Town East Apartments – 190 Units

Property Details

Growth of the Mesquite Housing Market
According to Redfin Analytics, this month’s average Mesquite single-family home sales price is over 23% higher than one year ago.
This growth implies parallel growth in the rental market—market rents—and thus long-term value in this multifamily investment. The high occupancy at Town East will allow us to come in and increase rents starting on Day 1.

Immediately Off Major Thoroughfare Artery
Bamboo Street is located within three major thoroughfares, including Interstate 30, US Highway 80, and Interstate 635. As development in Dallas continues to expand east, these areas off major thoroughfares will continue to benefit first.

Attractive Assumable Fannie Mae Financing
Town East has a 12-year, fixed rate Fannie Mae loan at 3.41% to be assumed that was originated in August 2019 with an original balance of $12,000,000 (balance of $11,358,278 at closing).

We have the opportunity to place a supplemental loan on the property to increase the leverage and decrease the down payment needed to purchase the asset.

Location

Mesquite is a suburban city located east of the city of Dallas, Texas. Most of the city is located in Dallas County, though a small portion extends into Kaufman County. As of 2019 census estimates, the population was 140,937, making it the 22nd-most populous city in the U.S. state of Texas. Mesquite is positioned at the crossroads of four major highways (Interstates 30, 635, 20, and U.S. Route 80), making locations such as downtown Dallas, Lake Ray Hubbard, Dallas Love Field, and DFW International Airport accessible.

According to legislative action, the city is the “Rodeo Capital of Texas”. In 2016, Mesquite received a Playful City USA designation for the fourth year in a row. The city has been named a Tree City USA by the National Arbor Day Foundation for over 25 years. The city of Mesquite holds the 10th-longest reign in all of Texas.

Unique to suburbs of Dallas and Fort Worth, the city of Mesquite is served by its own local airport, Mesquite Metro Airport. Companies and institutions with a major presence in the city are the United Parcel Service, Sears, AT&T, Charter Spectrum, Eastfield College, Ashley Furniture, and FedEx.

Impressive Sub-market Fundamentals

Located only 15 minutes east of downtown Dallas, Mesquite has all the amenities of a large city but with a small-town feel. Local events, businesses, and friendly neighbors all add to the community in Mesquite.

Mesquite was placed among the best 25 places to live in Texas based on the quality of life, affordability, growth, food and parks in a study by Better Homes and Gardens Real Estate HomeCity.

A study from WalletHub reported that Mesquite was among the top cities for economic growth in the country.

Renters make up 41% of Mesquite, Texas real estate, occupying a total of 19,154 units. *Yardi Matrix

8.6% Increase in average apartment rent from 2020. *Yardi Matrix

Business Plan – Strong Value Add Strategy

This is a standard value add deal in the very hot Dallas market. Town East was sourced off market and the seller is not taking full advantage of the opportunity this asset provides.

The owner recently started raising rents and is receiving $150 rent bumps with very minimal upgrades if any. It’s a very safe deal as we are assuming the current low interest debt at about 66% LTV and our purchase price is a very low basis at $90K per door. There are sale comps in the $120K per door range. We also have very conservative underwriting on our rent bumps and also our exit cap at 5.75% when the current market is in the low 4’s. We underwrote this deal in house and had a third party underwriting consultant underwrite the deal as well.

The business plan is to bring in a professional property management company to immediately improve operational inefficiencies. We will also improve the exteriors and dramatically change the curb appeal while upgrading the interior units to a more modern finish. We will then start gradually increase rents up to market standard.

We have a preferred equity partner coming in with $5M of the equity. Deal was sourced off market and acquired at a very low basis in a hot market! Very conservative underwriting with a 5.75% Exit Cap Rate in a market that is easily in the low 4’s right now!

This is a standard value add deal in the very hot Dallas market. The deal was sourced off market and the seller has not been pushing rents or upgrading units. They just started raising the rents and are receiving $150 rent bumps with very minimal upgrades if any. It’s a very safe deal as we are assuming the current low interest debt at about 66% LTV and our purchase price is a very low basis at $90K per door. There are sale comps in the $120K per door range. We also have very conservative underwriting on our rent bumps and also our exit cap at 5.75% when the current market is in the low 4’s.

The Business plan is to bring in professional management and run more efficiently on the operating side. We will also renovate the exteriors and dramatically change the curb appeal while upgrading the interior units. We will then begin to raise the rents to the market.

The Property – Extensive Renovations and High Occupancy

Currently 100% occupied, the 190-unit Town East Apartment complex is made up of 15 buildings across 8.38 acres, allowing for plenty of on-site parking. Over $3M in CapEx has been spent since the Property last traded hands in January 2018 with the majority of that money going towards Building Improvements – $638,318, Appliances $114,463, Parking Lot $42,307, HVAC & Boilers – $637,204, Flooring $89,094, and Interior Renovations $1,644,051.

Growth of the Mesquite Housing Market
According to Redfin Analytics, this month’s average Mesquite single-family home sales price is over 23% higher than one year ago. This growth implies parallel growth in the rental market—market rents—and thus long-term value in this multifamily investment. The high occupancy at Town East allows a new investor to come in and push rents starting on Day 1.

Immediately Off Major Thoroughfare Artery
Bamboo Street is located within three major thoroughfares, including Interstate 30, US Highway 80, and Interstate 635. As development in Dallas continues to expand east, these areas off major thoroughfares will continue to benefit first.

Attractive Assumable Fannie Mae Financing
Town East has a 12-year, fixed rate Fannie Mae loan at 3.41% to be assumed that was originated in August 2019 with an original balance of $12,000,000 (current balance of $11,556,226). New owner has the opportunity to place a supplemental loan on the Property to increase the leverage and decrease the down payment needed to purchase the asset.

Post Acquisition Expectations

Monthly Reports
Investors will receive monthly financials outlining current occupancy, NOI etc

Quarterly Analysis
Investors will receive additional detailed reports on a quarterly basis outlining execution of business plan, operational updates and distributions info

Distributions
Investors should expect quarterly distributions, except for the first distribution which should be 6 months after take over.

Communication
We strive to keep communication channels open and ongoing at all times