Deal Analysis

Representative Property Class Profiles and Partner Preferred Deal Structures:



Seacrest Court Apartments: Value-Add
Orange County: Class C Apartments in “B” class market

Seacrest Court Apartments offer an investor the opportunity to acquire a true value add opportunity located in Orange County California. The subject property sits on three separate contiguous lots in a strong “B” class market and is surrounded by a quiet residential neighborhood as well as numerous national credit retailers. Noteworthy amenities include 3 swimming pools, gated parking and secured entry. There is currently +/- 20% upside in rents based on current market rates for new tenants in adjacent competing properties. With professional management, an aggressive operator will profit from Seacrest Court’s high degree of upside potential. With continued pressure on the rental market, rents in the area are forecasted to accelerate by approximately 7% through the remainder of the year. Emerald Court is also an excellent candidate for the Orange County BEST program to recapture additional upside in annual income.

NOTE: Current pricing structure is based on obtaining new debt. Should an investor be willing to assume the existing note, there may be discount to list pricing. The current note is a CMBS loan with a balance of $5,650,000 with approximately 18 months remaining at 5.947% INTEREST ONLY.


  • Obtain New Debt or Assume Existing Note
  • Over 20% Rental Upside
  • Additional Upside Through Initiating BEST Program
  • Three Contiguous Lots On Approximately 1.5 Acres
  • 50% One Bedroom & 50% Two Bedroom Units
  • True Value Add C Class Property in a Strong B Sub Market


Class A: Cash Buyer: Emerald Village: Investment Overview: Stabilized
Acquisition: New Class A, 191 Units, Built in 2010
Located in Los Angeles: Purchase Directly from Developer
Sponsor must be vetted/seasoned & approved by HUD
Top 25 MSA: Purchase: Realize Current Cash flow: 9.0%-10.0%
Refi will significantly improve Cash on Cash Return
Purchase: Mortgage Balance: (Actual) $15,429,100: Financed: HUD 221 (d)4: $21, 392,000: $112,000 per door: Effective Cap Rate: 7.0-7.25
97% occupancy: Stabilized: $1M invested into amenities & landscaping
Stabilized Income: $200,000 per month

NOI: $1,540,000: Debt: $954,532: Cash Flow: $585,968…Rent increase of $50 would increase cash flow by $114,600 resulting in a net yield of 10.8%

HUD Assumable: $15,180,000: 40 year Fixed: Non-Recourse: 4.96% Interest: Eligible for A7 Refinance May 2013>Refinance today est.3.0%: Assumption timeline process: 3 weeks -6 months

Significant Cash on Cash return after Refinance

“Protective fee” to be paid 1 year out from Refi: Scenario: Sponsor pays $300K to lock-in Interest rate at that day: Significant cash upside to Sponsor due to drop of 50-150 Basis points: Upside Annual Cash Flow: Est additional $325K-$350K

Strong Refi/Value Play upside gained by Sponsor due to “Interest Rate-Lock”

Capital Stack Components: Equity-Sponsor: 80% Equity commitment in place/20%sponsor brings to the table…can go to 85% maximum Equity/$4.0M-$4.25M: Borrower brings in the balance

Private Equity Term Sheet Components: 80%: Terms

Total Capital Stack: $21,300,000: Senior Debt: $15,180,000: Total Equity: $6,100,000

Year 1: Preferred Equity: 80%: $4.890,000: Sponsor Equity: $1.220,000: Total Equity: $6.110,000

Add-on: 10% Preferred on the Equity-Accrued Day 1-Year 1: Current pay of 6.0%/ Year 2: 7.5%/ Year 3: 10.0%

7 Year Term: Can PrePay at any time without Prepayment Penalty as long as you have achieved a $1,650,000 Equity Multiple-derived from the $4,890,000 Preferred Equity: The Equity Multiple payments ($1,650,000 + $4,890,000) from the Sponsor are recurring throughout the term: These Sponsor payout’s require clarification!

Hurdles: Mezzanine Debt Financing Structure: Clarification Required

  1. Principal & interest payments related to the Senior Debt
  2. Sponsor pays any/all Operating Expenses, insurance, servicing fees related to the property & within budget
  3. Current pay requirements based on the schedule of 6%, 7.5%, & 10.0%
  4. Sponsor pay requirements based on the schedule of the Sponsor’s Equity piece
  5. Cash flow shall be split on a pay per basis between Sponsor (%) & the Equity Partner (%)
  6. On a Liquidity event-pay any & all outstanding operating expenses related to the property debt
  7. Return the Sponsor’s Equity + 10.0 IRR which includes _________ (?) minimum multiple of $1,650,000)
  8. Distribution of the proceeds-both parties-Terms: Target Rates: Returns: TBD: pursue 15%/ after 15% the sponsor receives the rest & ______ gets %
    ***Review for discussion at earliest opportunity