Analysis of Investments
Everest Kensington
Everest
Everest Kensington is an investment into a Class B garden style multifamily apartment complex with a total of 316 units located in Forest Park which is a suburb of Cincinnati, Ohio.
Investment Highlights
- Yr. 1 Cash-on-Cash 5.17%
- Initial Occupancy 98.00%
- Est. Time Horizon 10 years YEARS
- Current Cash Flow 5.41%
- Yr. 1 Cap Rate to Investor 6.22%
- Investor Purchase Price $21,924,982
- Total Offering Size $10,300,000
Loan Information
The loan totals $11,624,982 and is from Love Funding Corporation. The loan was assumed from the previous owner on the property and had an original term of 35 years fully amortizing and maturing in 2047. The interest rate is fixed at 2.9%; however, there is a mortgage insurance premium of 0.45% that is to be paid on top of normal interest. This makes the interest an effective fixed rate of 3.35%.
- Yr. 1 DSCR 2.08
- Loan-to-Offering 53.02%
- Hold Period DSCR 2.62
Tenant Information & Lease Terms
Leases are signed on an individual basis at multifamily properties. The property manager will negotiate terms on a case by case basis. Leases are generally signed on a 12 month basis; however, this may differ for each tenant.
Key Positives
This property was previously owned by a TIC investment from CORE. Everest was able to purchase the property for $18.2 Million which is below the price of acquisition of CORE who purchased the property for $19 Million.
The loan is amortizing for the entire hold period. This will mean that the outstanding loan at the end of the hold term will be decreased and the sale will be able to be executed with a lower amount of debt.
The property has seen recent renovation including the roof which will decrease the potential costs to maintain the property.
Key Risks to Consider
The property manager is still CORE Property Management. However, Everest has taken over Asset Management and will be hiring all outside contractors using their own property management team and will take most of the responsibility as Asset Manger.
The upfront load is high for a levered offering at 13.01%.
A portion of the reserves are non-accountable to the trust meaning the sponsor may have incentive to not use that portion of reserves for capital improvements. Should that account have remaining reserves, the sponsor will keep them as profit.
Everest is decreasing anticipated operating expenses by over 8.5% in year 1 compared to the trailing 12 at the property. They plan to achieve this by decreasing expenses at the property and limiting payroll expenses significantly.
Investment Sponsor Information
Everest
According to the sponsor's website: "Since its founding in 1994 by W. Robert Kohorst, Everest has invested in limited partnerships that held real estate and other assets. Everest has invested funds in excess of $200,000,000 in more than 650 limited partnerships; providing liquidity for an otherwise illiquid asset class. In addition to investing, Everest has replaced general partners and asset managers, upon the investors' request, and worked to restructure the operation and financial management of undermanaged or undercapitalized real estate assets. Everest specializes in reorganizing assets to provide stable cash flow, downside protection and an opportunity for a profitable exit.
Everest has also acquired and holds a portfolio of properties in various categories. With few exceptions, Everest holds a significant majority of the equity in each property within its portfolio. Everest's current portfolio of property is estimated to exceed $500,000,000 in value."