SB Real Estate Partners has budgeted approximately $1.4 million of exterior and common area capex, along with $2.0 million of interior unit renovation capex in order to collectively drive the value-add execution and compete with surrounding properties within immediate proximity.
SB Real Estate Partners has a strong presence in the submarket with an overall focus on Class B workforce multifamily throughout Phoenix (over 1,000 units under ownership).
Casa Anita is located within the thriving West Valley submarket of Phoenix, which has become the industrial, storage, and logistics hub of the city. This pocket of Phoenix is projected to add 23,000 more households and 31,000 workers through 2024, which would represent 22% of the MSA's overall job growth through that time period (Source: Alteryx and Costar).
$35,300,000
SB Real Estate Partners
Founded in 2017, SB Real Estate Partners (“SBREP”) is a multifamily investment firm committed to acquiring and asset managing value add investments throughout the Western United States. With an extensive track record in the institutional multifamily space, SBREP consistently sources compelling investment opportunities with the goal of maximizing value and risk adjusted returns for their partners.
https://www.sbrep.com/-
Srijin BandyopadhyayManaging Principal
Srijin Bandyopadhyay is the Managing Principal for SB Real Estate Partners. Prior to founding SBREP, Srijin was responsible for sourcing, diligencing and closing over $1.2 billion of multifamily acquisitions throughout the west coast for Greystar Real Estate Partners. Srijin holds an MBA from the UCLA Anderson School of Management and a Bachelor’s Degree from Washington University in St. Louis. Srijin resides in Orange County, Southern California, with his wife and two children.
| Property | City, State | Asset Type | Acq Date | Units | Purchase Price | Sale Price/Est. Value |
| 95 Burnett | Renton, WA | Multifamily | 10/26/2018 | 106 | $26,850,000 | $40,000,000 |
| Cordova | Phoenix, AZ | Multifamily | 6/26/2019 | 320 | $32,250,000 | $51,100,000 |
| Bridge Creek | Vancouver, WA | Multifamily | 10/15/2019 | 270 | $55,900,000 | $75,000,000 |
| Verona Court | Phoenix, AZ | Multifamily | 8/7/2020 | 141 | $20,000,000 | $36,600,000 |
| Casa Anita | Phoenix, AZ | Multifamily | 12/9/2020 | 224 | $35,300,000 | $59,800,000 |
| Val Vista | Mesa, AZ | Multifamily | 1/1/2020 | 98 | $15,400,000 | |
| Seventeen805 | Phoenix, AZ | Multifamily | 11/1/2020 | 138 | $29,750,000 | |
| ReNew 3030 | Mesa, AZ | Multifamily | 8/31/2021 | 126 | $24,300,000 | |
| East 3434 | Phoenix, AZ | Multifamily | 9/30/2021 | 128 | $27,500,000 | |
| ReNew Redlands | Redlands, CA | Multifamily | 10/14/2021 | 124 | $46,200,000 | |
| The Russell | Las Vegas, NV | Multifamily | 10/14/2021 | 241 | $67,000,000 | |
| St. Croix | Las Vegas, NV | Multifamily | 12/16/2021 | 256 | $73,100,000 | |
| Bloom 24 | Phoenix, AZ | Multifamily | 1/19/2022 | 114 | $34,200,000 | |
| Bridge Creek (recap) | Vancouver, WA | Multifamily | 1/20/2022 | 270 | $75,000,000 | |
| Confidential** | Phoenix, AZ | Multifamily | Pending | 180 | $58,100,000 |
**Under contract and non-refundable
The above bios and track record were provided by SB Real Estate Partners and have not been independently verified by RealtyMogul.
SBREP's capex budget totals approximately $3.8 million or roughly $17,000/door to address interior and common area renovations, along with various deferred maintenance and asset preservation items. The interior scope totals $2.0 million across all 224 units ($8,800/door) and includes: installation of in-unit, stacked washers and dryers, vinyl flooring, a modern light-gray two-tone paint scheme, resurfacing counters and cabinets, and replacing dated appliances with a modern stainless steel package. Common area improvements total approximately $656,000 or $3,000/door and includes: a full landscaping budget to activate the arrival/entry and leasing path as well as the overall grounds of the property as they are currently stale, repurposing the basketball court into an expanded and modernized kids play/family gathering area, a modern exterior paint scheme to significantly improve the drive-by/curb appeal of the property, installation of a perimeter gating or fencing system to establish the property's boundary and security, new FF&E for both the leasing clubhouse and pool areas, new BBQ stations, along with modern exterior lighting. Finally, the deferred maintenance and asset preservation budget of approximately $779,000 or $3,500/door includes: capex for HVAC unit replacements, parking lot asphalt and seal coating, boiler and plumbing system repairs and reserves, roofing maintenance, and hand rail and wrought iron repairs and reserves.
Below is a summary of the capital improvements budget:
| Interior Renovations | Total $ Amount | Per Unit | ||||||
| Roll Vinyl Flooring and/or Carpet | $179,200 | $800 | ||||||
| Faux Stainless Steel or Black Appliances | $336,000 | $1,500 | ||||||
| Resurfaced Counters | $112,000 | $500 | ||||||
| Two-Tone Paint | $156,800 | $700 | ||||||
| New Blinds | $56,000 | $250 | ||||||
| Lighting Fixtures | $112,000 | $500 | ||||||
| Hardware / Fixtures | $112,000 | $500 | ||||||
| New Baseboards | $56,000 | $250 | ||||||
| Washer/dryer Installation | $672,000 | $3,000 | ||||||
| Labor / Contingency (10%) | $179,200 | $800 | ||||||
| Total Interior Renovation Costs | $1,971,200 | $8,800 | ||||||
| Total Common Area Renovations | $655,953 | $2,928 | ||||||
| Total Deferred Maintenance & Asset Preservation Costs | $778,463 | $3,475 | ||||||
| Contingency (5%) | $170,281 | $760 | ||||||
| Construction Management Fee (5%) | $178,795 | $798 | ||||||
| Grand Total | $3,754,692 | $16,762 | ||||||
These amounts are subject to change at the discretion of the Real Estate Company.
SB Real Estate Partners (“SBREP”) is currently under contract to purchase Casa Anita Apartments for $35.3 million and is underwriting to investor level returns of 15.8% IRR / 1.7x equity multiple over a four-year hold, with average cash-on-cash returns of 5.9%. The seller is an out-of-state family that has owned the property for almost twenty years and has maintained a conservative leasing strategy. The unit mix consists primarily of 2x2 floor plans averaging 980 SF. SBREP currently owns Cordova Apartments, which is located one mile east of Casa Anita, and is leasing smaller 2x2 floor plans of equivalent condition/finishes at over $1,150/unit (more than $300 above Casa Anita). As a result, there is an opportunity to substantially renovate, rebrand, and reposition the property in order to bring rents closer to surrounding comparable properties.
In-Place/Stabilized Unit Mix:
| Unit Type | # of Units | % of Total | Average SF/Unit | Avg Rent (In-Place) | Avg Rent (Post-Reno) | Post-Reno Rent per SF |
| 1x1 | 72 | 32% | 709 | $779 | $1,010 | $1.42 |
| 2x2 | 152 | 68% | 978 | $864 | $1,265 | $1.29 |
| Total/Averages | 224 | 100% | 892 | $837 | $1,183 | $1.34 |
| Del Mar Apartments | Broadstone Desert Sky | Sunpointe Apartments | Ventana Palms | Cordova Apartments | Morada West | Marble Creek | Averages | Subject (Post-Reno Rents) | |
|---|---|---|---|---|---|---|---|---|---|
| Year Built | 2008 | 2007 | 1984 | 1989 | 1985 | 1998 | 1985 | 1994 | 1986 |
| # of Units | 144 | 288 | 152 | 160 | 320 | 428 | 244 | 248 | 224 |
| Class | B | B | C | B | C | B | B | B | |
| $/Unit (1x1) | $1,115 | $1,147 | $1,038 | $948 | $857 | $1,065 | $953 | $1,018 | $1,010 |
| SF (1x1) | 819 SF | 799 SF | 649 SF | 740 SF | 625 SF | 717 SF | 720 SF | 724 SF | 709 SF |
| $/SF (1x1) | $1.36 | $1.44 | $1.60 | $1.28 | $1.37 | $1.49 | $1.32 | $1.41 | $1.42 |
| $/Unit (2x2) | $1,315 | $1,462 | $1,313 | $1,226 | $1,148 | $1,265 | $1,215 | $1,278 | $1,265 |
| SF (2x2) | 1,127 SF | 1,118 SF | 917 SF | 950 SF | 880 SF | 952 SF | 1,000 SF | 992 SF | 978 SF |
| $/SF (2x2) | $1.17 | $1.31 | $1.43 | $1.29 | $1.30 | $1.33 | $1.22 | $1.29 | $1.29 |
| Distance from subject | 0.5 mi | 0.8 mi | 1.8 mi | 1.8 mi | 2.8 mi | 3.2 mi | 3.6 mi |
| Del Mar Apartments | Sunpointe Apartments1 | Cordova Apartments | Averages | Subject | |
|---|---|---|---|---|---|
| Date Sold | Feb 2020 | Under LOI | Oct 2020 | ||
| Year Built | 2008 | 1984 | 1985 | 1992 | 1986 |
| Class | B | C | C | B | |
| # of Units | 144 | 152 | 320 | 205 | 224 |
| Average Unit Size | 1,073 SF | 804 SF | 709 SF | 862 SF | 892 SF |
| Sale Price | $27,000,000 | $26,600,000 | $51,200,000 | $34,933,333 | $35,300,000 |
| $/Unit | $187,500 | $175,000 | $160,000 | $174,167 | $157,589 |
| $/SF | $185 | $218 | $215 | $206 | $177 |
| Building Size | 145,848 SF | 122,232 SF | 238,410 SF | ||
| Distance from subject | 0.5 mi | 1.8 mi | 2.8 mi |
Sale and lease comps were obtained from SB Real Estate Partners.
1 Reflects expected terms under LOI.
Market Overview
Per CoStar, the Phoenix multifamily market has proved to be resilient since the onset of the COVID-19 pandemic. Before the pandemic, fundamentals were solid and supported by some of the nation’s strongest employment and household growth. Relatively low levels of single-family homebuilding and healthy demand have continued to keep vacancies tight. Employment has started to rise again following the reopening of the economy in mid-May. Historically, the Phoenix MSA has attracted people in search of affordable living and job opportunities. This trend is expected to accelerate due to work from home arrangements that will lure renters from pricey West Coast markets.
Despite robust population growth over the past several years, single-family development has not kept pace and pricing has soared. Multifamily developers have worked to make up for the lack of residential construction. Demand for apartments has withstood a wave of new supply over the past two years and has kept vacancies historically low. Tight vacancies have contributed to ample rent growth that has consistently ranked among the best in the nation over the past two years.
Submarket Overview
Per CoStar, the West Valley submarket has been among one of the most resilient locations within the Phoenix MSA since the onset of the pandemic. The West Valley area has weathered the storm relatively better than other areas in Phoenix due to its affordable rents, which are about 15% below the market average. Because of steady apartment demand throughout the pandemic, daily asking rent levels in the West Valley recovered much faster than other areas in Phoenix post-pandemic. Before the pandemic, developers were attempting to meet robust demand in the area, which was previously underserved. From 2011-2017, apartment inventory had not grown, despite strong population growth during that period. Overall, the demand drivers that worked in favor of the submarket in the past are expected to continue to play out in the market once the effects of the virus fade.
The West Valley has achieved one of the best rent recoveries in the Phoenix market since the onset of the pandemic. By May, rents began to rise again, and they are now well above the March peak. The West Valley is one of the most affordable submarkets in Phoenix. Asking rents average approximately $1,050/month, which is about 15% below the market average. However, the submarket has also achieved the most significant rent gains in past quarters. Modest residential construction, coupled with a lack of affordable available inventory in the market, had granted property managers leverage to increase rents even in the pandemic environment.
| Sources of Funds | Amount |
|---|---|
| Debt - Initial Proceeds | $25,245,309 |
| Debt - CapEx Proceeds | $3,754,691 |
| Equity | $11,248,791 |
| Total Sources of Funds | $40,248,791 |
| Uses of Funds | Amount |
| Purchase Price | $35,300,000 |
| Acquisition Fee | $244,667 |
| Loan Fee | $290,000 |
| CapEx | $3,754,691 |
| Closing Costs(1) | $534,433 |
| Working Capital | $125,000 |
| Total Uses of Funds | $40,248,791 |
Please note that the SB Real Estate Partners' equity contribution may consist of friends and family equity and equity from funds controlled by SB Real Estate Partners. Additionally, the numbers represented above can change prior to closing depending on final loan proceeds, property condition assessments, appraisals, final closing costs, and other lender-mandated expenses.
(1) RM Technologies operates the RealtyMogul platform. RM Technologies charges a fixed, non-percentage-based fee for real estate companies to use the marketplace. An estimate of this fee is included in the Closing Costs and is intented to be capitalized into the transaction at the discretion of the Manager.
The terms of the bridge loan are as follows:
- Estimated Proceeds: $29,000,000
- Interest Rate (Floating): SOFR plus 4.00%
- Term: 3 years
- Interest Only: 3 years
- Extension Options: Two (2) one-year extension options
The expected terms of the senior loan refinance are as follows:
- Estimated Proceeds: $31,200,000
- Origination Date: December 2022
- Estimated Rate (Floating): SOFR plus 3.00%
- Term: 10 years
- Interest Only: 5 years
There can be no assurance that a lender will provide debt on the rates and terms noted above, or at all. All rates and terms of the debt financing are subject to lender approval, including but not limited to possible increases in capital reserve requirements for funds to be held in a lender-controlled capital reserve account.
SB Real Estate Group intends to make distributions from SBREP-Casa Anita Owner, LLC to SBREP-RealtyMogul Investors, LLC as follows:
- To the Members, pari passu, all excess operating cash flows to an 8.0% preferred return.
- 70.0% / 30.0% (70.0% to Members / 30.0% to Promote) of excess cash flow and appreciation thereafter.
SBREP-Casa Anita Owner, LLC intends to make distributions to investors. Note that all distributions will occur after the payment of both company's liabilities (loan payments, operating expenses, and other fees as set forth in the LLC agreements, in addition to any member loans or returns due on member loan).
Distributions are expected to start in April 2021 and are projected to continue on a quarterly basis thereafter. These distributions are at the discretion of SB Real Estate Partners, who may decide to delay distributions for any reason, including maintenance or capital reserves.
| Year 1 | Year 2 | Year 3 | Year 4 | |
|---|---|---|---|---|
| Effective Gross Revenue | $2,427,115 | $2,768,459 | $3,213,88 | $3,756,427 |
| Total Operating Expenses | $1,072,668 | $1,109,846 | $1,151,000 | $1,196,043 |
| Net Operating Income | $1,354,447 | $1,658,614 | $2,062,881 | $2,563,374 |
| Year 0 | Year 1 | Year 2 | Year 3 | Year 4 | |
|---|---|---|---|---|---|
| Investor-Level Cash Flows | ($3,000,000) | $27,369 | $940,666 | $6,062 | $4,068,324 |
| Net Earnings to Investor - Hypothetical $50,000 Investment | ($50,000) | $456 | $15,678 | $101 | $67,805 |
Certain fees and compensation will be paid over the life of the transaction; please refer to SB Real Estate Partners' materials for details. The following fees and compensation will be paid(1)(2)(3):
| Type of Fee | Amount of Fee | Received By | Paid From | Notes |
|---|---|---|---|---|
| Acquisition Fee | $244,667 | SB Real Estate Partners | Capitalized Equity Contribution | |
| Construction Management Fee | 5.0% of CapEx drawn to date | SB Real Estate Partners | Capitalized Equity Contribution |
| Type of Fee | Amount of Fee | Received By | Paid From |
|---|---|---|---|
| Administrative Services Fee | 1.0% of amount invested into SBREP-RealtyMogul Investors, LLC | RM Admin(3) | Distributable Cash |
| Asset Management Fee | 1.0% of Effective Gross Income | SB Real Estate Partners | Distributable Cash |
(1) Fees may be deferred to reduce impact to investor distributions
(2) RM Technologies operates the RealtyMogul platform. RM Technologies charges a fixed, non-percentage-based fee for real estate companies to use the marketplace. An estimate of this fee is included in the Closing Costs and is intented to be capitalized into the transaction at the discretion of the Manager.
(3) RM Admin will be providing the following services:(a) responding to inbound investor inquiries regarding how to subscribe to the Project, (b) distribution of all annual tax forms (after receipt of same from Project Sponsor), (c) processing distributions that are payable from SBREP-RealtyMogul Investors, LLC to Investors, however, RM Admin will not be deemed to have custody of client funds, (d) distribution of all quarterly reports (after receipt of same from Project Sponsor) and (e) summarizing sponsor information on property performance, responding to investor inquiries regarding sponsor performance information as well as the real estate market generally.
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The preceding summary of principal terms of the offering is qualified in its entirety by reference to the more complete information about the offering contained in the offering documents, including, without limitation, the Private Placement Memorandum, Operating Agreement, Subscription Agreement and all exhibits and other documents attached thereto or referenced therein (collectively, the "Investment Documents"). This summary is not complete, and each prospective investor should carefully read all of the Investment Documents and any supplements thereto, copies of which are available by clicking the links above or upon request, before deciding whether to make an investment. In the event of an inconsistency between the preceding summary and the Investment Documents, investors should rely on the content of the Investment Documents.
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