Real EstateInterCapital Group

Dallas-Fort Worth Multi-Family Equity I

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Status

Closed

Recently funded

Accepting $10,000 - $500,000 investments

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Accepting $10,000 - $500,000 investments

Overview

Performance Update

• View the most recent update for Dallas-Fort Worth Multi-Family Equity I.

Invest in an equity ownership of Sevona Avion, a 97% occupied multi-family property in Dallas-Fort Worth (DFW), Texas. The three story garden-style apartment complex was built in 2012 and is located equidistant from both Dallas and Fort Worth central business districts (CBD).

The Property’s location benefits from major employment centers in the immediate area that drive renter demand, including American Airlines' corporate headquarters, the DFW International Airport, and the Great Southwest Industrial District, which is one of the largest industrial parks in the nation. Given the job demand drivers in the vicinity, the Dallas-Fort Worth area attracts young professionals and young families looking for ample job opportunities, which has contributed to the area having the largest population gain in the U.S in 2020. According to CBRE, available jobs grew by 147k in 2020.

The sponsor, InterCapital Group is an investment management firm focused on the acquisition and repositioning of multi-family assets in the U.S., with realized investments on 43 assets and an average gross IRR of 24%. InterCapital Group plans to upgrade 100% of unit interiors, common areas, and further improve curb appeal. The sponsor expects to increase rents on average by $157 per unit once the renovations are complete, which will bring rents closer to market, but still below newly constructed properties, helping to ensure that the complex remains competitively positioned. In addition to expected increased rents over the life of the investment, investors are also expected to benefit from capital appreciation at time of sale, which is expected to be within 5 years.

The offering is expected to provide investors a targeted net annualized return of 14-16%, of which an annualized ~6% is expected to be 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. Since this is an equity investment, there is potential for returns to be above or below the target range.

Important Notes

• Unrelated business taxable income (UBTI) is income earned by a tax-exempt entity that is not related to its exempt purpose. UBTI tends to be generated when a tax-exempt entity becomes an owner (in part or full) of a business (such as a limited partnership). LPs may generate taxable income in a retirement account if the partnership borrows money. As such, 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

Desirable location
Market dynamics
Job demand drivers
Experienced local sponsor
  • The greater Dallas-Fort Worth area has experienced significant increases in both population and job growth, making it one of the most desirable places to live in Texas. The property itself is located equidistant to both Dallas and Fort Worth CBDs, while still offering discounted living and a 25-30 minute commute to downtown Dallas.

  • The submarket where the property is located has performed well throughout the COVID-19 pandemic with stable leasing activity, rent growth, and investment. The lack of new development within the submarket during the early 2000’s has led to housing shortages, enabling owners to push rental rates higher while keeping vacancy rates below the Dallas-Fort Worth average. Rent prices still remain lower than the average rent in the broader Dallas-Fort Worth MSA, also contributing to higher renter demand.

    • The average vacancy is 4.6% with year-on-year rental growth at 9.7%.
    • CoStar predicts that over the next 5 years, vacancy is expected to remain static at ~5% and rents are expected to increase at an average of 5.76% per year.

  • Job demand drivers in very close proximity to the property include American Airlines' corporate HQ and DFW Airport, with these two companies alone employing more than 240k people. The Great Southwest Industrial District, which totals over 110M SF of industrial space and includes companies such as Cintas and Bell Textron, provides abundant job opportunities. The amount of quality employers in the submarket where the property is located have spurred population growth of 118k in 2020 alone, which was the largest population gain in the U.S. for the year.

  • Headquartered in Texas, the sponsor, InterCapital Group, was founded in 2010 as an investment management firm focused on the acquisition and repositioning of multi-family assets in the U.S., primarily operating in Texas. InterCapital Group is a full-service vertically integrated investment firm with property and construction management services provided by its affiliate, Dayrise Residential.

    \ Since inception, the firm has acquired over 100 assets totaling ~40k apartment units, and has realized investments on 43 assets with an average gross IRR of 24%. Its current portfolio consists of ~19k units with a total value of ~$3B. InterCapital owns 24 multi-family assets in Texas, totalling over 8.3k units, with 14 properties (~5.2k units) specifically in the Dallas-Fort Worth area.

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 $20.7M equity position is junior to $62.8M of senior debt. The senior loan was provided by a national private direct lender with over $16.6B of loans originated in 2020 and the remaining equity was provided by the sponsor, InterCapital Group. It is expected that ~$9M of Yieldstreet's $20.7M equity position will be assigned to an affiliate fund not yet launched to the public.

Cash flow

How do I get paid?

Over the life of the investment, investors are expected to receive a target annualized return of 14 - 16%, net of Yieldstreet’s management fee and structuring fee as further described in the Investment Memorandum. Investors are expected to receive cash flows from two sources: ~6% of annualized income from property rents, which is expected to be paid quarterly beginning second quarter 2022, and the balance of the returns are expected to be achieved via appreciation at time of sale of the property, which is anticipated to be within 5 years.

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Assets

What is the collateral underlying the transaction?

Built in 2012, Sevona Avion is a three-story garden-style apartment complex located equidistant from Dallas and Fort Worth CBDs. In total, the property has 344 units, which consist of one bedroom (62% of units), two bedroom (35% of units), and three bedroom (3% of units) apartments. The property has been well-maintained since completion, helping to uphold its high quality curb appeal. Sevona Avion’s amenity package includes a resort style pool, poolside cabanas with TVs and refrigerators, outdoor lounge with fireplace, grille stations, fitness center, coffee bar and kitchen, business center, dog park, and attached garage parking in select units. Interiors of the units include stainless steel appliances, granite countertops, walk-in closets, crown molding and a private balcony or patio.

As of November 2021, the property was 97% occupied with an average in-place rent of $1,428/unit ($1.51 PSF) and limited concessions. The property will be managed by InterCapital’s internal property management arm, Dayrise Residential, founded in 2010 and managing over 19k apartment units across four states.

Returns & Management fees

Ann'l management fee

2.0%

Target ann'l net return

14 - 16%

Inv share in excess profits

100%

Target equity multiple

1.7x - 1.9x

Target ann'l cash yield

~6%

Schedule

Payment schedule

Quarterly + event based

First expected payment date

2Q 2022

Target term

5 years

Structure

Tax document

K-1

Offering structure

SPV

Expenses

Ann'l flat expense

0.25%

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  • Returns & Management fees

    Ann'l management fee

    2.0%

    Target ann'l net return

    14 - 16%

    Inv share in excess profits

    100%

    Target equity multiple

    1.7x - 1.9x

    Target ann'l cash yield

    ~6%

  • Schedule

    Payment schedule

    Quarterly + event based

    First expected payment date

    2Q 2022

    Target term

    5 years

  • Structure

    Tax document

    K-1

    Offering structure

    SPV

    Expenses

    Ann'l flat expense

    0.25%

Docs