In December 2016, Urban Green and Affinity Property Management jointly launched an offering for a 52-unit, Class-A apartment development in Portland, OR.
Affinity had acquired the site in October 2014 and contributed the land to the partnership with Urban Green below market value. Subsequently, the two sponsors entitled the property for 52 market-rate apartments and secured construction permits, which were advantageously pulled prior to the adoption of the new (and more restrictive) permit fee regime in Portland. Construction was planned over a period of 18 months, followed by a lease-up and stabilization by December 2018. The all-in delivered basis was expected to compare favorably to other newly delivered Portland multifamily projects.
Upon stabilization, the sponsors intended to refinance the project, followed by an additional year of operations and a targeted sale at the end of Year 4. However, by the time the deal launched on the CrowdStreet Marketplace, the sponsors had already received an unsolicited offer above pro forma projections from a buyer to purchase the project upon construction completion.
In Q1 2017, the building permit had been picked up and construction of the site work had begun. Additionally, the sponsors obtained a metro grant that would be used as part of the project funding.
Construction Loan Finalized
In Q2 2017, the sponsors closed on the construction loan for the project. By the end of June, all of the earthwork and slab prep were completed on the site, the footings and columns were poured, and the underground utility work was completed. Construction was continuing on schedule with only minor delays, targeting a completion date of May 2018.
Early Sale Announcement
In Q1 2018, the sponsors announced that the project was under contract for sale, remaining largely on schedule and within budget. The buyer was conducting due diligence and desired to close in late June or July, upon project completion.
The sale transaction officially closed in June 2018. Attractive basis in the property, timely and on-budget construction, and overall a successful business plan execution allowed the two sponsors to take advantage of an opportunistic exit, achieving strong returns for investors, including a higher-than-projected IRR, which in part, was due to the short hold period and early nature of the exit.
*Net of the most onerous fees charged to clients of CrowdStreet Advisors, LLC, our registered investment advisor subsidiary; an investor’s actual returns on a realized investment may differ.
This report contains explanations of a series of events associated with the Burnside offering that resulted in an approximate 49.9% (net of most onerous fees) IRR to investors (including those from the CrowdStreet Marketplace). Certain aspects of the report such as dates of major events and the final outcome are easily verifiable while others, particularly underlying reasons behind the sponsor’s business plan execution, are not.
The report partially relies upon the sponsor’s explanations, the information contained within sponsor-produced quarterly reports, and conference calls. This analysis is not an assertion of independently verified facts but, rather, is for informational purposes only, to convey CrowdStreet’s understanding of what transpired.
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