Project name
The Junction (FULLY FUNDED)
Location
109 West Ave, San Marcos, Texas, USA
Initiator
REALIANCE USA B.V.
Local partner
Category
Existing property student housing/152 units, 488 student rooms
Expected investment term
4 years
Exit strategy
Sale to an investor
Total investment
US$ 25.322.971
Bank loan
US$ 15.193.783 (60%)
Equity Project LP US$ 10.129.188
T2 Investments US$ 1.500.000
Campus Realty Advisors US$ 2.551.675
The Junction Capital LP US$ 6.077.513
Equity The Junction Capital LP US$ 6.200.000
Participation The Junction LP US$ 6.077.513
Costs Capital LP US$ 122.487
Structure
Participation directly in The Junction Capital LP
Participation
From US$ 250.000 (248 participations of US$ 25.000)
Projected gross total return
74,9% over 4 years
Projected gross return
18,7% per year (ROI)
Unique selling points
The investment in The Junction offers REALIANCE relations the opportunity to invest with an experienced local partner in a value-add proposition in existing U.S. purpose-built student housing. Gross annual returns of 29% have been achieved for the last two projects with the same partner (The Gates at Valdosta and The Beacon). In addition, the existing student housing assets in the REALIANCE portfolio are performing well.
An investment in student housing is less sensitive to cyclical fluctuations as this category is less affected by economic developments. A relatively low LTV/LTC of 60%, a low purchase price and conservative assumptions mitigate the risk. In addition, investors, through REALIANCE, collectively own a majority interest in the project entity and thus hold the largest ownership interest in the property.
Currently, there is a shortage of housing for students studying at Texas State University in San Marcos. With the increasing number of students (over 38,000 by 2023) and the current supply covering only a portion of this, there is a potential additional demand of over 10,000 student rooms. In addition, Texas State University has set a goal of achieving the highest attainable classification for research universities (R1) by 2027.
The complex is within walking distance of the university and offers access to all campus and downtown San Marcos amenities. The unit mix provides housing for a wide range of housing needs. Through a comprehensive renovation program (over US$30,000 per unit), both the common areas, interiors and the exterior will be qualitatively improved to better match current housing needs, resulting in higher rental income.
Due to increased interest (debt service), the financial position of The Junction came under pressure, making it impossible to maintain and optimize the complex at the desired level. As a result, the complex is performing below the market. Now that the current financier does not wish to extend the loan, the current owner is forced to sell the complex (financial distress). As a result, the opportunity exists to purchase the proposition (total investment) for approximately 50% of the price of a comparable property sold in 2023. This puts the buy-cap rate at an attractive level of 8.5% when stabilized.
CRA and T2 Investment participate for a total of 40% in the risk equity. The remainder is offered exclusively to REALIANCE participants.
Given the size of the proposition, only a maximum of 24 participants can participate.
For more information you can reach REALIANCE at +31 (0) 20 21 03 180 or invest@realiance.nl.
