OUR CURRENT OFFERING
Download The Executive Summary
This is a regulation D 506c offering with a $50,000 minimum and $1.6 million maximum. To make a commitment please enter information to continue with onboarding process:
Great multifamily opportunities have been SCARCE over the past year but we’ve found one that will likely be our only deal this year. This is a regulation D 506C offering for accredited investors.
This acquisition represents a joint venture between Joffrey Capital and CAF Capital Partners.
The partnership with CAF is exactly what I have been looking for in terms of a long-term reliable multifamily partner. Here’s why.
CAF
The CAF leadership group has an impressive background including former executives from GE Capital and Invesco Real Estate. These guys are pros and recognized in the industry for their stellar reputation.
They are trusted by some of the biggest names in business. Their current limited partners are include Goldman Sachs, Cantor Fitzgerald and Carlyle Group. They also work with various publicly traded REITs.
The experience of working with these kinds of institutions should not be underappreciated. The level of performance, reporting and accountability expected of them is quite high. Joffrey Capital will serve as CAF’s retail arm with active management and decision making by the CAF team and me.
CAF’s operating track record is flawless, and they have delivered impressive average annualized investor returns of approximately 27 percent to investors after 30 dispositions despite extremely conservative underwriting and pro formas.
Perhaps more importantly, CAF currently operates a multibillion-dollar apartment portfolio with no distressed assets. They have not had a single equity call in their history as owners despite recent inflation and interest rate volatility.
Suffice it to say that partnering with CAF is a huge win for our group and will help us to take advantage of the real estate market headed our way.
The Back Story on this Deal on the Opportunity
A few months back I told you that distress would likely come in two flavors. One is obvious: property level distress like poor management and delinquent rent. There is a lot of that out there and we will likely encounter buying opportunities of that nature in the coming months.
The other type of distress is what I have called “institutional capitulation”. This takes many forms but ultimately does not involve an asset under duress. It’s the ownership that needs to sell for one reason or another.
I have previously used the example of a fund with an expiration date needing to liquidate. Another example is what’s going on in the current opportunity that I am bringing to you today.
In this case a publicly traded REIT that is primarily in the business of debt, needs cash to strengthen its balance sheet.The REIT is liquidating all of its physical property in order to do this so that it can better qualify for short term debt needed for its core business of leading.
The net result is that they are willing to sell at a loss despite owning a top performing cash flowing asset since 2021.
Now here’s where it gets particularly interesting for our group. CAF is a vertically integrated real estate company with a very strong property management component as well. CAF has been managing this particular property for the REIT since it was purchased and has first right of refusal to buy it.
Currently CAF runs 72 properties and considers this its top performer in terms of rent collections (zero bad debt or delinquencies) and organic rent growth (over 5 percent without renovations).
I have previously used the example of a fund with an expiration date needing to liquidate. Another example is what’s going on in the current opportunity that I am bringing to you today.
CAF know this asset inside and out and has been implementing its value-add program successfully for the seller. They also know the significant upside opportunities it presents.
It is important not to underestimate the significance of this established intimate knowledge of the property. One of the challenges to buying any major asset is identifying potential issues undisclosed by the sellers.
CAF has run this property for two years. There are no skeletons in the closet that we must worry about. This significantly mitigates execution risk that all new acquisitions typically face.
The Opportunity
Now for the asset itself. Arbors on Oakmont a in a 256-unit apartment complex in Fort Worth, TX.
In real estate, we always start with location. Dallas/Fort Worth (DFW) continues to be one of the top ranking MSA’s for job creation in the country and that trend continues in 2023.
When you have job growth you have population growth. The ~8% population growth from people moving into DFW translates into a projected additional one million people in the area over the next 5 years. They need a place to live.
Forth Worth is seeing disproportionate growth in this MSA. In fact, Fort Worth absorbed 46 percent of new tenants in the DFW MSA despite being a third of the size of Dallas.
The property itself is in an ideal location within Fort Worth. There is convenient proximity to major employers such as Lockheed Martin, TCU, Texas Health Methodist Hospital and a vast number of businesses in downtown.
It is also a great place for tenants to enjoy living. The property is near The Shops at Clearfork, Fort Worth’s premier dining and shopping center. This luxury retail district features brands such as Neiman Marcus, Tiffany’s, and Louis Vuitton.
As the brands I reference indicate, this is an “A” location with an average household income of $83K. This statistic is very important as analysis shows that rent affordability limits in the area are currently double the amount that this property currently charges.
There is a lot of upside to the property as well. Current ownership has spent over $2.5M for largely exterior improvements including: paint, clubhouse renovation, rebranding, signage, pool furniture and repair and more.
The value-add business plan to drive up net operating income plan includes:
1. Interior Upgrades: Most units are “classics” and are untouched.
2. Add Washers & Dryers.
3. Add Pet Yards
These simple steps are already enough to drive up rents significantly improving net operating income and adding millions of dollars to the property value. Also, we are buying at a very attractive price at $125/door. Comparative analysis shows that this is a discount of about $20K per door compared to recent nearby sales. Furthermore, there are no new constructions planned in the surrounding area.
Suffice it to say, this is a solid performing asset for us to acquire. And there is also no question that we are approaching this asset with conservative underwriting.
Financing will be fixed for the duration of the hold and we are using low leverage. The property projects to close at just under 60 percent loan to value debt.
Positive cash flow is projected immediately with distributions paid out quarterly. Overall CONSERVATIVE projected annualized returns through the hold are 17 percent although CAF, as referenced earlier, has routinely significantly outperformed its projections.
Finally, CAF and I have agreed to a very friendly investor waterfall. The general partners will not participate in any profits at disposition until you make a MINIMUM of 8 percent annualized return on top of your principal.