Real EstateInterCapital Group

Tucson Multi-Family Equity I

Annualized return3

Term

26 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

Performance Update

• View the most recent update for Tucson Multi-Family Equity I.

Invest in Alterra Apartments, a 94% occupied garden-style multi-family property located in Tucson, Arizona. The property benefits from its location within the growing Tucson area, which has experienced increasing migration trends from California, Washington, Colorado, and other high cost states, allowing for proliferation in housing prices and rental demand.

Other major demand drivers within close proximity to the property include the David Monthan Air Force Base, Raytheon Missiles and Defense, and the University of Arizona.

Premise

Potential benefits of investing in private real estate assets

  • According to the National Council of Real Estate Investment Fiduciaries (NCREIF), as of Q1 2021 the average 25-year return for private commercial real estate outperformed the S&P 500 Index.
  • According to The Institutional Investor, low correlation to global public equities and bonds helps to reduce the overall risk level of portfolios.
  • Rents paid by tenants can generate an additional income stream for investors.
  • Capital appreciation characteristics achieved via potential increasing property prices may assist with the achievement of long-term financial goals.
  • Inflation hedge since property values and rental income typically increase during periods of inflation, helping to protect the purchasing power of investors.

Increased and continually growing long-term demand for multi-family rentals

  • Yieldstreet remains bullish on multi-family property given the housing shortage that the U.S. is currently facing.
  • According to CBRE’s U.S. Real Estate Market Outlook 2022, the multi-family sector is expected to have a record-breaking 2022 thanks to its solid fundamentals and heightened investor interest.
  • Under-development, in conjunction with the current low cost of capital and migration away from major cities as a result of the pandemic, has caused house prices to increase, pricing out many potential buyers and forcing them to rent.

A city with flourishing migration trends, employment and recreational opportunities

  • Over the last 5 years, Tucson has seen increasing migration trends from California, Washington, Colorado, and other high cost states, which is pushing housing prices and rental demand to levels not seen before. According to Axios, population growth over the last decade was 10% while the median home price increased by 32% year-over-year.
  • According to Berkadia, within a 5-mile radius of the property, there are more than 100k jobs, 68% of which are white-collar.
  • Downtown Tucson, which is located 9 miles from the property, is home to the University of Arizona which is the largest employer in the area and supports over 34k jobs. Other major demand drivers in the area include the Davis Monthan Air Force Base and Raytheon Missiles and Defense.

  • The property sits along a major retail corridor, Broadway Boulevard, which gives renters access to over 4M SF of retail space and 100+ restaurants and bars.
  • The Loop - rated the #1 recreational trail in the U.S. according to USA Today, is located less than 5 miles from the property and gives renters access to over 131 miles of paved pathways and bike trails, which many use for their everyday work commutes.
  • Yieldstreet believes that all of these factors combined create a dynamic that can support further rent growth and increasing property prices, to help in driving total returns for the offering.

Strong multi-family submarket performance that has persisted throughout the pandemic

  • According to Freddie Mac’s 2022 Multi-Family Market Outlook, the strongest rent growth occurred in less expensive submarkets, such as the submarket where the property is located, with migration changes initially brought about by the pandemic appearing to continue into 2022.
  • Historically, the Tucson submarket has not delivered many units per year, which has allowed landlords to push rents at a strong rate. New construction is not common because the rental rates achieved in the market do not justify the cost to construct a new building.
  • The submarket recorded year-on-year asking rent growth of 17%, with three-year average annual rent growth of 9.9%.
  • As there is no new construction underway, Alterra Apartments are in high demand and are expected to benefit from current rent patterns which are expected to continue in the near term.
  • In addition to attractive anticipated rent growth, CoStar expects vacancy to be below 4% over the same time period.

High demand property with budget for additional renovations to further drive rents and resale value

  • Located at 801 S Prudence Rd, Tucson, AZ 85710, the property is a two-story garden-style apartment community that is 94% occupied as of February 3, 2022.
  • The previous owner renovated 14% of apartments and achieved rent premiums of $190-$400 per unit. The Sponsor has a $4M capital improvement plan, which is expected to update an additional 42% of units, common areas, and further improve curb appeal.
  • The amenity package includes a recently renovated fitness center, laundry facilities, upgraded pool and outdoor patio area, playground, dog park, soccer field, and more.
  • The unit mix consists of 32 studio units, 112 1-bedroom units, and 272 2-bedroom units.

Investment managed by an experienced sponsor

  • InterCapital Group is an investment management firm founded in 2010, focused on the acquisition and repositioning of multi-family assets in the U.S.
  • The firm 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 investments with an average gross IRR of 24%.
  • InterCapital Group’s current portfolio consists of ~19k units with a total value of ~$3B.
  • This is the second offering on Yieldstreet with InterCapital Group. The first offering, Dallas-Fort Worth Multi-Family Equity I continues to perform in line with expectations.

Clear business plan capitalizing on the asset’s location demographics and migration trends

  • The Sponsor purchased the property in March 2022 at 94% occupancy.
  • The Sponsor plans to spend $4M on capital improvements, with the intention to upgrade 42% of unit interiors and common areas to a modern finish, and to improve curb appeal.
  • In comparison to non-renovated units, the units that were renovated by the previous owner are achieving rent premiums of $190-$400 per unit. InterCapital has budgeted a $250/unit premium on their renovated units, in line with the previous owner.
  • The property will be managed by InterCapital’s internal property management arm, Dayrise Residential.
  • Alongside renovations, the Sponsor intends to continue pushing rents as high as the market allows over the next 3 years before seeking to sell the property at an attractive future price. In January 2022, new leases were signed at a 24% premium compared to the prior lease rent.

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 $22.86M equity position is junior to $64M of senior debt. The senior loan was provided by a national direct lender with over $18.3B of loans originated in 2020. The sponsor has provided the remaining $2.5M of equity.

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 Yieldstreet’s management fee, structuring fee and expenses as further described in the Investment Memorandum.
  • A majority of returns are expected to be generated via the anticipated future sale of the property, with income generated by the property value increasing as units are renovated and rents are subsequently increased.
  • As such, investors are expected to receive cash flows from two sources: ~2% of annualized income from property rents, which is expected to be paid quarterly beginning second quarter 2022.
  • The remainder of returns are expected to be achieved via appreciation at time of sale of the property, which is anticipated to be within 36 months.

Slide 1 of 2

Returns & Management fees

Ann'l management fee

2.0%

Target ann'l net return

Login to view

Inv share in excess profits

100%

Target equity multiple

1.4x - 1.6x

Target ann'l cash yield

~2%

Schedule

Current income schedule

Quarterly

First expected payment date

2Q 2022

Capital appreciation

Event-based

Target term

3 years

Structure

Tax document

K-1

Offering structure

SPV

Ann'l flat expense

0.25%

Slide 1 of 3
  • Returns & Management fees

    Ann'l management fee

    2.0%

    Target ann'l net return

    Login to view

    Inv share in excess profits

    100%

    Target equity multiple

    1.4x - 1.6x

    Target ann'l cash yield

    ~2%

  • Schedule

    Current income schedule

    Quarterly

    First expected payment date

    2Q 2022

    Capital appreciation

    Event-based

    Target term

    3 years

  • 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 ITC REQ II 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.