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Property Update
North Russell: A New Chapter
We took North Russell to market with Berkadia, and the interest has been real, 13 offers so far, with a few more still coming in. But after talking it through with our largest investors, we've decided recapitalizing makes more sense than selling.
$10.75M
Recap Price
7.76%
Year 3 Cap Rate
7.26%
Yr 3 Return on Cost
Buyers simply aren't valuing the land the way we do. Our BOVs came in at $11M to $12.2M without putting anything on it, and there's still real upside left: 30 unrenovated units with $175+ in rent growth, and room to build 32 more units on the site. A recap also saves us about $275,000 in broker fees.
Adam Hertz, our broker on this deal, will invest and co-sign the loan with us at $10,750,000 instead of buying the property outright.
Our two largest investors are rolling their full proceeds back in, and Joe and Levi plan to add $650K to $1M as a sponsor co-invest. This month's distribution held at a 5% return on capital, as planned.
We'll share the full business plan in the coming weeks. As always, reach out to Joe or Levi if you have questions.
On Investor Trust & Transparency
This Wasn't a Text I Expected to Receive
One of our largest investors, Nate and Beckie Lambert, who also manage a fund-of-funds, texted me that they were flying in to inspect one of our properties.
I'll admit, my first thought wasn't "This is awesome." It was "Okay … let's make sure they see everything." Because out of all the deals in our portfolio, this one has faced the most struggles and challenges.
But we're overcoming them, not because we were hiding anything. Being trusted with someone's capital is a responsibility we don't take lightly. So we opened every door, answered every question, and invited them straight into the process.
A few days later, they sent this:
"Your openness and response … was EXTREMELY comforting."
That message meant more than they probably realize. Anyone can communicate when things are going well. Trust is built by being just as transparent when things are tough.
I'd rather have an uncomfortable conversation today than lose an investor's trust tomorrow. That's how we do business.