Multi Family Portfolio II

Unique selling points

Multi Family Portfolio II is the eleventh fund in the successful corporation between ICG and REALIANCE. The chosen strategy of purchasing, renovation and optimization of the management has been realized in similar projects.

Atlanta and San Antonio are important economic growth centers of the US and have weathered the corona crisis relatively well. Both metroplexes have a favorable business climate, relatively low taxes and low living costs. Recent years have seen a high rate of employment growth in both cities. After a contraction in 2020 as a result of the corona crisis, the recovery started in 2021, which is currently resulting in a significant increase in demand for rental apartments, resulting in significant rent increases.

The locations of the projects are both in relatively desirable and affluent submarkets. West Midtown Atlanta is in full development and popular for its many award-winning restaurants and high-end retail. The projects in San Antonio are well located in the affluent northern part with its pleasant rolling hills and good school districts. Employment centers and airports are easily accessible for all complexes.

Spread across three high-quality ‘Class A’ complexes: Mark at West Midtown with 244 apartments (‘urban’), Sonterra Heights with 332 apartments and Hilltop at Shavano with 376 apartments (both ‘sub-urban garden style’). The complexes have a good mix of 1-, 2- and 3-bedroom apartments with different rents for a wide group of tenants with middle to high incomes. The high average income in the various submarkets offers the opportunity to upgrade the apartments to the highest standard in the market, resulting in a higher rent income.

Based on the good relationship with brokers and sellers, the local partner has been able to acquire the complexes in a competitive market. The local partner expects to benefit from rent increases in the current market and sees value-add potential for both the complexes themselves as well as the property management. Despite the fact that the projects in San Antonio are not in the same micro location, economies of scale can be realized in management.

The acquisition prices for the complexes are below replacement costs at comparable locations. The complexes in San Antonio can be purchased for an attractive price compared to other larger Texan cities. An important feature of Mark at West Midtown is that recently signed leases are already significantly higher than previous contracts, underlining the potential to increase rental income.

The local partner is very experienced as an investor and property manager with similar projects in the south of the US and has built up a portfolio of approximately 17,000 rental apartments with Atlanta and cities in Texas as its main markets.

An interesting aspect of the current proposition is the acquisition of three separate 3-plus 2-year loans with a leverage of 70% to 75% at favorable financing conditions. These loans offer flexibility to sell or refinance the complexes during the investment period (also separately) at a higher NOI. With a variable interest rate there is pre-payment penalty at a sale.

Based on current income and value-add potential, the expected cash-on-cash return, as of the third quarter. After a period of five years the total return (including sales result) of the entire portfolio is projected at 65.4% (13.1% on an annual basis). The total return (including sales result) of the entire portfolio is projected after a period of five years at 65.4% (13.1% on an annual basis).

ICG and REALIANCE jointly participate in regular equity for US$ 5,758,280 (12.4% of US$ 46,358,280). In addition, half of the joint fees are deferred.