Frequently Asked Questions
Trion Properties is differentiated by:
- An excellent track record - Our investment strategy has proven successful through all phases of the business cycle, including the Global Financial Crisis. Trion Properties has generated an average gross IRR in excess of 30% since inception.
- A deeply experienced team - Since our founding in 2005, we have acquired more than 6,000 units representing more than $1 billion in total capitalization, including pending closes. Our Managing Principals have a combined 40 years of real estate experience, and our team previously executed a similar investment strategy for the Trion Multifamily Opportunity Fund I and the Trion Multifamily Opportunity Fund II.
- Vertical integration - We strive to keep all functions in house, including project management, construction, and property management. The result: Complete oversight of renovations, accelerated timelines, and better control of quality and costs—all of which drive higher returns for investors.
- A rigorous investment approach – Our process is designed to meet our long-term objective of delivering outsized returns without taking outsized risks.
- Alignment of interests - We are proud to invest alongside our client base, which is comprised solely of accredited investors.
Yes, they have consistently beaten the industry average which is a mid-teens IRR.
Because we invest in assets with substantial earnings potential and take a proactive approach to improving net operating income (NOI), we believe our multifamily portfolio has considerable ability to withstand interest rate increases.
Furthermore, our prudent investment approach enables us to ride out difficult environments, then exit once conditions have improved. For assets with compounding annual NOI growth, time can heal most wounds caused by an increase in cap rates (which can rise alongside interest rates).
As it pertains to managing the cost of financing, we fix rates when possible and use derivatives to hedge risk on floating-rate debt. We also consider the purchase of assets with assumable long-term fixed-rate debt.
No, you cannot exchange into or out of the Fund.
Healthy fundamentals provide support to the multifamily asset class as a whole—and we believe our approach positions us particularly well to not only navigate an inflationary environment but thrive in it.
Two key elements of our disciplined strategy enable us to generate strong NOI and ultimately deliver compelling total returns for our investors:
- Careful portfolio design - We are focused on strategic deals in the best submarkets where uniquely strong demand is fueling long-term rent growth. These areas offer high quality of life, abundant recreation activities, and accessibility to major employers. Many also benefit from relative affordability and business-friendly policies which draw employers to the area and encourage household migration.
- Controlling expenses - In an inflationary environment, construction materials and labor costs rise, which can make value-add renovation projects more expensive. This is a dynamic we are prepared to manage. First, rising input costs make new development projects more expensive, which constrains the new supply pipeline and works in our favor by giving more room for existing assets to grow rents and appreciate in value. Second, the rent growth we are able to capture on renovated units provides a cushion for rehab expenses. Third, by vertically integrating our operations and continually pursuing operational improvements, we are positioned to maximize efficiency and keep costs in check.
Our team optimizes NOI and adds maximum economic value to each investment through extensive renovations, rebranding of the assets, and hands-on management.
Property rehabilitation - Our renovations
are typically more extensive than other
Class B products in the marketplace, helping
us achieve higher rent and/or optimize
income through reduced vacancies and
increased lease renewals.
We take a customized approach determined by target rental rates for the given property. Our renovations are design-forward and resident-focused; we transform units into clean, modern, and desirable places to live. We concentrate on cosmetic upgrades, mild infrastructure repairs, and adding high-value amenities and communal spaces with an aesthetic designed to appeal to higher-paying residents.
- Market repositioning - We leverage corporate-level leasing and marketing efforts aimed at young adults with the discretionary income to afford contemporary housing.
- Property management - Our commitment to resident satisfaction drives sustained high occupancy at premium rents. Property management is overseen from a central location as part of our vertical integration strategy, and maintenance teams are strategically positioned to quickly respond to requests. We deploy modern software and property-specific websites to create a high-quality online experience for renters.
When identifying markets well-suited to our investment approach, our philosophy is simple: We target markets where we can successfully operate throughout the real estate cycle—not just when times are good. This means focusing our efforts on areas with sustainable growth supported by a diverse set of strong economic drivers and favorable supply-demand dynamics.
On the demand side, we look for persistent tailwinds, including a steadily growing population and high quality of life. We look for ample tech, entertainment, and service industry employment alongside a strong young professional class with upwardly mobile individuals and families seeking rental units at a great value. In terms of supply, we avoid areas with robust pipelines—often the case in locations where land is abundant and new construction is plentiful—as this drives down rental rates.
As it pertains to the Fund, we believe first-ring suburbs of primary markets, secondary markets, and tertiary markets located in Western and Southeastern states provide for an investment landscape that is more advantageous to generating higher investment returns than urban core markets due to (i) the relatively higher available yields, (ii) a supply-demand dynamic that is more favorable to rent growth, (iii) more affordable housing which helps foster in-migration and job growth, and (iv) and greater opportunities to create value through operational improvements which are often not consistently priced in the valuations in these markets.
Yes. The Fund may utilize leverage in an effort to maximize the Fund's returns, subject to certain borrowing limitations.
We typically leverage between 65% and 70% loan to cost.
Yes. The Fund intends to distribute cash flow, dividends, interest or other income realized from investments, plus proceeds from any disposition or refinancing at least quarterly.
The Fund will target:
- IRR of 12.0% to 15.0%
- Cash-on-cash yield of 6.0% to 8.0%
- Equity multiple of 1.5x to 2.0x
- Management fee: 1.0% of the average daily amount of the total capital invested
- Diligence and servicing fee: 1.5% of the average daily amount of total capital invested for members that invest in the Fund through a broker-dealer
- Acquisition fee: 1.0% of the purchase price of each property
- Property management fee: Greater of (i) $4,000 per month and (ii) 4.0% of gross revenues collected on a monthly basis
- Construction management fee: 5.0%
- Loan origination fees: Not to exceed 1.0%
The minimum capital commitment is $50,000. The minimum unit size is $1,000.
In the current environment, challenges to our strategy include:
- Increased operating and construction costs resulting from higher inflation
- Rising interest rates, which increase our interest costs on variable rate debt, unless we have hedged the risk
The Fund is also subject to the risks inherent in the acquisition, development, ownership, and operation of real estate and real estate-related businesses and assets. Please refer to the PPM for a discussion of risk factors and investment considerations.
Although there are potential challenges on the horizon, the U.S. economy is mostly stable, and the outlook calls for continued growth in the multifamily sector. Vacancy rates are near cyclical lows, renters are actively leasing apartments, supply is tight, and operators are implementing healthy rent increases. Robust demand is being driven by several factors, including would-be buyers being priced out of the market for single-family homes, healthy labor dynamics, and a rebound in household formation. In fact, the fundamentals for multifamily may be the best we have seen over the multi-decade span of our careers.
We believe the outlook for the overall multifamily sector is strong and anticipate that the undersupply of housing in the U.S. and advantageous demographic trends will continue to support favorable investment dynamics in the years ahead. We expect this backdrop will bode well for multifamily asset values.
The Fund term is six years from the final closing, subject to two one-year extensions.
Interests are being offered to U.S. and non-U.S. persons. Interests offered to U.S. persons are offered exclusively to U.S. persons who are accredited investors.
The minimum capital commitment is $50,000. The minimum unit size is $1,000.
Trion principals will commit the lesser of (i) 5.0% of the Fund’s aggregate capital commitments and (ii) $2.5 million.