Denver (Edgewater) 54 Unit Class C Off-Market Apartment Complex Ingall's Grove
Purchase Price: $8,800,000
Equity Raise: $2,755,000
Hold Period: 5 to 7 Years
IRR Target: 20%+
Equity Multiple Target: 2.5x+
Cross Mountain Capital, the Sponsor, and Offerd, have purchased 54 unit, Class C multi-family building in Denver. The asset was identified after an extensive off-market campaign in targeting assets capable of delivering exceptional returns on capital through a transformative heavy value-add strategy.
1. Heavy Value Add
Through our repositioning strategy, we plan to transform the building into a Class B asset.
We have allocated close to $1 million for interior and exterior renovations to optimize net operating income.
Rents are about 20% greater in Terra Village, the building right next door, and our value-add strategy will put Ingall’s Grove a class above it. Newer construction is priced at a 50% premium. Notwithstanding, we have not projected higher rents than Terra Village
2. Exceptional Submarket Growth
·Denver has been one of the top MSAs in the nation for many years based on job, employment, rent and asset price growth. Now it is top in the nation in COVID-19 resilience, based on factors such as the employment rate, local precautions and preparedness, and the existing health of the population.
As a leafy suburb only minutes from the Denver core, Edgewater has benefits from a COVID-19 induced flight out of the core, as well as population growth from new Denver arrivals.
Edgewater rents have not fallen, and there is limited housing availability. Zillow currently shows four houses for sale, all close to substantially higher than $500,000.
3. Downside Protection
Investor appetite and capital availability for investment typically decreases during the exact moment when great opportunity exists. This creates a pricing arbitrage whereby sophisticated investors can capitalize. The spreads between multi-family assets and financing have widened, as many buyers are waiting out the turmoil, while interest rates have decreased.
The COVID-19 vaccine has been rolled out, and a massive stimulus is on the way. Macro economists are modeling employment growth and GDP to substantially increase beginning the first quarter of 2021. This has already started causing a run up in asset prices in all sectors.