Architect hold plans

CHURCHILL AT ST. ANDREWS

CHURCHILL at ST. ANDREWS
132 Units | Columbia, SC | $12,550,000 Purchase Price 
Investment Description:
Churchill at St. Andrews, a 132 Unit C Class Property, was built in 1972 and is in great condition. This property features large townhomes and garden style apartments and is only 8 miles from Downtown Columbia. Located in the second largest market in South Carolina, Churchill at St. Andrews is in the Lake Murray submarket, one of the most desirable areas in the Columbia MSA. This submarket continues to experience an influx of new residents, driven by the top-rated school district and proximity to well-known established employers
Investment Highlights: 

Target Returns for 506 (C) Accredited Investors:

  • 8% annual cash on cash 

  • 16% IRR, 18.5% annualized

  • 1.9x Equity Multiple

  • 90% Projected Return in 5 Year

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TIMELINE

Frequently asked questions

What is the Investment summary?


1972 apartment complex, 132 door C+ class in B- area, value add opportunity




What are the investor returns?


  • 7% Pref
  • 8% CoC
  • 18.5% AAR
  • 16% IRR




Who can invest?


Accredited investors only 200K Annual Income (Individuals) - or - 300K with spouse - or- net worth $1M (excluding primary residence)




How do I verify Accreditation and when is it due?


You can get this verification from CPA or online websites can verify your accreditation. You can also use Early IQ, they can verify the accreditation in 2-3 days. We are picking up this cost and the verification is free for investors, once verified they can utilize this letter for certain period




What is current occupancy?


95% as on 2/2021




What is current average rent and market rent?


$875 to $927 – with upgrades target rent premium is $155 per unit




What is the hold term, min investment?


5 year hold $50K minimum




What is the total capital raise?


$5.2M




Can you explain the cashflow, when this principal return?


This is return on capital, after CoC you still have original capital in the deal. The capital i your returns next year is calculated based on the same capital. At the end of the deal capital is returned




What is the business plan?


  • Upgrade property exterior and interior + Rebranding
  • Raise current rents to market average rents
  • Implement operating efficiencies
  • Our Goal: Ensure Churchill achieves best in-market rents and attracts high-quality tenants.
  • Interior
  • Smart Home Features and Upgrades, including Smart Locks, Smart Thermostats, and USB Chargers
  • Optional in-unit Washer and Dryer Rental Service
  • Complete Renovation of 88 units: 12 1BR; 46 2BR; & 30 3BR (Floor, counters, cabinet lift, black appliances, lighting etc)
  • Exterior
  • Leasing Office Renovation/Upgrade
  • Business Center
  • Rebranding of Property, i.e Changing of Signage
  • Improve Exterior Lighting
  • Improve Pool Area
  • Deferred Maintenance
  • Add Bike Racks
  • Add School Bus Wait Area for Kids




What is the average cost of rehab per unit (interior)?


$7.5K ($7K upgrades and $500 smart home) PM gave the rough estimate, we will also get bids when actually implementing Flooring, black appliance, painting, changing cabinet doors, resurfacing counter top




What deferred maintenance items are identified, Renovation costs – are there any bids from contractors to support the cost for the scope of work proposed?


  • Drainage issue throughout the property (30K estimates)
  • 1 Roof replacement and minor roof repairs (36K estimated)
  • 1 foundation issue for a building (5K estimated)




Are there any delinquencies?


There is one major delinquency, applied for bankruptcy but got rejected and have given a notice. This one does not fall under COVID eviction memorandum




When will distribution start and what will be the frequency?


3-6 month stabilization Quarterly after that




Who is the previous owner and What is the reason for sale?


They completed their business plan and exiting for realizing profit




What is the entry CAP and what is the Exit CAP?


5.1 and 5.7




Current NOI & Expense Ratios?


NOI: $634,339 T-12 (639K) Entrry Expense Ratio: 54.57% Exist Expense Ratio: 47.86%




Why is expense ratio so high?


This is a typical to expect in this age property




What are the CapEx reserves?


We have accounted for 33K that is $250/unit reserves




What are current amenities?


Swimming pool, community room, laundry facilities, 256 parking spaces




Describe the ownership


Investors 80% and GP 20%, any profits are split that way. With pref 7%, LPs get 7% year by year basis before GP takes any profit, remaining is split 80/20. If there is any deficiency in any year for the 7%, will try to catch up the following year




What is the capital stack?


The capital stack is priority in which the parties involved get paid, first the bank for the loan, then LPs and then GPs




Is there refinance and return of capital?


The current business plan does not plan for refinance. (We have a long term assumable loan that is very low interest)




What type of investment is Churchill?


This is a Value-add Opportunity, also with current occupancy levels, it is cash flowing asset




Cost segregation K1 losses


The k1 losses 60-80% of the investment can be rolled over for passive investors till utilized. To the minimum applied to cashflow of this property will write-off the cashflow year after year (please note some recapture will happen at the end, they need to consult CPA)




Can we get Proforma document or underwriting?


We prefer not to share as this is off market and confidential. Happy to walk through the financials over zoom with an NDA.




Why is turnover zero?


Previous owner accounted turnovers under repairs and maintenance, its underwritten in the same bucket




Will the aluminum wiring be replaced or left as-is?


Aluminum wiring has been remediated with Copper. Property has been thoroughly inspected during pre-access due diligence by the acquisition team lead by our PM group. All quotes are actual quotes from inspections with additional cushion for any surprises. Our income growth projections on proforma are lower than what was proposed by the PM (very reliable company; First Communities management), and our expenses slightly higher. To provide cushion for any surprises




Tenants – who is the current tenant mix?


Most of the Tenants are families with kids in the neighboring schools. There are no USC student on the property. Majority of the tenants have kids and want their children to attend the schools in the area. Median household income on the property is around $51,000 (from the lease audits)




How many of current renters are currently behind on rent under the eviction moratorium?


We have one resident who is very behind. They are going through bankruptcy and are currently being evicted.




Why are real estate property taxes highlighted and showing a big jump?


They are highlighted to show that we have a good understanding of the tax assessment process for Columbia and have anticipated a large tax increase and accounted for it in our plans




What are the down side scenarios?


Extra long hold- This is a possibility, holding on longer to achieve a better sell out. On a loss scenario your liability is limited to what you put in, so in a scenario where the property could not be sold, and the bank takes it back, you would lose all your equity. This is the worst case scenario. Capital Call- In the event that he project needs capital for some reason, maybe unexpected uncovered damage, or poor performance, the Managers can do a capital call. If you don’t participate, your ownership % can be diluted proportional to the amount requested.




On your 4 deals, have any sold yet?  What is your performance record on those deals? (on actual versus projection….even if they haven’t sold, what is the latest projection versus expectation?)


The only deals that I have sold have been my personal properties which makes it difficult to compare returns because I had refinances, and very long holds. My current properties are on track for ~18% AAR.




Can this property be used in a 1031 Exchange?


The business plan is not to do a 1031 exchange for this property




How realistic is the sell out price?


Apartments are valued like a business based on the annual cash flow and a discount rate. The Cash Flow is called Net Operating Income(NOI). NOI=Income-Operating Expenses. The value of a property is equal to = NOI/(Discount Rate, which is known as Capitalization Rate or Cap Rate). CAP rate can be thought of as the market rate of return in which an investor is willing to invest in a property that does not consider leverage. We are buying the property for a 5.1 CAP rate We are assuming the property sells at a 5.7 CAP rate, which means we are assuming the market depreciates in the next 5 years. This is a conservative assumption, but a smart one for multifamily investing. So in 5 years, we have driven the NOI up through unit renovations and operational improvements. We divide that improved NOI by a conservative cap rate and that’s our predicted sell out price. That’s essentially the business model. Buy a property, increase its cash flow and sell it at slightly worse market conditions that today. If the conditions are the same as today, all the better.