DEAL PREVIEW ROOM: https://crossmountaincapital.invportal.com/app/reservation-detail/61d332b08f11b9001a7ccfab

EQUITY RAISE: $4,000,000

SUMMARY

Cross Mountain Capital and Offerd (the “Sponsors”) are pleased to offer the opportunity for investors to participate in the Edgewood Apartments. This investment involves the purchase, renovation, and optimization of an off market mismanaged 112-unit, Class C workforce housing multi-family building in Westminster, a suburb of Denver, Colorado.

Through our repositioning strategy, we plan to transform the building into a Class B asset and provide investors with outsized returns and limited downside risk exposure, driven by strong equity growth from apartment renovations and mark-to-market. The Sponsors have a successful track record in Denver and other markets and will invest at least 10% of the $4million equity raise.

Investors will receive an 10% preferred return, which remains in place until all investor capital is returned. After an 10% return, the Sponsor will earn an incentive of excess distributable capital of 20%, until investors obtain a 20% IRR and 35% thereafter. The preferred return, hurdle structure, and generous promote in favor of investors ensures the Sponsor only gets rewarded if the investors see significant returns

DEAL HIGHLIGHTS

Early Return of Capital & Significant Equity Appreciation 

• Through our repositioning strategy, we plan to transform the building into a Class B asset and provide investors with a 115% return on their investment during the hold period (2.3x + equity multiple) and an IRR north of 20%.  
• We project investors will receive a 50%+ return of capital by the end of year 2 with a cash out refinance with agency debt, after the reposition strategy has been completed. 

Heavy Value-Add

• Extraordinarily poor existing management, bloated payroll, and mass vacancy due to previous fire damage and inability to timely restore units, resulting in a sale price 15% below prevailing comps. Building is currently 25% vacant. 
• Rents are greater in the building right next door, Candlelight Apartments, which is currently 100% occupied with comparable unrenovated units. Our value-add strategy will put Edgewood a class above Candlelight. 
• Allocated over $1 million for interior and exterior renovations to optimize net operating income.

Track Record in Submarket, Vertical Integration

• The Sponsors own multifamily units across the U.S., including over 200 units in the Denver MSA, and have successfully implemented value-add strategies throughout the US on over $200 million in assets. The asset was acquired after a year-long off-market campaign conducted through the Offerd platform. 
• Property and Construction Manager, and sponsor team member, 3Gen Construction Group manages over 1000 units across the Colorado Front Range, allowing for vertical integration and alignment of interests. 

Exceptional Market Growth and Fundamentals

• Denver has been one of the top MSAs in the nation for many years, based on jobs, employment, rent and asset price growth.  Additionally, it has shown strong COVID-19 resilience because of factors such as the strong employment rate, local precautions and preparedness, and the existing health of the population. As a leafy suburb only minutes from the Denver core, Westminster has benefited from a COVID-19 induced flight out of the core, as well as population growth from new Denver arrivals.
• Westminster apartment rents have risen over 6% in the last year, and there is limited housing availability. Zillow currently shows few houses for sale, most priced substantially higher than $500,000.

Low Maintenance Cost & Onsite Management

• Compact building footprint allows for reduced operating expenses for landscaping, plowing, and general maintenance. 
• Property has a spacious onsite office and maintenance storage rooms for efficient onsite management.

Conservative Underwriting & Favorable Bridge Debt

• Exit cap rate of 5% (market cap rate is 4%) despite demand-side pressure and limited supply.
• Modeling 4% annual rate of rental growth in a market that can sustain higher rent growth, based on consensus projections of 6-10%.
• 85% LTV bridge debt from long term debt partner Lasalle Debt Investors at L+365 basis points with a rate cap built in. Current effective interest rate of 3.85% is on par with agency loans.