation to the rest of the Raleigh MSA, as the average market rent in Raleigh is $1,561 according to CoStar. The Property is well positioned to harness the tremendous rent and income growth in the Raleigh MSA while providing an economic alternative to more expensive Class A product in the Downtown submarket.

Value-Add Potential

The Property is uniquely positioned for immediate upside through the implementation of interior and exterior upgrades. The business plan is to spend approximately $13,500 per classic unit to upgrade appliances, flooring, countertops, and cabinetry. All units feature laundry connections and will receive new W&D appliances in each unit. The business plan also includes an exterior refresh with conversion of the existing laundry facility to a fitness center to improve desirability and tenant experience.

Highlights

Favorable Debt Assumption

The loan on the property, at acquisition, was assumed from the previous owner in the amount of $21,026,000. The loan has approximately eight years of term remaining with a maturity date of August 2031, a fixed interest rate of 3.33% and approximately two years remaining for interest-only payments. This compelling interest rate, as well as the interest-only remaining, is not achievable on new loans in the market today. For comparison, a 7-year Fannie Mae loan at 65% leverage has an average interest rate of 5.78% as of December 7, 2023 according to Northmarq. 

Proven Value Add Renovation

The seller of the Property has renovated 38 units to date with updated counters, cabinets, bathrooms, flooring, and appliances, which have achieved average premiums of $280 per month compared to previous rents. The business plan is to continue with a similar renovation scope for the remaining 132 units while also charging the same average renovation premium. RM Communities also plans to upgrade the Property by adding a valet trash program to provide an amenity that better competes with new product in this submarket. We believe the renovation plan should allow the Property to ahieve competitive rents for this submarket. 

Submarket Affordability

The Property, after renovation, is projected to achieve average rents of $1,833 per month, which reflects a 25.5% rent to income ratio as the average household income within a three-mile radius of the Property is just over $86,000 according to CoStar. This monthly rent is also an affordable alternative to purchasing a home. According to Zillow, within four miles of the Property the average value for homes in the market is $550,000. We believe the property is well positioned to take advantage of the affordability in the immediate submarket while also providing an economic alternative to more expensive homeownership. 

Investment Summary

• On January 31, 2018, Novel Realty Apartment Growth REIT (fka Novel RealtyREIT II) acquired a $1,000,000 joint-venture equity investment related to the acquisition and renovation of Villas de Toscana (fka Tuscany at Westover Hills), a 190-unit garden-style apartment community located in San Antonio, TX.
• The Property was built in 1984 and is comprised of studios, one and two-bedroom floor plans with an average unit size of 684 square feet. The Property is a gated community with amenities that include a basketball court, fitness center, pool, dog park, picnic area, carports, laundry facilities and a BBQ area.
• The Real Estate Company’s business plan is to implement a value-add strategy by completing interior and exterior renovations at the Property. Unit interior upgrades are expected to include a combination of black-on-black appliances, faux-wood flooring, utility saving devices, and new fixtures. Exterior and amenity improvements are expected to address painting, carpentry, landscaping, fitness center upgrades, backyard changes, pool enhancements, and balcony improvements.
• On December 20, 2021, the Tuscany Property was sold. The Tuscany Property was originally acquired for $14,350,000, or $75,526 per unit, and was sold for $17,650,000, or $92,895 per unit. 

Investment Summary

• Novel RealtyREIT II has acquired a $1,000,000 joint-venture equity investment related to the acquisition and renovation of a 263-unit garden-style apartment community located in Fort Worth, TX. 
• The Property was purchased for $55,250 per unit.
• The Property was built in 1968 and is comprised of one, two, and three-bedroom floor plans with an average unit size of 1,043 square feet. Amenities across the Properties include a swimming pool, clubhouse, children's play area, a public mail center, a public laundry center, 24 hour emergency on-site maintenance, and a leasing center with full public kitchen. 
• The Real Estate Company’s business plan is to implement a value-add strategy by completing interior and exterior renovations at the Property. Interior upgrades are expected to include black-on-black appliances, faux-wood flooring, utility-efficient devices and new fixtures.  Exterior and amenity improvements are expected to include a parking lot seal coat and restriping, new signage, leasing clubhouse upgrades and a dog park, among other improvements.​
• On October 25, 2022, the Property was sold. As a result of the business plan for the renovation of the Property, since the Property’s acquisition, 49 of the 263 units had been renovated. The exterior and common area improvements were completed, including painting, clubhouse renovations, the addition of BBQ grills, signage, and a water retrofit. Due to the weaker than anticipated tenant demographic both at the Property and in the surrounding submarket, the real estate company sponsoring the transaction was unable to lease renovated units as underwritten, and the Property required capital calls as a result to support operations and sale efforts; however, the Fort Worth market appreciated, and the Property was sold at a profit, causing the special purpose entity to receive its original investment without a loss of principal.

Investment Summary

• Novel Realty Apartment Growth REIT has acquired a $3,000,000 joint-venture equity investment related to the acquisition and renovation of a 164-unit garden-style apartment community located in Avon, CT.
• The Property was purchased for $146,341 per unit.
• The Property was built in 1973 and is comprised of one, two, and three-bedroom floor plans with an average unit size of 1,165 square feet. Amenities at the Property include a fitness center, pool, picnic area, dog park, tot lot, tennis court, elevators, community laundry, WiFi, low-density wooded landscape, and a clubhouse.
• The Real Estate Company's business plan is to implement a value-add strategy by completing interior and exterior renovations at the Property. Planned unit interior upgrades will include the addition of new appliances, countertops, cabinetry, fixtures, flooring, lighting, and in-unit washers and dryers. Exterior / amenity improvements will consist of painting, lighting, new landscaping, a grill area and fire pit, and patio fences. 
• On September 30, 2022, the Property was sold for $33,750,000, or $205,793 per unit, reflecting a 40.6% increase in property value since acquisition. As a result of the business plan for the renovation of the Avon Property, since the Avon Property’s acquisition, 39 of the 164 units had been renovated. The exterior and common area improvements were completed, including painting all common areas and hallways, furnishing the pool area, as well as renovating the clubhouse/game room and kitchen. Since the Avon Property’s acquisition, the Avon Property’s average rent rate increased from $1,499/month as of November 2018 to $1,706/month upon the sale of the Avon Property, representing a 14% increase in rent rate.

Investment Summary

Value-add acquisition of well-maintained multifamily property with further upside potential in El Paso, Texas.

Investment Summary

• Novel RealtyREIT II has acquired a $1,440,000 preferred equity interest (the “Investment”) related to the renovation of a 31-unit multifamily property located in Chicago, IL (the "Property").
• The business plan is to rehabilitate the Property by addressing all deferred maintenance items and substantially improving and modernizing the Property's interiors, exteriors, and landscaping.  Upon completion of the capital expenditure plan, the Property is anticipated to offer renoveted interiors and amenities including a new workout room, storage lockers, a bike room, and new landscaping of the common area garden. The business plan is anticipated to take approximately 15 months to complete. 
• The Property was built in 1918 and is comprised of one and two-bedroom floor plans wtih an average unit size of 777 square feet. 
• The Property is approximately 77% leased. The Real Estate Company has intentionally left particular units vacant in order to execute the interior renovations immediately. 
• The Real Estate Company acquired the Property in March 2018 from the original owner and anticipates using the refinance proceeds to (1) pay off an existing senior loan and (2) to repair and renovate the Property.  
• The Real Estate Company has over thirty five years of real estate experience and has managed the repositioning of nine investment properties in the Chicago area since 2014. The Property will be managed by an affiliate of the Sponsor.
• The Real Estate Company has secured a senior loan of $6,200,000, which includes a $1,047,000 holdback for property renovations. The loan has a three-year initial term with two 12-month extensions. 
• The Investment has a remaining term of 60 months as of the acquisition date of June 22, 2018.   
• The Investment is interest-only throughout the entire term.