All Forum Posts by: William Walker

Originally posted by @Serge S.:

@William Walker interesting deal and congrats! Have you and your team done a reposition of this magnitude before? There is a lot of heavy lifting here. So average rents currently are $500 and your pushing them to $800 is that correct? What is your projected exit NOI/Cap rate? Do you guys property manage in house or use professional PM? This kind of reposition would take me 3 years realistically, wondering your projected hold period.

@Serge - yes we just completed a larger $5.5m renovation on one of our assets in Atlanta. When we took over there were 200 hard down and a nickname "the bandos". That property is now 88% occupied in approx 14 months. 

Going-in lease rates on the Subject were slightly below market, the problem was collections / delinquency. We are aiming to collect 97%+ of avg market rates, about $800

We are targeting $600k NOI, as for projecting cap rates i try not to, i look more at if from a worst case scenario and get comfortable with that situation. That being said, we would be comfortable with a 7.75% exit cap, which should be easily beat assuming no major economic meltdown.

We have property management and construction companies in-house that help support the assets. We have a 2 year loan with extension, but plan to hit our targets in 12-18 mo, will reassess the market at that point and either refinance or sell. 

Originally posted by @Kevin Ferguson:

Thanks for sharing this syndication @William Walker! 

What were your investors concerns with this property? Knowing you were buying an asset that had 23% Occupancy at takeover and knowing CoC would be minimal in the beginning?

@Kevin Ferguson

Hey Kevin - Occupancy was at 77% the vacancy was 23%.

We have a long successful track record of turning around distressed properties and have earned our investors trust over the years. They know we are professionals at identifying market inefficiencies and executing successful multifamily repositions.

Originally posted by @Scott Mac:

Hi William,

This property sure has a lot of potential.

I was wondering though, what "amenities" you guys have planed for this class B asset?

Scott...

@ScottMac 

Wicked good potential Scott! We work hard to find our investments. This property use to have a pool many years ago, but was filled in by prior ownership. We will be installing a playground (lots of families and young children living at complex), common grilling stations / seating areas, and update the club room above the leasing office for an after school study room.

Originally posted by @Jaysen Medhurst:

Looks like a very cool deal, @William Walker. What are the current rents? Where do you think they'll end up after you stabilize the property? How long do you expect to hold the property? Can you share the syndication details-fees, preferred returns, etc.?

Keep us updated. Would love to see how it all plays out.

Hey @Jaysen Medhurst - mo. collections were around 40k when we took over; We will take collections up to at least high 70s and targeting $800 avg mo rent. We will reassess the property / market in 12-18 months, from there we will either sell or refinance and hold. Happy to get on a call and explain return expectations and answer any other questions, direct message me if you would like to discuss.

Fellow RE Connoisseurs,

In an effort to provide value, produce content, and give back, I am documenting a 4M Capital multifamily project from acquisition to stabilization. For those of you who are eager to learn and get into the multifamily business, this will provide a close look into a heavy renovation. I will update this journal periodically and at key milestones throughout the investment life-cycle.

Story:

We became aware of the "Subject" through a long-standing broker relationship in Atlanta. We were brought the deal because we have earned the reputation for being easy to work and are CLOSERS!

The financials and operations were a mess; the property was barely breaking even. The going-in numbers looked terrible. 

(Many people put a lot of emphasis in their analysis on going-in cap rate, I would argue that this number can be irrelevant. In this case, if we had of relied on going-in cap rate, we would not have done the deal.) 

The asset was hairy. We ran into deed and insurance hurdles that almost derailed the closing, but after four long months of hard work, problem solving and perseverance, we successfully closed an amazing deal (average closing time 59 days).

With a large influx of capital, efficient management, and a little time the stabilized figures will look much different than going in. We are estimating NOI increases of 300k+

Property Details:

Investment Strategy:

Our goal is to provide a safe, clean and well-maintained community for our residents. If you do these three things, sustainable profits will follow. I do not recommend taking on a project like this without ample experience and liquidity. We have a strong team and proven track record of turning troubled properties into well-performing assets, but it did not and does not happen over-night.

The Subject is suffering from physical and operational deficiencies. At takeover, the economic and physical vacancy was 23.5%, we had 12 hard down units, 33 residents with outstanding balances and a mess of deferred maintenance.

This asset is extremely well located within the sub-market and performing well below its potential. The symptoms above provide the opportunity to create value through curing deferred maintenance, raising the occupancy, and ultimately increasing NOI.

Our investment strategy includes a full management overhaul, deferred maintenance remediation and capital improvements. Over the next 12 months, we will be implementing financial and operational procedures, on-boarding the asset to 4M Capital’s platform, and carrying out capital improvements.

Major Deficiencies:

-8 down units (demo'd to studs)

-High vacancy and delinquency

-Poor management

-Deferred maintenance 

Upgrades / Capital Improvements

-Bring down units online

-Install new heat and air systems

-Install new doors / windows

-Add amenity package

-Upgrade kitchen / bathroom / appliances

-Landscaping

Deal Economics 

Construction Budget

A few cool shots with the drone.. don't let the dreary weather fool you, this is a great property on a fantastic piece of land, just needs a lot of elbow grease and a little TLC.

Financing

All members at 4M Capital work extremely hard to produce excellent returns for our investors. We take a hands-on approach and have a broad range of experience, including: accounting, construction, finance, operations, and property management. We are willing to do whatever it takes to get the job done – even if that means lacing up the work boots or sleeping on the leasing office couch.

Equity Raised: Individual Accredited Investors

-$2,100,000

Debt: Bridge-loan

-Term: 24-month interest only

-LTC: 80%

Appreciate comments, thank you for reading and check back for project updates

For more information on 4M Capital visit www.4mrei.com and subscribe to our mailing list.

https://www.facebook.com/4Mrei/

Looking good!  As an active partner with Jackson Builders, I can vouch for the integrity and hard work ethic of this group. Looking forward to seeing the final result!

James, since the operator has a proven track record of success he/she is keeping more equity in the deal. The preferred return being offered to you is similar to debt. Depending on how the waterfall is structured, the preferred return holders will have first rights to the cash flow, typically an asset manager fee is the only component paid before the preferred share holders. However, this is not the same as an 8% equity stake in the deal.

 Let's assume you are the only preferred shareholder, in this case you would receive 8% of the cash flow after all expenses are paid. What this does is allow the sponsor or asset manager to keep more equity on the back end, while still providing investors the returns they need. Think of preferred returns and equity as separate buckets. Whether the structure is better or worse depends on your investment needs.

In this investment you will be receiving a fair return each quarter / month in the form of cash flow, but you are not going to share in the large chunk of appreciation when the property is sold. Hope this helps!

Nick, Perhaps you could present the seller with an itemized expense listing of the repairs. Then offer to pay the price he wants, in exchange for a repair allowance to be paid at closing by the seller. This would provide you the money you need for repairs at closing, and the seller is not lowering his price.

@Jered Sturm - Thank you for organizing this gathering, count me in. If I an help you facilitate the meeting in anyway, let me know.