Real Estate

Hartman Hill Build-for-Rent Portfolio

Annualized return3

Term3

24 months

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Status

Waitlist open

Remaining

Accepting $15,000 - $500,000 investments

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Accepting $15,000 - $500,000 investments

Overview

An equity investment in Hartman Hill, a 71-unit build-for-rent (BFR) community in Chattanooga, Tennessee.

  • Risk-adjusted strategy: Most BFR investments expose investors to construction and pricing risk as communities are developed from the ground up. Homes at Hartman Hill, however, are acquired at a fixed price from the seller once they are fully completed, removing risks associated with construction. To date, 58 of the 71 homes have been acquired and the community is 40% leased.
  • Housing affordability: Mortgage rates have hit their highest levels in more than 20 years and houses are more unaffordable than ever before, forcing many buyers out of the market and into single family rental communities creating demand for properties like Hartman Hill.
  • Experienced sponsor: Based on assets under management, Haven Realty Capital is one of the top 3 players in the growing BFR sector and has just announced a $1B joint venture with JPMorgan to help them buy and develop entire communities of new homes. Haven has realized returns on $395M of investments generating an annualized return of 22.1% and 2.1x multiple on invested capital.
  • Inflation hedge: Annual lease renewals allow management to re-set rent prices more frequently to match current inflation and market conditions.
  • Attractive debt financing: The senior loan used to finance the community has an interest rate cap in place at 6.1% which continues to work well for this deal in light of the higher interest rates in the mortgage debt market since July.
  • Short term: Yieldstreet and the Sponsor expect to sell the community within 24 months.
  • Strong location: According to John Burns Real Estate Consulting, year-to-date, home prices in Chattanooga have increased by 14.6% and in 2021 they increased by over 23.7%.

A recent video of Hartman Hill.

Premise

Investing details

What am I investing in?

  • An equity investment in Hartman Hill, a build-for-rent 71-unit single family rental community.
  • Located within the Red Bank submarket of Chattanooga about 8.5mi from downtown, households are attracted to the submarket due to its neighborhood feel, low crime rate and its location that allows for easy commutes to major job centers both in and outside of downtown.
  • The Sponsor, Haven Realty Capital, is acquiring fully built homes at an agreed upon fixed price (all-in cost basis of $436K/unit) from the seller/developer over a period of seven months which began in April 2022.
  • 58 homes have been acquired as of October 30, with the remaining 13 homes due for delivery by year end.
  • The units are similar in construction and feel to a for-sale single-family product and all of them will have 2-car attached garages.
  • Cushman & Wakefield, one of the largest property managers in the country, is managing the property.
  • Yieldstreet has all the major decision rights and the right to compel a sale of the community in 2 years time.

Investment strategy

What is the value proposition?

  • The Sponsor entered into a contract in November 2021 to acquire the community from the seller/developer at a fixed price resulting in an all-in cost basis of $436K/ unit which is effectively a 5.8% stabilized cap rate.
  • Recently obtained broker price opinions suggest that the homes are worth on average 17% more than the 2021 fixed price that we agreed to acquire them for. This implies that while the homes are being delivered in 2022, they have been acquired at a discount to current market prices which should stand to benefit investors at the time of sale.
  • As the homes are being acquired at an agreed upon fixed price and only after they have received their Certificate of Occupancy, investors are not taking on any construction or price risk.
  • As of October 30, 23 of the 58 homes acquired have been leased at an average rent of $2,761 per month. Tenants in this community have an average age of 41 and an average household income of $178k which implies a rent to income ratio of 18%.
  • It is anticipated that all 71 homes will be leased by 2Q 23 and that rents will increase by 4.5% each year.
  • The Sponsor intends to sell the community in two years time for approximately $513K/unit at a base-case exit cap rate of 5.125%, representing a 17.6% increase on purchase price. When build-for-rent communities are sold they are sold in one transaction, typically to an institutional buyer. As such, BFR communities trade at a cap rate like other commercial properties, as opposed to trading on a per-unit basis. The cap rate premium associated with the community at exit may result in a per unit price above what a retail buyer would pay for the same housing unit, creating a potential arbitrage opportunity for investors.

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Behind the investment

Who is the Sponsor?

  • Haven Realty Capital was founded in 2010 and was an early entrant in the Single-Family-Rental (SFR) sector, at its peak owning and/or operating 10k homes across the U.S.
  • In terms of invested capital, their total spans across $575M invested equity, $1.7B total capitalization over 46 investments representing ~6,000 units. Haven is a trusted sponsor on behalf of premier institutional capital sources including Apollo, Carlyle, CenterSquare, Deutsche Bank and Walton Street.
  • Since its peak, Haven has realized returns on $395M of investments across 13 SFR, Multi-Family (MF) and Land Portfolios, generating an annualized return of 22.1% and 2.1x multiple on invested capital.
  • In the BFR sector, Haven’s portfolio consists of ~$1.2B across 35 communities and 3,500 homes in 9 states. They have partnered with 24 national and regional builders in order to scale its platform efficiently.
  • Haven owns 5 BFR communities in Tennessee highlighting its experience in the area. 3 of these projects are in Nashville and one each in Chattanooga and Knoxville. Additionally, Haven owns 9 BFR communities in nearby Atlanta, which they acquired in 2020 and 5 are already stabilized.

Market backdrop

Why should you consider investing?

  • We are bullish on the Chattanooga market, with recent migration and home price numbers demonstrating its strength. Chattanooga has benefited greatly from post-COVID migration trends, notably due to the fact that Tennessee has no income tax and is considered to be highly business friendly.
  • The market is now experiencing massive inventory shortages insufficient to meet the rising demand from existing residents and new migrants. Housing supply currently stands at 1.1 months in Chattanooga’s resale market which is driving further demand.
  • Demand drivers for the area and the community include medical and health-related companies, including Erlanger Health and BlueCross BlueShield. Volkswagen has also built its North American hub for EVs in Chattanooga. Volkswagen has invested an estimated $800M into the plant, and hired over 5000 employees over the last couple of years.
  • We remain bullish on build-for-rent single family homes given the rapid and consistent increase in rental demand as homeownership across the country continues to decline due to housing shortages and increases in mortgage rates.
  • Investing in build-for-rent single family homes can also help to hedge your portfolio against inflation. Shorter lease lengths allow management to re-set prices more frequently to match current market conditions.
  • Lastly, as all of the homes are located in one professionally managed community it makes management of the investment more efficient and cost effective.

Essentials

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

Where does Yieldstreet lie in terms of priority?

  • Yieldstreet has contributed $10.3M of the equity with the remainder contributed by the Sponsor demonstrating their alignment of interests.
  • The remainder of the project has been financed by a delayed draw senior loan at an interest rate of SOFR + 3.11%. There is an interest rate cap in place at 6.1% which continues to work well for this deal in light of the higher interest rates in the floating rate debt market.

Cash flow

How do I get paid?

  • As homes are still being acquired and leased up is it not a cash flowing investment at this time. As such, investors are expected to receive returns via capital appreciation at the time of sale which is anticipated to be within 2 years.
  • As cash flows are received by the Fund, Yieldstreet’s management fees and other fees and expenses as further described in the operating agreement are deducted first, and then capital contributions are returned to investors.

Accessibility

Who can invest?

  • Eligible investors must certify 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 comprised of these plans and funds.

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.

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  • Returns & Management fees

    Ann'l management fee

    2%

    Target ann'l net return

    Login to view

    Target ann'l cash yield range

    ~0%

    Target equity multiple

    1.2x - 1.4x

  • Schedule

    Payment schedule

    Event based

    Target term

    24 months

  • Structure

    Tax document

    K-1

    Offering structure

    SPV

    Ann'l flat expense

    0.25%

Docs

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.

This offering page describes only certain aspects of the offering ("Offering") of the securities issued by YS HAV REQ I LLC ("Issuer"). The Offering is made only by means of the Investment Memorandum relating to the Offering (the "Offering Document"). 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 Offering Document, or as incorporated in the Offering Document 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 Offering Document or in any marketing or sales literature issued by the Issuer or YieldStreet Management, LLC, as adviser thereto, and referred to in the Offering Document, and, if given or made, such information or representations must not be relied upon. All investors must read the Offering Document 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.