1503 Fulton
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Investment Highlights
- Strong risk reward with a fully renovated building, fixed-rate debt with value-add returns.
- Fixed Rate Debt in Rising Interest Rate Environment: We will be assuming the current Freddie Mac loan with a fixed rate of 4.19% and interest only to July 2024.
- These terms would not be possible in today’s rising interest rate environment.
- Proforma rents already proven: We feel confident in our underwritten rents as the property is already achieving our pro forma rents on 22 units and, in a few cases, outperforming the pro format.
- Strong Fundamentals: The Arden Arcade submarket has no units under construction, a 97.3% occupancy rate, and is projected by CoStar to grow by 24% in the next four years. Additionally, South Arden is one of the better pockets of Arden Arcade with an average income within a 2-mile radius of the property $79,391. The immediate location consists of quality dining and entertainment and expensive single family, as well as recently renovated multifamily properties.
- Strong Basis: Pricing has fallen post-rate shock by approximately 25%. Trion is under contract for $24MM ($230,769/door, $278/SF, 4.57% going-in cap rate, and 5.88% un-trended return on cost). Recent trades, primarily pre-rate shock, have gone for a lower cap rate, return on cost and significantly higher price per square foot. The discount on a cost-per-square-foot basis is roughly 40% from the comp set that is primarily non-renovated.
- High-Quality Renovations: High-end interior finishes, quartz countertops, in-unit washer/dryers, and exterior renovations including new dual pane windows, new roofs, full patio replacement, asphalt, and concrete walkways.
- Economies of Scale: Trion owns two properties on Fulton Avenue that have proven out the business plan at 1503 Fulton. All three properties will benefit from shared labor and scaling expenses.
1503 Fulton on Map
