In October 2018, GVA Management (“GVA”) launched an offering for a 334-unit, 173,000 square foot, Class B multifamily apartment complex located in the growing market of San Antonio, Texas.
GVA planned to implement new management, which would help reduce costs and increase net operating income, and to implement interior renovations totaling $5,000 per unit to bring them in line with market comparables. GVA projected the renovations could increase rents by an average of $115 per unit and that occupancy would increase to 95% upon stabilization.
Repositioning In Progress
By Q2 2019, GVA had rebranded the property to “Aspire” and was continuing the repositioning process by completing exterior upgrades as well as designer unit renovations. In-place rents had grown 10% since acquisition and were 4% above original pro forma.
At the end of June 2020, GVA completed the refinancing of the property and distributed a portion of the net proceeds back to investors, while withholding a certain percentage for reserves and future capital needs. Although by end of Q4 2019 performance had deteriorated and occupancy had declined to 83%, over the first half of 2020 occupancy steadily climbed to 96% and by end of Q2 2020 GVA had renovated 242 units to either partial or full renovation scope.
GVA received an unsolicited offer to buy out investor interests in the property. Considering the financial effect of the pandemic on the property’s tenant base, their ability to pay, the continued moratorium on evictions, as well as the recent refinancing, GVA believed the remaining upside was limited and decided it was in the best interest of investors to accept the buyout offer.
After an approximate two-year hold, GVA exercised discretion as the sponsor and decided to deviate from the original business plan. It accepted an unsolicited offer to buy out investor interests in the property, achieving positive, albeit lower-than-projected returns for investors.
*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 Villas del Encanto offering that resulted in an approximate 10.1% (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.
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