Real Estate•Avenue One Holdings, LP

SFR Diversified Fund 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 a Fund that will own a portfolio of single family rental (SFR) properties primarily located in key U.S. geographies including Atlanta, GA, Dallas, TX and Charlotte, NC, among others. The target markets are expected to benefit from strong demographics, employment fundamentals and favorable supply-demand dynamics due to the current affordable housing shortages across the country.

Years of modest construction of new homes has tightened housing supply in the U.S., while affordability constraints have prevented a large portion of Americans from home ownership. SFRs can offer a cost-effective solution to those seeking a suburban lifestyle with the space to raise a family and to accommodate remote working needs. COVID-19 has accelerated the “suburban-migration” phenomenon; however, even before the pandemic began, institutional capital began to shift into the space due to favorable long-term economic trends.

As of February 28, 2022, the Fund owns a pool of homes and by March 31, 2022 the Fund is expected to have acquired 179 properties for approximately $52.3M. Over the next one month, the Fund will seek to purchase another ~$19M of undervalued properties priced between $200K and $300K in the target markets, to bring the total portfolio value to ~$71M. Following the stabilization of each property, it is expected that rents will be brought in line with respective market prices, and increase by at least 3% per year. Investors are also expected to benefit from capital appreciation at time of sale.

The offering is expected to provide investors a targeted net annualized return of 12-14%, with an annualized ~5.5% being distributed quarterly as current income. The balance of the returns are expected to be achieved via appreciation of the properties at time of sale. Since this is an equity investment, there is potential for returns to be above or below the target range. The Fund has 27-months remaining with the option for two 12-month extensions.

Important Notes

• Unrelated business taxable income (UBTI) is income earned by a tax-exempt entity that is not related to their 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

Current housing shortages

Increased SFR demand

Strong rental and sales markets

Two sources of cash flow

Experienced originator

The limited housing supply across the U.S. is expected to support a sustained bull market in single family homes. Over the last 10 years, the number of newly constructed homes added to the market was roughly half that of the prior decade. According to Zillow, currently, there is fewer than three months of supply of homes on the market, the lowest on record since the turn of the century.
The recent COVID-19 pandemic has accelerated an existing trend of millennials moving to the suburbs in search of space and communities to raise families. Due to factors such as the lack of entry-level homes, rising home prices, and record levels of college debt, millennials may be unable to purchase a home, leaving single family home rentals as an affordable option.
Properties in the portfolio are expected to be geographically diversified across the southeast and southwest U.S. The Fund will primarily source assets in the following markets: Dallas, Kansas City, Tampa, Orlando, Jacksonville, Atlanta and Charlotte. According to John Burns Consulting, rent growth for target geographies is expected to range from 4.0% to 7.0% annually over the next 2-3 years. House prices are also expected to increase over the same time period. View the John Burns Consulting Single Family Rental Forecast here.
The portfolio consists of income generating assets. The homes are expected to generate income via rents, which are expected to be increased once renovations are complete, and via profit once the homes are sold as expected.
Avenue One is the originator of the transaction and a service platform that offers institutional investors access to the single family rentals asset class at scale. The platform combines data, advanced analytics and technology to empower acquisition and operational specialists to find, buy, renovate, lease and manage properties on behalf of investors.
Avenue One has been mandated by some of the world's largest insurance and private equity funds to identify, buy and manage thousands of homes, deploying billions of dollars into SFR investments. In April 2021, it was recognized as a "Turnkey Platform revolutionizing housing" by JBREC."
Learn more about Avenue One here.

Essentials

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

Capital structure

Where does Yieldstreet lie in terms of priority?

Purchases of homes will occur on an ongoing basis and Yieldstreet will provide 100% of the equity. As of March 7, 2022, the Fund owns a pool of homes and by the end Q1 2022 is expected to have provided $15.7M of the equity upon the closing of a total of seventeen portfolio of homes. The anticipated total $21M equity position is junior to the anticipated ~$50M of senior debt expected to be associated with the portfolio upon full funding. The senior debt has been provided by an insurance provider.

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% - 14%. This expected return is net of Yieldstreet’s management fee, fund expenses and annual flat expenses as further described in the Private Placement Memorandum. Investors are expected to receive cash flows from two sources: ~5.5% of annualized income from property rents, expected to be paid quarterly following the stabilization of the portfolio which is expected to be in 8 months time, and the balance of the returns are expected to be achieved via appreciation at time of sale of the properties, which is anticipated to be within 27-months.

Assets

What is the collateral underlying the transaction?

The Originator will select properties based primarily on two factors: economic expectations for the regions where the properties are being acquired and factors specific to the properties that are being acquired.

The first step in identifying attractive SFR properties is to select the general location based on expected rental growth and home price appreciation over the coming years. The target markets identified have strong fundamentals, such as rising rents, growing populations, and a shortage of affordable housing stock.

The Originator also aims to purchase properties that are currently leased below-market. Following acquisition, the Originator intends to perform light renovation work where needed so that rents can be maximized before seeking to sell the portfolio of homes to a larger institutional investor.

Returns & Management fees

Ann'l management fee

Target ann'l net return

12% - 14%

Inv share in excess profits

100%

Target equity multiple

1.2x - 1.3x

Target ann'l cash yield

~5.5%

Schedule

Payment schedule

Event based

Prefunded

Yes

Target term

27 months

Structure

Tax document

K-1

Offering structure

SPV

Expenses

Ann'l flat expense

0.25%

Slide 1 of 3

Returns & Management fees
Ann'l management fee
2%
Target ann'l net return
12% - 14%
Inv share in excess profits
100%
Target equity multiple
1.2x - 1.3x
Target ann'l cash yield
~5.5%
Schedule
Payment schedule
Event based
Prefunded
Yes
Target term
27 months
Structure
Tax document
K-1
Offering structure
SPV
Expenses
Ann'l flat expense
0.25%

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.

¹ Past performance is no guarantee of future results. Any historical returns, expected returns, or probability projections may not reflect actual future performance. All securities involve risk and may result in significant losses.

² Represents an average net realized internal rate of return (IRR) with respect to all matured investments in your portfolio, utilizing the effective dates and amounts to and from the investments and net of management fees and all other expenses charged to the investments. Past performance is not a reliable indicator of future results and should not be relied upon as the basis for making an investment decision. All securities involve risk and may result in significant losses, including the loss of principal invested.[read more]

³ "Annual interest," "Annualized Return" or "Target Returns" represents a projected annual target rate of interest or annualized target return, and not returns or interest actually obtained by fund investors. “Term" represents the estimated term of the investment; the term of the fund is generally at the discretion of the fund’s manager, and may exceed the estimated term by a significant amount of time. Unless otherwise specified on the fund's offering page, target interest or returns are based on an analysis performed by Yieldstreet of the potential inflows and outflows related to the transactions in which the strategy or fund has engaged and/or is anticipated to engage in over the estimated term of the fund. There is no guarantee that targeted interest or returns will be realized or achieved or that an investment will be successful. Actual performance may deviate from these expectations materially, including due to market or economic factors, portfolio management decisions, modelling error, or other reasons.

⁴ Reflects the annualized distribution rate that is calculated by taking the most recent quarterly distribution approved by the Fund's Board of Directors and dividing it by prior quarter-end NAV and annualizing it. The Fund’s distribution may exceed its earnings. Therefore, a portion of the Fund’s distribution may be a return of the money you originally invested and represent a return of capital to you for tax purposes.

⁵ Represents the sum of the interest accrued in the statement period plus the interest paid in the statement period.

⁶ The internal rate of return ("IRR") represents an average net realized IRR with respect to all matured investments, excluding our Short Term Notes program, weighted by the investment size of each individual investment, made by private investment vehicles managed by YieldStreet Management, LLC from July 1, 2015 through and including July 18th, 2022, after deduction of management fees and all other expenses charged to investments.

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