Portland, OR

Realized Deal : Hoyt20

Sponsored By ScalanKemperBard

Risk Profile
Opportunistic
Amount Invested
$1,486,000
Targeted IRR
21.3%
Actual IRR*
21.7%
Targeted Equity Multiple
1.47x
Actual Equity Multiple*
1.55x
Targeted Hold Period
2.0 years
Actual Hold Period
2.2 years

In May 2016, ScanlanKemperBard (“SKB”) and Green Light Development (“Green Light”) launched an offering for a six-story, 59-unit multifamily development project located in Portland, Oregon.

The business plan called for demolishing an existing two-story office building and constructing 59 apartment flats along with an 850 square foot retail space that would connect to the apartment lobby. Through this development, SKB and Green Light aimed to take advantage of fast-changing market dynamics which they believed had made Portland one of the more attractive multifamily investment markets in the United States at that time. 

At the time of the offering, the project had already received unconditional design review approval from the City of Portland, and permit applications had been submitted with the intent to start construction in mid-July 2016. Construction was targeted to last 13 months, at which point the lease-up of the property would begin. SKB and Green Light had structured the project to be flexible for either a short-term sale after two years, or a long-term hold of approximately seven years.

Project Timeline

Site Cleared, GC Selected, Construction Loan Closed

December 2016

By the end of Q3 2016, SKB and Green Light had demolished the building and cleared the site. Additionally, a general contractor (“GC”) had been selected and a Guaranteed Maximum Price (“GMP”) contract executed, and construction was underway. The construction loan closed in Q4 2016, with an option to convert it to a five-year permanent loan upon maturity. SKB and Green Light planned to decide whether to sell the property (short-term hold scenario) or convert/refinance the loan (long-term hold scenario) prior to the initial loan maturity date.

Substantial Completion

December 2017

By the end of Q4 2017, the project had received a certificate of substantial completion and close-out of construction was underway. Budget-wise, the project was on target and had utilized little contingency to-date.  With construction activity coming to a close, leasing had become the primary focus. Avenue5, a residential property management company headquartered in the Pacific Northwest, was selected to handle on-site leasing and property management efforts. A coffee operator was expected to take occupancy in the ground floor retail space during the first quarter of 2018 and the project's first two residential leases were secured at rates above pro forma, with move-ins scheduled for January 2018. SKB and Green Light anticipated the remaining majority of the project's lease-up would occur in the spring and summer months.

Pursuit of Immediate Sale

December 2017

By the end of Q2 2018, all capital improvements were complete, and leasing activity continued to be strong with the property finishing the quarter at 79% occupied. During the first two weeks in July, the occupancy further increased to 89%. After evaluating sale and refinance options, SKB and Green Light decided to focus on immediate sale efforts and selected a reputable investment sales brokerage team to market the property for sale. Based on the broker's estimated sale value and timing, SKB and Green Light believed the investment would achieve the underwritten targeted investor returns.

Final Outcome

Timely and on-budget execution of the development plan, coupled with favorable submarket conditions created the opportunity for SKB and Green Light to quickly lease-up the property and achieve targeted rental rates, which translated into a successful sale in November 2018 producing investor returns in line with the original pro forma.

*Net of fees.

This report contains explanations of a series of events associated with SKB and Green Lights’ Hoyt20 offering that resulted in an approximate 55% (net of fees) absolute return on original equity 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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