Chelsea Multi-Family Equity
Annualized return3
Tiered pricing
Yes
Term
23 months
Waitlist open
Accepting $15,000 - $500,000 investments
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Accepting $15,000 - $500,000 investments
Overview
Equity ownership in a pre-war three-property portfolio located in the Chelsea neighborhood of NYC.
Equity ownership in a pre-war three-property portfolio located in the Chelsea neighborhood of NYC.
- Institutional quality asset: Equity ownership in a 94-unit, three-property multi-family portfolio in Chelsea, one of the most desirable neighborhoods of New York City. Chelsea has numerous demand drivers including art galleries, tech companies such as Google, nightlife, and the Chelsea Market, making it a true “live-work-play” neighborhood.
- Core urban market: Multi-family properties in New York City, especially in a prime location like Chelsea, have historically shown resilience during times of economic volatility. Given its strong fundamentals, New York City is currently attracting institutional capital from firms like Blackstone and The Carlyle Group.
- Acquired at a discount: Based on the cap rate in Chelsea at the time of purchase, this portfolio was acquired at a 16% discount relative to comparable properties. This could result in outsized returns for investors when the portfolio is sold.
- Value-add opportunity: The portfolio was previously owned by a single individual for over 40 years with no major renovations or upgrades. The sponsor plans to execute an extensive renovation plan to modernize the majority of the units and implement institutional quality management to bring rents up to market levels.
- Experienced sponsor: Slate Property Group (SPG) is a preeminent owner and operator of multi-family properties focused exclusively in the New York City metropolitan area. Since 2014, SPG has realized 20 investments with an average annualized return of 26.5%.
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Premise
Investing details
Investing details
What am I investing in?
- Equity ownership in a pre-war three-property portfolio located in the Chelsea neighborhood of NYC. Specifically, the buildings are located on 301 West 22nd St, 300 West 21st St, and 229 West 20th St.
- The properties were acquired in July 2022 with a total capitalization of $968K per unit, which includes the anticipated renovation budget.
- Yieldstreet has major decision rights and the right to compel a sale of the portfolio anytime after two years.
- The sponsor will be contributing $7.3M (25% of equity). Of that amount, the key principals have contributed over $1.2M of personal funds to the investment, further demonstrating an alignment of interest in the success of the deal.
Investment strategy
Investment strategy
What is the value proposition?
- In July 2022, the portfolio was acquired from a single individual who owned the assets for over 40 years. The properties were purchased with a total capitalization of $968K per unit, which includes the anticipated renovation budget.
- The Portfolio was acquired at a 4.1% capitalization rate. Over the last 15 years, the average market capitalization rate in the Chelsea submarket has been 3.9%, indicating that the Portfolio was purchased at a discount to historical pricing in the submarket. The current market capitalization rate in Chelsea is 3.5%, again suggesting that the Portfolio was acquired at an attractive basis based on current market trends.
- The previous owner focused on on-going repairs and maintenance, rather than renovations. As a result, the properties are primed for a comprehensive renovation to bring the rents to market level.
- Beginning in December 2022, the Sponsor intends to perform $12M of renovations to modernize the 81 free market units and update hallways, lobbies, and elevators throughout the portfolio. The renovations include a reconfiguration of layouts of some units to increase the number of bedrooms in the units, allowing the sponsor to charge higher rents (Chart 1).
- SPG expects the renovations to be complete by June 2023 with the portfolio stabilizing shortly thereafter. Once renovations are complete, the Sponsor intends to increase rents on renovated units by approximately 49% to bring them in line with comparable renovated properties (Chart 2 and Chart 3).
- The Sponsor intends to sell the property in H2 2024 and has modeled a target sales price of $1.15M/unit, representing a ~19% increase on total deal capitalization. (Chart 4).
- This is a Value-Add investment strategy given the robust business plan that must be carried out to renovate and raise rents. As a result of the additional risks, it is expected that investors will be adequately rewarded at the time of re-sale.
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Behind the investment
Behind the investment
Who is the sponsor?
- Since its inception, Slate Property Group has purchased and developed over $4B in real estate totaling 3K multi-family units across approximately 50 investments and realized returns on 20 investments with an average internal rate of return of 26.5%.
- Slate Property Group is a vertically integrated full service real estate investment firm and includes a construction subsidiary, SD Builders, and a property management arm, MGT Property Management.
- Their current portfolio consists of 34 assets in the New York City MSA that total 2.8K multi-family units and 71 commercial units, or approximately 2.6M SF in total, demonstrating that they have significant experience and expertise in this market.
- This will be Yieldstreet’s second investment with Slate Property Group. NYC Mixed-Use Property Financing is currently performing in line with expectations.
Market backdrop
Market backdrop
Why should you consider investing?
- Investing in multi-family housing in core urban markets such as New York City, offers a potential safe haven for investors during volatile times. New York City is one of the most stable multi-family markets over the past century, with consistently low supply, and high demand.
- According to Ariel Property Advisors, Manhattan multi-family sales totaled $4.7B in the first half of the year, up 11% from H2 2021 and 353% from H1 2021, ultimately demonstrating the value that institutional investors continue to find in the space.
- A major cause for the increasing rents in Manhattan is the housing shortage that currently exists. The expiration of the 421a tax break for New York City multi-family developers is expected to slow the pace of new development for the foreseeable future as returns for new buildings are diminished, further driving demand for this investment.
- The Chelsea submarket of Manhattan is one of the most desirable submarkets for renters in the city, due primarily to the high-profile employers in the area, such as Microsoft, Venmo, and Google.
- Other drivers of demand for the properties include the close proximity to the Meatpacking District and Hudson Yards which is home to global financial and technology firms such as Facebook, Microsoft, Amazon, Wells Fargo, Pfizer, Boston Consulting Group, Ernst Young, BlackRock, JP Morgan Chase, and Warner Media, amongst others.
Essentials
Please refer to the Private Placement Memorandum in the Documents section for more details about this offering.
Please refer to the Private Placement Memorandum in the Documents section for more details about this offering.
Capital structure
Capital structure
Where does Yieldstreet lie in terms of priority?
- Yieldstreet expects to contribute $22.4M of the equity with the remainder of the equity contributed by the Sponsor demonstrating their alignment of interests.
- The remainder of the project has been financed by a senior loan at an interest rate of SOFR + 3.30%.
- There is an interest rate cap in place at 2.50% which limits the maximum interest rate payable to the senior loan at 5.80% which continues to work well for this offering in light of the higher interest rates in the mortgage debt market since July as SOFR is currently above 3%.
Cash flow
Cash flow
How do I get paid?
- There is no recurring current cash flow income projected by this investment given the extensive business plan that needs to be executed upon. Any cash flows generated by the properties will be used to help service the senior loan.
- As such, investors are expected to receive returns via capital appreciation at the time of sale which is anticipated to happen by 2H 2024.
- As cash flows are received, Yieldstreet’s management fees and other fees and expenses as further described in the operating agreement are deducted first, and then capital contributions and returns are repaid to investors.
Accessibility
Accessibility
Who can invest?
- Eligible investors must verify that they are accredited investors.
- This offering is not available to pension plans, defined benefit plans, defined contribution plans, retirement plans, IRAs, 401(k) and 403(b) funds, and funds composed of these plans and funds.
Exclusive tiered pricing available
Exclusive tiered pricing available
- We are currently offering a management fee reduction to investors that meet a certain investment threshold.
- Per the adjacent graphic, if an investor allocates $250,000 to the deal they will receive a 0.25% reduction bringing their effective management fee to 1.75% on their entire investment.
Returns & Management fees
Ann'l management fee
2%
Target ann'l net return
Login to viewTarget ann'l cash yield range
~0%
Target equity multiple
1.4x-1.6x
Schedule
Payment schedule
Event based
Term remaining
23 months
Structure
Tax document
K-1
Offering structure
SPV
Ann'l flat expense
0.25%
This offering page describes only certain aspects of the offering ("Offering") of the securities issued by YS SLT REQ I LLC ("Fund"). The Offering is made only by means of the Private Placement Memorandum dated December 13, 2022 relating to the Offering (the "PPM"). The information on this offering page is a summary of the Offering, does not purport to be complete and should not be considered a part of the PPM, or as incorporated in the PPM by reference or as forming the basis of the Offering. No person has been authorized to give any information or to make any representations other than those contained in the PPM or in any marketing or sales literature issued by the Fund or Yieldstreet Management, LLC, as adviser thereto, and referred to in the PPM, and, if given or made, such information or representations must not be relied upon. All investors must read the PPM in its entirety prior to investing in the securities. Investing in private markets and alternatives, such as this offering, is speculative and involves a risk of loss, and those investors who cannot afford to lose their entire investment should not invest. Returns are not guaranteed.
Investing in private markets and alternatives, such as this offering, is speculative and involves a risk of loss, and those investors who cannot afford to lose their entire investment should not invest. Returns are not guaranteed.
2 Represents an average net realized internal rate of return (IRR) with respect to all matured investments in your portfolio, utilizing the effective dates and amounts to and from the investments and net of management fees and all other expenses charged to the investments. Past performance is not a reliable indicator of future results and should not be relied upon as the basis for making an investment decision. All securities involve risk and may result in significant losses, including the loss of principal invested.[read more]