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- 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.