Analysis of Investments

Element

Nelson Brothers

Nelson Brothers Element is an investment into a Class A/B student housing facility that has a total of 288 units and 792 beds. The property was built in 2003/2004 and renovated in 2016. The property is marketed to students attending Sacramento State University which is located in Sacramento, California.

Investment Highlights

  • Yr. 1 Cash-on-Cash 6.00%
  • Initial Occupancy 99.20%
  • Est. Time Horizon None YEARS
  • Current Cash Flow
  • Yr. 1 Cap Rate to Investor 5.32%
  • Investor Purchase Price $91,497,679
  • Total Offering Size $37,997,679

Loan Information

The loan is for a total of $53,225,000 and is from CapitalOne Multifamily Finance, LLC under the Fannie Mae DUS program. The term is for a total of 10 years with the first 6 years being interest only. When amortization begins it is on a 30 year schedule. The interest rate is fixed at 4.18%.

  • Yr. 1 DSCR 2.1
  • Loan-to-Offering 58.47%
  • Hold Period DSCR 1.87

Tenant Information & Lease Terms

The property is marketed to students at Cal State University Sacramento. Leases for off-campus student housing is generally on a 12 month schedule; however, it is possible that students may sub-lease their units during the summer. 

Leases are signed on an individual basis and not per unit. This is why the cost per bed rather than per unit and square foot are more relevant when analyzing student housing.

Parents are required to sign a guarantee of rent payments on leases for students.

Key Positives

  • The population in the area is growing and the population numbers in the area are strong. 

Key Risks to Consider

  • The sponsor acquisition fee is near $2 Million.

  • Rent growth is projected by the appraiser to be  3% which is less than the sponsors projection of 2.25%.

  • There is undeveloped land nearby the property that can be made into a competing property.

  • The students at Cal State Sacramento are generally commuters and therefore the need for student housing is limited as most students choose to live at home or within the region.

  • The cap rate to investors is low (sub-4%).

Investment Sponsor Information

Nelson Brothers

According to the sponsor's website: "Since its inception in 2007, Nelson Brothers has acquired and managed over $240 million in assets through the acquisition of 19 student housing properties and 3 assisted living properties across 9 states. Nelson Brothers focuses on targeted growth opportunities and value-added investments for its clients through capital improvements, cost efficiency, and revenue maximization. Its entities include Nelson Brothers Professional Real Estate LLC, and Nelson Brothers Property Management Inc."

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