Real Estate

Harbor Group Multi-Family Eq Portfolio I

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Status

Closed

Recently funded

Accepting $15,000 - $500,000 investments

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Accepting $15,000 - $500,000 investments

Overview

Invest in an equity ownership of three multi-family buildings that consist of 664 rental units with an average occupancy rate of over 95%. The location of each of the properties is expected to benefit from strong demographics, employment fundamentals and favourable supply-demand dynamics. As a result, each property is expected to provide investors with stable, current cash returns generated by rents and the opportunity for long-term capital appreciation.

  • Olive Ridge Apartment Complex: Garden-style multifamily complex located in Pomona, California
  • The Henry Apartment Complex: Townhouse- and mid-rise-style complex located in Pomona, New York
  • Royal Athena Apartment Complex: Waterfront-style apartment complex located in Bala Cynwyd, Pennsylvania

According to CoStar reports and comparisons of similar properties recently sold, each property within the portfolio was acquired for below market price. The sponsor intends to perform light renovations to each of the buildings and raise rents closer to the market average. Following completion of the renovations, the properties will offer quality and competitively priced rentals to residents in the locations relative to the newer constructions available.

The offering is a co-investment opportunity sponsored by Harbor Group International (HGI), a global real estate investment and management firm with $13.5B in real estate assets under management. The Real Estate Opportunity Fund has made an investment in a fund managed by HGI, and such fund will also have an allocation to this portfolio of multi-family buildings.

The offering is expected to provide investors a targeted annualized return of 12-13%, with an annualized ~4.25% 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

Experience sponsor
Strong markets
Attractive basis
Business plan support
  • The sponsor, Harbor Group International (HGI), is a global real estate investment and management firm with $13.5B in real estate assets under management. HGI’s investments include 284 assets with 48,000 multifamily units and 4.3M SF of commercial space. HGI was founded in 1985, has approximately 1,200 employees worldwide and executes on its primary business areas: acquisitions, dispositions, asset management, construction, leasing, and property management. As of 12/31/2020, HGI has realized 333 investments with a net IRR of 16.85% and equity multiple of 1.54x.

  • Olive Ridge: The submarket has benefitted from an increase in demand from renters that are looking to cut costs as average rents in the submarket trail the L.A. County average by 20%. Vacancy is expected to remain below 3.0% as new development is uncommon with only a 4% increase in inventory in the last 20 years.

    The Henry: The submarket has performed well year-over-year with vacancy rates in line with its historical average. New construction is unusual and the lack of new supply is expected to put downward pressure on vacancy, keeping it in line with or below the historical average.

    Royal Athena: According to CoStar, the submarket comprises Philadelphia’s wealthiest suburbs and is well- situated between the area’s main white-collar employment centers, Center City Philadelphia and King of Prussia. Vacancy rates are expected to decrease from their current level as new construction begins to taper off. Building fundamentals and outlook here

  • The portfolio was purchased at an attractive cost-basis that is below replacement cost in each respective submarket.

    Olive Ridge was acquired for ~$212K per unit while the properties in the sales comparison set sold for ~$323K on average per unit.

    The Henry was acquired for ~$320K per unit while the properties in the sales comparison set sold for ~$329K on average per unit.

    Royal Athena was acquired for ~$216K per unit while the properties in the sales comparison set sold for ~$306K on average per unit.

  • The sponsor’s business plan is supported by rent comparables. Given that rents at all three buildings sit below comparable properties in each of the submarkets, the sponsor is expecting to increase rents annually following the completion of the planned renovations. On a combined basis, the sponsor projects net rental income generated by the whole portfolio to increase by 4.0% per annum over the hold period.

Essentials

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

Capital structure

Where does Yieldstreet lie in terms of priority?

Yieldstreet’s $1.8M equity position is in equal position with other equity holders in the portfolio, including the Real Estate Opportunity Fund which was also offered to investors on the Yieldstreet platform. The equity position is junior to the ~$118M senior debt associated with the portfolio. The senior debt has been provided by US-based banks, a government-sponsored enterprise, and a private lender.

Cash flow

How do I get paid?

Over the life of the investment, investors are expected to receive a target net annualized return of 12 - 13%, net of Yieldstreet’s management fee, commitment fee and fees earned by the sponsor as further described in the Investment Memorandum. Investors are expected to receive cash flows from two sources: ~4.25% 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 the time of sale or refinancing of the property.

Assets

What is the collateral underlying the transaction?

The portfolio consists of three multi-family assets that toal 664 units and have an average occupancy of 95.2%.

Olive Ridge Apartments are located at 2261 Valley Blvd, Pomona, CA 91768. Of the 220 units, there are 28 Studio units, 152 1BD/1BA units, and 40 2BD/1BA units. The sponsor plans to spend $1.9M to upgrade the interiors of 43 units and the amenity space, amongst other items. The sponsor expects to renovate the units on a rolling basis, averaging 1 unit per month. Renovation work is expected to commence in approximately 3 months and take about 43 months to complete.

The Henry apartments are located at 1 Crystal Hill Dr, Pomona, NY 10970. Of the 169 units, there are 16 1BD/1BA units, 16 1BD/1.5BA units, 4 1BD/2BA units, 86 2BD/2BA units, 46 2BD/2.5BA units, and 1 3BD/2.5BA unit. The sponsor plans to spend $1.2M to upgrade all 169 units and the amenity space, amongst other items. The sponsor expects to renovate the units on a rolling basis, averaging 10 units per month. Renovation work is expected to commence in approximately 7 months and take about 17 months to complete.

Royal Athena apartments are located at 600 Righters Ferry Rd, Bala Cynwyd, PA 19004. Of the 275 units, there are 50 studio units, 147 1BD/1BA units, 24 2BD/1BA units, and 54 2BD/2BA units. The sponsor plans to spend $1.6M to perform an amenity space refresh, build out a model unit and office, and rebrand the property.

Returns & Management fees

Ann'l management fee

2%

Target ann'l net return

12% - 13%

Share in excess profits

100%

Target equity multiple

1.85x - 1.95x

Target ann'l cash yield

~4.25%

Schedule

Payment schedule

Quarterly + event based

Prefunded

Target term

6 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%

    Target ann'l net return

    12% - 13%

    Share in excess profits

    100%

    Target equity multiple

    1.85x - 1.95x

    Target ann'l cash yield

    ~4.25%

  • Schedule

    Payment schedule

    Quarterly + event based

    Prefunded

    Target term

    6 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.