Real EstateJuly Residential

Houston Multi-Family Equity I

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Status

Closed

Recently funded

Accepting $10,000 - $1,000,000 investments

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Accepting $10,000 - $1,000,000 investments

Overview

Read about why there is no place like Houston here

Invest in an equity ownership of five multi-family apartment complexes located in southern Houston, TX. The properties: Shadowtree, The Townhomes, Plaza at Hobby, Casa Grande, and Airport Crossings are garden-style and 94% occupied. The submarkets where the properties are located have a deep pool of renters, who are supported by the area's extensive employment opportunities.

Over the last decade, Houston has seen significant new drivers of its economy due to expanding healthcare, renewable energy and technology sectors. These new career opportunities coupled with attractive cost-of-living and no state or city taxes are drawing a growing educated and skilled workforce to the area. The complexes, which were built between 1976 and 1983, have seen renovations performed to a small number of units. The sponsor intends to continue upgrading the remaining units to include new cabinetry, appliances, flooring, and fixtures in an attempt to increase rents before an eventual sale.

The offering is expected to provide investors a targeted annualized return of 15-17%, with an annualized ~7% of the expected return being distributed quarterly as current income. The balance of the returns are expected to be achieved via appreciation of the property at the time of sale or refinance. Since this is an equity investment, there is potential for returns to be above or below the target range.

Important Notes

• 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 comprised of these plans and funds.

Highlights

Proven business plan
Desirable location
Attractive cost basis
Experienced team
  • The seller of the portfolio spent approximately $7.2M on renovations and as a result saw increased rents in every unit type that was renovated. Based on this proven strategy, the new sponsor of the portfolio will spend another $8.9M to upgrade 664 units. The renovation plan is expected to allow the sponsor to increase rents at each property to bridge the gap in rents compared to the comparable rentals.

  • According to CoStar, the submarkets consist of a deep pool of renters-by-necessity, which continues to drive demand for affordable housing in the area as the cost of homeownership is increasing. In the submarkets where the properties are located, median home sale prices are up 22% compared to last year which is keeping rental demand strong as most can not afford to buy. CoStar expects vacancy to remain relatively stable in the midst of supply and demand-side pressures from the pandemic, and rent growth is expected to average 2.3 - 2.4% annually over the next five years.

  • In comparison to recent comparable sales in the submarkets where the properties are located, the multi-family complexes were acquired for less than their direct market peers and for less than their “as-is” appraised value.

  • The sponsor, July Residential, is a New York based real estate investment firm which focuses primarily on workforce housing in high-growth markets, with the goal of creating value through property improvements and in-house management. July Residential co-founders Avihai Daniell, LV Lavalli, and Isaac Pinto, have extensive experience in multi-family property acquisition, development, and management through previous business ventures. July Residential is an affiliate of the El-Ad Group, which is a real estate development and investment company founded in 1992 with over $2B in AUM.

    Element National Management (Element), founded by LV Lavallii, as well as El-Ad Group, is a full-service apartment management company, and will manage the properties. Element currently employs approximately 50 employees, and operates in 4 states, and has provided management services to over 20,000 units across the nation.

Essentials

Please refer to the Investment Memorandum in the Docs section for more details about this offering.

Capital structure

Where does Yieldstreet lie in terms of priority?

Yieldstreet’s $21M equity position is junior to ~$72.6M of senior debt and $4.8M of preferred equity. The senior lender has pre-approved the entire $8.9M renovation plan and is expected to fund the items in the budget as they are realized, which results in a total loan of ~$81.5M. The senior loan was provided by a publicly listed American investment firm and is secured by the portfolio, and the $4.8M preferred equity contribution was provided by a Canadian based REIT. The remaining common equity was provided by the sponsor, July Residential.

Cash flow

How do I get paid?

Over the life of the investment, investors are expected to receive a target annualized return of 15 - 17%, net of Yieldtsreet’s management fee and origination fee as further described in the Investment Memorandum. Investors are expected to receive cash flows from two sources: ~7% of annualized income from property rents, which is expected to be paid quarterly, and the balance of the returns are expected to be achieved via appreciation at time of sale or refinancing of the property, which is anticipated to be within 5 years.

Assets

What is the collateral underlying the transaction?

The portfolio consists of five multi-family properties totaling 1,275 units located in Houston, TX. The properties were built between 1976-1983 and cater to blue-collar workers who are renters by necessity. The portfolio was 93.5% occupied upon acquisition and has had an average occupancy of 92% over the last 12 months. The seller of the portfolio previously invested $7M in capital improvements and was able to increase the net operating income by 20% in 2 years. The sponsor is expected to perform full unit upgrades that will include replacing flooring with vinyl floors throughout the unit, new kitchen countertops and backsplashes, new black appliance packages, lighting and plumbing fixtures, bathroom fixtures, as well as repainting and bathtub resurfacing. The planned renovations are expected to increase net operating income (NOI) at the properties through increased rent and efficient property management.

Shadowtree: Shadowtree was built in 1979 and is in the Southwest Houston submarket located at 9475 W Sam Houston Parkway, Houston TX. The property consists of 428 units across 29 garden style buildings and was 96% occupied at the time of purchase. The property has two resort-style swimming pools, on-site laundry, and is in proximity to shopping centers, parks, and main transportation arteries that provide easy access to employment hubs.

The Townhomes: The Townhomes was built in 1983 and is in the Southwest Houston submarket located at 8030 W Airport, Houston TX. The property consists of 73 units across 16 garden style buildings and was 92% occupied at the time of purchase. The community includes amenities such as on-site parking, swimming pool, and in-unit washer and dryers. The property is in a transit-oriented location for renters with easy access to the Metro Public Transportation bus line which connects riders to major employment and entertainment centers.

Plaza at Hobby: Plaza at Hobby was built in 1976 and is in the Southeast Houston submarket located at 8501 Broadway, Houston TX. The property consists of 328 units across 24 garden style buildings and was 88% occupied at the time of purchase. The property is located just 1 mile from the Hobby Airport and provides proximate access to I-45 which gives commuters a short ride to Downtown Houston or the Clear Lake area.

Casa Grande: Casa Grande was built in 1979 and is in the Southwest Houston submarket located at 9445 Concourse, Houston TX. The property consists of 268 units across 18 garden style buildings and was 97% occupied at the time of purchase. The property offers a swimming pool, soccer field, outdoor patio, assigned parking, and on-site laundry. The community is a short drive to shopping and dining venues. Additionally, the property gives renters quick access to major roadways.

Airport Crossing: Airport Crossing was built in 1984 and is in the Southwest Houston submarket located at 8300 W Airport, Houston TX. The property consists of 178 units across 12 garden style buildings and was 95% occupied at the time of purchase. The property amenities include two swimming pools, private patio/balcony, fireplaces, and in-unit washer/dryer. Residents are located minutes from three malls in the submarket and main transportation arteries.

Returns & Management fees

Ann'l management fee

2.5%

Target ann'l net return

15% - 17%

Inv Share in excess profits

100%

Target equity multiple

1.9x - 2.0x

Target ann'l cash yield

~7%

Schedule

Payment schedule

Quarterly + event based

Prefunded

Target term

5 years

Structure

Tax document

K-1

Offering structure

SPV

Expenses

First year expense

$150

Annual Flat Expense

$70

Slide 1 of 3
  • Returns & Management fees

    Ann'l management fee

    2.5%

    Target ann'l net return

    15% - 17%

    Inv Share in excess profits

    100%

    Target equity multiple

    1.9x - 2.0x

    Target ann'l cash yield

    ~7%

  • Schedule

    Payment schedule

    Quarterly + event based

    Prefunded

    Target term

    5 years

  • Structure

    Tax document

    K-1

    Offering structure

    SPV

    Expenses

    First year expense

    $150

    Annual Flat Expense

    $70

Docs

Content

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.