80 W Taylor - Multifamily Investment with Non-recourse Debt

[John Galloway]

Investment Info:

Large multi-family (5+ units) commercial investment investment in Colorado Springs.

Purchase price: $2,830,000
Cash invested: $725,000

Project IRR (without fees) as of refinance in 2022 - 29.26%
Equity Multiple as of refinance in 2022 - 1.44x

This was a syndicated real estate project located in Colorado Springs, Colorado. We successfully acquired a 30-unit building, implemented a re-leasing strategy, conducted unit renovations, and ultimately refinanced the property with the Fannie Mae Freddie Mac Small Balan Loan program for a profitable return within just 24 months. My role encompasses overseeing the project's acquisition and diligence, fundraising efforts, and ongoing property management.

What made you interested in investing in this type of deal?

We were fortunate enough to compete for a portion of a large portfolio acquisition in Colorado Springs. An owner of about $25M in property passed away and a fund was able to buy his entire asset portfolio out of probate. We had a relationship with the fund manager and were able to pick up this asset from them. The apartment is in great shape and was meticulously maintained by the tenants.

How did you find this deal and how did you negotiate it?

We have existing relationships with the listing broker and the fund that listed the property for sale.

How did you finance this deal?

We financed the deal with a local lender and then refinanced with the Fannie Mae Freddie Mac Small Balance loan program. The debt is amortized over 30 years and is non-recourse.

How did you add value to the deal?

We replaced the property manager and were able to get around $250.00 more per month than proforma rents. We renovated several units, but most of the value was brought with a more robust leasing process.

What was the outcome?

We have a stabilized, cash flowing asset on 3.23% non-recourse debt.

Lessons learned? Challenges?

The property was not a deeded age-restricted community, however, it was run like one for years and the original tenants had that expectation. We had to be sensitive in the transition as the community was pretty tight nit and resistant to some of the changes we were making.