Belmont Estates

Unique selling points

Belmont Estates is the ninth project in the successful collaboration between ICG and REALIANCE. The chosen strategy of acquisition, renovation and optimization of the property management is realized in comparable projects.

Dallas/ Fort Worth, one of the economic drivers of the US, came through the corona crisis relatively well compared to other major cities. The metroplex has a favorable business climate, low taxes and low costs of living. Recent years have shown a consistent high employment growth, averaging around 100,000 per year. After a recession in 2020 due to the corona crisis, a strong recovery is expected in 2021, which will result in continued demand for rental apartments.

Belmont Estates’ location is central in the metroplex in the sought-after and relatively affluent sub-market Arlington. The CBD’s of Dallas and Fort Worth are easily accessible as well as DFW International Airport, which has remained one of the largest airports in the US during corona. With quick access to Interstate 30, the metroplex is well connected to employment centers and retail. In addition, the complex is close to the largest sports and entertainment area in Texas with the stadiums of the Texas Rangers and the Dallas Cowboys as well as two Six Flags parks.

The “Class B” complex with 224 apartments has an interesting mix of different 1- and 2-bedroom apartments. The 1-bedroom apartments range from 656 sq.ft. up to 720 sq.ft., so rents are within the budget of a large group of tenants. The 2-bedroom apartments range from 913 to 981 sq.ft. The relative high average income in the sub-market offers the opportunity to upgrade the apartments to a higher standard.

The complex has been purchased off-market on the basis of the good relationship between the local partner and the seller, but with a fast closing. The agreed price of around US$ 130,000 per apartment is below the price at which similar projects have recently been sold and is also below Overlook at Bear Creek, which project was introduced by REALIANCE last year, as well as the agreed price of an adjacent comparable complex. In addition to the renovation potential of the complex, the local partner also sees good opportunities to improve the property management. A reserve of US$ 125,000 has been agreed with the seller for possible setbacks in the rent collection and another US$ 100,000 for past due maintenance of apartments.

As an investor and property manager, the local partner is very experienced with similar projects in the south of the US and has built up a portfolio of approximately 15,000 rental apartments. Dallas/ Ft. Worth is its home market with approximately 7,000 apartments under management.

An interesting aspect of the current proposition is the attraction of a loan with a leverage of 71.3% against favorable conditions. This loan offers flexibility to extend, refinance or sell the complex after a period of 3 years at a higher NOI. The advantage of this is that no pre-payment penalty applies at the moment of sale or that (part of) the mezzanine could be repaid in the event of refinancing.

Based on current rent income and the improvement potential, the expected cash-on-cash return, from the third quarter after participation (Q4 2021), is 7% on an annual basis. The total return (incl. the sales result) is projected to be 77.3% after a period of five years (15.5% on an annual basis).

ICG and REALIANCE jointly participate for US$ 994,200 (12.8%) in the regular equity. In addition, the payment of part of the joint fees in being deferred.