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Sourced through off market avenues, Rocco Apartments presents an opportunity to acquire an operationally distressed property located in Dallas-Forth Worth at a basis of $112K/unit, which is well below both replacement cost and recent trades in the area. Sentinel Peak believes this distress stems from current owner's mismanagement of the Property, which has resulted in occupancy falling into the 70s in advance of an upcoming rate cap maturity and DSCR test, forcing the owner into a distressed sale.
Sentinel Peak is a vertically integrated Sponsor, who is headquartered in Dallas-Fort Worth. Sentinel Peak has purchased over 7,000 units since its inception. Currently, Sentinel Peak owns and manages over 6,500 units throughout Texas valued at approximately $1 billion.
Due to the advantageous acquisition basis, achievement of the business plan is predicated largely on returning physical and economic occupancies to stabilized levels through assertive leasing and property management. The Base Case business plan projects an attractive return profile to investors without relying on significant renovations or lifting in-place rents. The Property is projected to exit at a price that is well-supported by comparable trades while leaving plenty of value-add opportunities available for the next buyer.
Sentinel Peak Capital Partners
Sentinel Peak Capital Partners LLC (“Sentinel”, “Sentinel Peak” or “SPCP”) is a private, vertically integrated, commercial real estate investment firm primarily focused on the acquisition and repositioning of multifamily properties located in major metropolitan markets throughout Texas. Based in Dallas, Texas, Sentinel seeks to enhance the value of each asset it acquires across all phases of the business cycle by (i) acquiring properties below historical replacement cost, (ii) providing active oversight of the construction and renovation process, and (iii) making targeted capital investments to address physical and operational deficiencies with the goal of driving increased rent growth and reduced maintenance expenses.
Established in 2015, Sentinel was co-founded and is managed by Richard Chesney and Ryan Beaupré (the “Principals”). Sentinel targets multifamily properties built between 1980 and 2008 that the Principals believe can be repositioned to achieve superior returns for its limited partners. In order to reposition each asset, Sentinel deploys investment capital to address capital structure or physical and operating deficiencies that have caused the asset to under-perform relative to its competitive set. Once these deficiencies have been addressed, depending on market conditions, Sentinel seeks to either refinance the asset to recapture investor capital and hold long term, or sell the asset immediately following its repositioning.
https://summitapm.com/sentinel-peak/-
Richard ChesneyManaging Partner -
Ryan BeaupreManaging Partner
Richard Chesney is a co-founder and Managing Partner of Sentinel Peak Capital Partners. He is responsible for developing and effectuating the repositioning strategies for each property that Sentinel Peak acquires. Prior to co-founding Sentinel Peak, he worked within the Real Estate Finance Group at Goldman, Sachs & Company in Dallas, where he participated in the origination, loan closing, and securitization of approximately $1.0 billion in commercial mortgage loans across several asset classes, including, multifamily, retail, office and hospitality properties. Prior to his time at Goldman Sachs, Richard worked within the special servicing division within J.E. Robert Companies (JER Partners) where he was part of a team that actively managed all non-performing loans and REO assets. During his time at JER, he was part of a team that repositioned a portfolio multifamily property in excess of 1,000 units. These repositioning strategies allowed the firm to recoup its original loan balance. Prior to JER, he worked for Cole Capital in Phoenix in an asset management role and began his career with Holliday Fenoglio Fowler in its Dallas office on its debt platform. Richard earned his Masters of Business Administration, concentrating in finance, from Southern Methodist University in Dallas, Texas, and his Bachelors in Architecture from the University of Arizona in Tucson, Arizona. He is an active member of the Urban Land Institute, serves on the Boards of Directors for the Lake Highlands Public Improvement District & local apartment associations, and lives in Dallas with his wife Melanie and their son and daughter.
Ryan Beaupré is a co-founder and Managing Partner of Sentinel Peak Capital Partners. He is focused on investment partner communication and the strategy of Sentinel Peak’s corporate growth. Prior to co-founding Sentinel Peak, Ryan worked in the sports and entertainment industry, where he provided niche investment banking services to various clients focused on sports facility and real estate development. With a primary focus on arena feasibility analyses and economic/fiscal impact studies, Ryan participated in advisory services on more than $2.0 billion in sports-related capital investment projects. He also held roles in sales and marketing capacities within the NBA and the NFL. He is originally from Dallas and earned his Masters of Business Administration from Southern Methodist University and his Bachelors in Business from the University of Arizona. Ryan is an active member of Young Presidents’ Organization (YPO), an avid sports fan, and enjoys spending time with his wife, Rachel, and their three children.
| Property Name | City, State | Asset Type | Status | Acq Date | Units | Purchase Price | Sales Price or Estimated Value | Implied or Realized IRR | EMx | T12 at Closing | Annualized NOI at Closing/Current | Delta (%) |
| Oakwood Apartments | Dallas-Fort Worth, TX | Multifamily | SOLD | 10-26-2016 | 60 | $3,400,000 | $6,200,000 | 24.70% | 1.90X | $177,410 | $382,536 | 115.6% |
| The View at Lake Highlands | Dallas-Fort Worth, TX | Multifamily | SOLD | 12-07-2017 | 292 | $23,500,000 | $35,250,000 | 26.50% | 1.90X | $1,378,283 | $2,274,440 | 65.0% |
| The Junction Apartments | Dallas-Fort Worth, TX | Multifamily | SOLD | 12-03-2018 | 205 | $16,950,000 | $27,300,000 | 31.00% | 2.46X | $913,274 | $1,378,326 | 50.9% |
| Forest Ridge Apartments | Dallas-Fort Worth, TX | Multifamily | SOLD | 01-28-2016 | 160 | $7,495,000 | $21,250,000 | 42.80% | 4.85X | $473,723 | $940,536 | 98.5% |
| The Reserve at Lake Highlands | Dallas-Fort Worth, TX | Multifamily | SOLD | 05-17-2017 | 152 | $9,475,000 | $19,500,000 | 29.80% | 3.24X | $629,628 | $1,096,239 | 74.1% |
| Eleven600 Apartments | Dallas-Fort Worth, TX | Multifamily | OWNED | 05-08-2018 | 216 | $18,250,000 | $30,000,000 | 23.00% | 2.57X | $946,299 | $1,617,901 | 71.0% |
| Twenty-One 15 Apartments | Dallas-Fort Worth, TX | Multifamily | OWNED | 04-17-2018 | 280 | $22,000,000 | $45,000,000 | 27.60% | 3.22X | $1,056,809 | $1,958,460 | 85.3% |
| The Hub on Chisholm Trail Apartments | Dallas-Fort Worth, TX | Multifamily | OWNED | 01-29-2019 | 256 | $23,250,000 | $39,000,000 | 24.90% | 2.67X | $1,191,383 | $1,811,592 | 52.1% |
| The District Apartments | Dallas-Fort Worth, TX | Multifamily | OWNED | 04-04-2019 | 228 | $20,350,000 | $36,000,000 | 32.10% | 3.01X | $1,222,068 | $1,741,176 | 42.5% |
| Lakebridge Apartments | Houston, TX | Multifamily | OWNED | 02-26-2020 | 272 | $26,650,000 | $49,500,000 | 58.20% | 3.74X | $1,177,784 | $2,270,616 | 92.8% |
| Carrara at Cypress Creek | Houston, TX | Multifamily | OWNED | 08-18-2020 | 234 | $20,000,000 | $30,000,000 | 25.90% | 2.23X | $972,106 | $1,649,292 | 69.7% |
| The Hampton on Jupiter | Dallas-Fort Worth, TX | Multifamily | OWNED | 11-02-2020 | 364 | $36,000,000 | $54,600,000 | 52.10% | 2.71X | $1,772,748 | $3,211,296 | 81.1% |
| The Linc at Cypress | Houston, TX | Multifamily | OWNED | 12-18-2020 | 176 | $16,250,000 | $24,000,000 | 23.90% | 1.97X | $572,096 | $1,329,696 | 132.4% |
| The Edge at Clear Lake | Houston, TX | Multifamily | OWNED | 03-12-2021 | 320 | $34,000,000 | $44,800,000 | Property Under Renovation | Property Under Renovation | $1,891,392 | $2,632,328 | 39.2% |
| The Haven on Chisholm Trail | Dallas-Fort Worth, TX | Multifamily | OWNED | 05-20-2021 | 328 | $35,000,000 | $52,480,000 | Property Under Renovation | Property Under Renovation | $1,395,795 | $2,425,908 | 73.8% |
| The Landing at Clear Lake | Houston, TX | Multifamily | OWNED | 05-20-2021 | 244 | $26,200,000 | $34,160,000 | Property Under Renovation | Property Under Renovation | $1,381,927 | $1,943,850 | 40.7% |
| The Legacy at Clear Lake | Houston, TX | Multifamily | OWNED | 05-20-2021 | 164 | $16,800,000 | $22,960,000 | Property Under Renovation | Property Under Renovation | $818,910 | $1,046,219 | 27.8% |
| Lakebridge Townhomes | Houston, TX | Multifamily | OWNED | 07-01-2021 | 94 | $12,400,000 | $15,500,000 | Property Under Renovation | Property Under Renovation | $534,109 | $821,556 | 53.8% |
| The Preston Apartments | Houston, TX | Multifamily | OWNED | 08-01-2021 | 144 | $20,000,000 | $24,000,000 | Property Under Renovation | Property Under Renovation | $1,044,403 | $1,341,852 | 28.5% |
| The Domain at Ellington | Houston, TX | Multifamily | OWNED | 10-15-2021 | 256 | $26,750,000 | $35,840,000 | Property Under Renovation | Property Under Renovation | $957,016 | $1,489,422 | 55.6% |
| The Pines at Spring Rain | Houston, TX | Multifamily | OWNED | 12-15-2021 | 232 | $33,650,000 | $41,760,000 | Property Under Renovation | Property Under Renovation | $1,171,727 | $1,637,317 | 39.7% |
| Waterside Apartments | Houston, TX | Multifamily | OWNED | 12-15-2021 | 259 | $33,000,000 | $41,440,000 | Property Under Renovation | Property Under Renovation | $1,366,703 | $1,634,388 | 19.6% |
| The Parker at Ellington | Houston, TX | Multifamily | OWNED | 12-15-2021 | 244 | $29,950,000 | $34,160,000 | Property Under Renovation | Property Under Renovation | $1,061,104 | $1,407,254 | 32.6% |
| The Beverly at Clear Lake | Houston, TX | Multifamily | OWNED | 12-15-2021 | 214 | $26,050,000 | $31,200,000 | Property Under Renovation | Property Under Renovation | $938,189 | $1,356,908 | 44.6% |
| The Bradford at the Park | Dallas-Fort Worth, TX | Multifamily | OWNED | 12-15-2021 | 300 | $50,500,000 | $55,500,000 | Property Under Renovation | Property Under Renovation | $1,833,622 | $2,857,320 | 55.8% |
| The Gates | Houston, TX | Multifamily | OWNED | 05-01-2022 | 270 | $29,500,000 | $37,800,000 | Property Under Renovation | Property Under Renovation | $903,185 | $1,403,292 | 55.4% |
| The Gentry | Houston, TX | Multifamily | OWNED | 05-01-2022 | 146 | $20,000,000 | $25,000,000 | Property Under Renovation | Property Under Renovation | $724,204 | $975,132 | 34.6% |
| The Gibson | Houston, TX | Multifamily | OWNED | 05-01-2022 | 196 | $26,000,000 | $32,000,000 | Property Under Renovation | Property Under Renovation | $1,065,901 | $1,404,948 | 31.8% |
| The Grove | Houston, TX | Multifamily | OWNED | 05-01-2022 | 464 | $51,500,000 | $65,000,000 | Property Under Renovation | Property Under Renovation | $1,531,195 | $2,419,344 | 58.0% |
| The Madison on the Lake | Houston, TX | Multifamily | OWNED | 06-01-2022 | 392 | $48,500,000 | $57,500,000 | Property Under Renovation | Property Under Renovation | $1,843,795 | $2,499,835 | 35.6% |
| Totals/Weighted Avg. | 7,162 | $763,370,000 | $1,068,700,000 |
The above bios and track record were provided by Sentinel Peak Capital Partners and have not been independently verified by RealtyMogul.
(1) Units that are covered under business income insurance are counted as occupied.
(2) Oakwood Sold on 1/16/2020 for $6.2 million.
(3) The View at Lake Highlands sale closed in September 2020 for a sale price of $35.25 million.
(4) The Junction sale closed in March 2022 for a sale price of $27.3 million.
(5) Forest Ridge sale closed in June 2022 for a sale price of $21.25 million.
(6) Reserve at Lake Highlands closed in March 2023 for a sale price of $19.2 million.
(7) Current occupancy taken as of May 2023. Harvested Assets include physical occupancy at date of sale.
(8) Renovation completion percentage and renovated rental rate increase taken from the 5/2023 report.
(9) TTM at closing taken from the last available report from the prior owner prior to purchase.
(10) Current Annualized NOI was taken from April 2023 financials and annualized. Harvested assets were taken from the last full month of operations.
Built in 1984, Rocco (the “Property”) is a 312-unit apartment community that presents an extremely unique opportunity to acquire a distressed asset at a below-market basis of ~$112,179 per unit. Stabilized assets in comparable condition located in North Arlington near the Property have traded at an average of $130,000 to $160,000 per unit in this current environment.
Located on Randol Mill Road near Eastchase Parkway, the Property is positioned just south of Interstate-30, providing residents easy access to Downtown Fort Worth and Downtown Dallas. Additionally, Rocco is conveniently located near several local demand drivers, including Texas Health Arlington Memorial Hospital (~3.5 miles) and University of Texas at Arlington (~4 miles), as well as to ATT Stadium, Globe Life Field, Six Flags Over Texas and Hurricane Harbor Waterpark. Additionally, the Property is about 1 mile from national retailers, including Target, Walmart Supercenter, Sam’s Club, and Lowes Home Improvement. Sentinel Peak Capital Partners (“Sentinel Peak” or “SPCP”) believes the ability to generate superior risk-adjusted returns for the next 18-24 months will rest within the distressed property segment where prior owners have either over levered, miscapitalized, and/or mismanaged their assets. Rocco is the first of these opportunities that we expect to come over this time period. As such, the Property’s current occupancy of 70% provides an opportunity to create value by placing the existing vacant unit stock into a leasable condition and improving the credit quality of the overall resident base. The current owner does not have adequate cash to turn 30% of the Property currently vacant into a leasable condition; SPCP’s injection of capital will address this issue, and the near-term goal will be to get the Property leased back to market occupancy level (~93%) within the first few quarters.
Further, the current owner does not currently have an adequate marketing mix to drive sufficient qualified traffic to the Property; due to this lack of a qualified resident base, property operations have slipped, vacancy has increased, and cash flow has declined. To address this issue, SPCP’s business plan will include placing the Property on Apartment.com’s boost program, which places the Property within the top slots on their website within a defined area. Historically, SPCP has been successful in placing our properties undergoing renovation on this program which has aided the speed of accomplishing our business plans by driving qualified traffic to our properties and re-tenanting assets within the first year of ownership. Sentinel Peak has budgeted about $660k for any exterior deferred maintenance/minor upgrades and $420k for interior make-ready costs. Upon stabilization, Sentinel Peak expects to exit the property in 2.5 years. Sentinel Peak has an extensive and successful track record of managing and stabilizing highly distressed properties like Rocco throughout our history. Further, SPCP owns and has owned several comparable properties in DFW and within this submarket. Sentinel Peak has an internal Property Management, Asset Management, and Construction Management team that oversees the daily asset and overall renovation process.
It is worth underscoring the fact that the business plan and projected returns are not reliant on turning units to a drastically higher standard or materially increasing rents over their in-place levels. The business plan is largely predicated on stepping into an operationally distressed asset, re-stabilizing it, and selling it at a supportable price with ample room for future value-add initiatives, maximizing the pool of potential buyers on exit.
CapEx Breakdown
| Interior Renovations | Total Amount | Per Unit | Per Unit (Renovated) |
| Make Ready of Current Vacant Units | $136,667 | $438 | $4,556 |
| Black Appliances | $46,500 | $149 | $1,550 |
| Chrome Fixtures | $42,000 | $135 | $1,400 |
| Backsplash | $10,500 | $34 | $350 |
| Resurfacing | $40,000 | $128 | $1,333 |
| New Flooring | $52,500 | $168 | $1,750 |
| Repainting | $50,000 | $160 | $1,667 |
| Labor | $40,000 | $128 | $1,333 |
| Total Interior Renovations | $418,167 | $1,340 | $13,939 |
| Exterior Renovations | Total Amount | Per Unit | |
| Exterior Lighting | $75,000 | $240 | |
| Repaint and Site Carpentry | $25,000 | $80 | |
| Foundation Repair | $25,000 | $80 | |
| Landing Repair | $10,000 | $32 | |
| Roof Repairs | $15,000 | $48 | |
| Sewer Pipe Clean Out | $25,000 | $80 | |
| Parking Lot Repairs | $75,000 | $240 | |
| Hot Tub Repair | $25,000 | $80 | |
| Security Cameras | $50,000 | $160 | |
| Restain Cedar Balconies | $25,000 | $80 | |
| Landscaping | $75,000 | $240 | |
| Excess Marketing | $75,000 | $240 | |
| New HVAC Units | $125,000 | $401 | |
| Signage Replacement | $25,000 | $80 | |
| Exterior Fence | $10,000 | $32 | |
| Total Exterior Renovation Costs | $660,000 | $2,113 | |
| Other Costs | Total Amount | Per Unit | |
| Contingency | $53,908 | $173 | |
| Construction Fees | $67,925 | $218 | |
| Total Other Costs | $121,833 | $391 | |
| Grand Total | $1,200,000 | $3,844 |
The Project is located in Fort Worth, Texas, directly south of Interstate 30. Following the acquisition of the Project, the Partnership will undertake an approximately $1,200,000 capital improvement plan to address certain operational and physical deficiencies at the Project that the Sponsor believes will allow the Project to compete with recently renovated properties in the immediate area. The Project is currently named Rocco Apartment Homes (“Rocco”), but the Manager may choose to change the name of the project during the due diligence phase.
Constructed in 1984, the Property is improved with fifteen (15) two-story buildings containing three hundred and twelve (312) units, one (1) pool, and one (1) leasing office building. The residential buildings are made up of brick and wood siding atop a concrete slab on grade foundation. The exterior veneers are a combination of Hardie plank, cedar plank, and brick with pitched composition roofs. The Property's site encompasses 11.75 acres (37.7 units per acre), 505 total parking spaces consisting of 449 regular parking spaces, 36 covered parking spaces, and 20 handicap spaces. The Project contains 312 units with a mix of 209 one-bedroom units (67%) and 103 two-bedroom units (33%). Per the June 7, 2023 rent roll, the Project is 70.5% physically occupied with 88 vacant units. The Property's units consist of two-hundred and twelve (212) soft-surface countertops, while the remaining one hundred (100) units are renovated with hard-surface quartz countertops. The Project has been owned by its current ownership since 2021 and has received a light renovation from the current owner. Property amenities include one (1) swimming pool, one (1) leasing center, and one (1) playground.
The Property currently has three levels of finish out (“classic”, “summit,” and “quartz”), and SPCP does not plan to change this mix as we believe it is appropriately suited for this submarket and will allow SPCP to position the Property to capture the entire spectrum renters within the submarket. Being able to market the Property to the entire leasing spectrum will allow SPCP to achieve its occupancy and stabilization goal as quickly as possible. Aside from turning the current vacant unit stock into a leasable condition, the Sponsor plans to inject capital into the asset to address some deferred maintenance items on the exterior of the Property, which will aid in accomplishing their leasing goals.
Unit Mix
| Unit Type | # of Units | Avg SF/Unit | Avg Rent (Proforma) |
Rent PSF (Proforma) |
Avg Rent (In-Place) |
Rent PSF (In-Place) |
| A1 - 1x1 | 64 | 552 | $965 | $1.75 | $966 | $1.75 |
| A2 - 1x1 | 74 | 683 | $1,074 | $1.57 | $1,057 | $1.55 |
| A3 - 1x1 | 71 | 789 | $1,145 | $1.45 | $1,147 | $1.45 |
| B1 - 2x2 | 55 | 917 | $1,331 | $1.45 | $1,241 | $1.35 |
| B2 - 2x2 | 48 | 1,020 | $1,454 | $1.43 | $1,451 | $1.42 |
| Totals / Averages | 312 | 773 | $1,172 | $1.51 | $1,152 | $1.49 |
Lease Comparables
| Campbell | Maxwell | Tides at Eastchase | Tides on Randol East | Tides on Randol West | Averages | Rocco Apartments (Post Reno) | |
| Distance from Subject Property | 2.6 Miles | 1.1 Miles | 0.3 Miles | 0.15 Miles | 0.3 Miles | 0.9 Miles | NA |
| Year Built | 1984 | 1984 | 1984 | 1984 | 1984 | 1984 | 1984 |
| Number of Units | 263 | 292 | 340 | 356 | 208 | 292 | 312 |
| 1 Bedroom | |||||||
| $ / Unit | $1,181 | $1,167 | $1,181 | $1,188 | $1,098 | $1,163 | $1,115 |
| Square Feet | 674 | 716 | 704 | 774 | 695 | 713 | 679 |
| $ / SF | $1.75 | $1.63 | $1.68 | $1.53 | $1.58 | $1.64 | $1.64 |
| 2 Bedrooms | |||||||
| $ / Unit | $1,515 | $1,534 | $1,407 | $1,514 | $1,461 | $1,486 | $1,474 |
| Square Feet | 987 | 1,019 | 965 | 1,126 | 1,044 | 1,028 | 965 |
| $ / SF | $1.53 | $1.50 | $1.46 | $1.34 | $1.40 | $1.45 | $1.53 |
Sales Comparables
| The Aria | Jaxon Apartments | The Madrid | The Preslee | 6 Eleven Lamar | Oakley | Blakely | Crossroads at Arlington | Cantebria Crossing | The Hub | Averages | Rocco Apartments | |||
| Sale Date | Dec-22 | Aug-22 | Jul-22 | May-22 | Mar-22 | Oct-21 | Nov-22 | Jul-21 | May-23 | Nov-22 | Sept-23 | |||
| Sales Price | $28,500,000 | $41,000,000 | $33,500,000 | $46,300,000 | $31,000,000 | $32,340,000 | $28,416,000 | $30,750,000 | $24,992,000 | $23,500,000 | $32,029,800 | $35,000,000 | ||
| Year Built | 1980 | 1985 | 1984 | 1981 | 1979 | 1980 | 1981 | 1986 | 1983 | 1980 | 1982 | 1984 | ||
| # of Units | 184 | 240 | 201 | 290 | 200 | 196 | 192 | 216 | 176 | 168 | 206 | 312 | ||
| Average Unit Size | 861 SF | 843 SF | 779 SF | 714 SF | 717 SF | 918 SF | 743 SF | 828 SF | 745 SF | 861 SF | 801 SF | 773 | ||
| Sales Price / Unit | $154,891 | $170,833 | $166,667 | $159,655 | $155,000 | $165,000 | $148,000 | $142,361 | $142,000 | $139,881 | $154,429 | $112,179 | ||
| Sales Price / SF | $180 | $203 | $214 | $224 | $216 | $180 | $199 | $172 | $190 | $162 | $194 | $145 | ||
| Occupancy at Sale | 92.90% | 87.50% | 95.00% | 94.40% | 95.00% | 90.00% | 94.70% | 97.20% | 97.10% | 91.70% | 93.55% | 70.00% | ||
| Distance from Subject Property | 3.7 Miles | 5.4 Miles | 3.8 Miles | 5.4 Miles | 2.9 Miles | 3.0 Miles | 3.8 Miles | 2.0 Miles | 5.3 Miles | 3.7 Miles | 3.9 mi | NA | ||
| Notes | Renovated | Renovated | Renovated | Renovated | Renovated | Renovated | Non/Partial Reno | Non/Partial Reno | Non/Partial Reno | Non/Partial Reno | ||||
Market Overview
As the Dallas/Fort Worth metroplex continues to capitalize on its pro-business environment and general affordability, wage growth and rent growth are expected to increase above national averages. Furthermore, many of the jobs that have been announced in recent years have yet to start, as many of these corporate relocations are still in the process of constructing their new regional headquarters. Given this fact, job growth and wage growth are expected to continue into the medium term throughout the DFW region.
Longer-term, above-average population growth, along with strong demographics, has positioned the Dallas/Fort Worth Metroplex as one of the top regional economies in the U.S., not only today but into the future. DFW’s diversified economic base and proactive business climate continue to attract both people and businesses to the area. DFW is expected to remain on its long-term growth trends for the near and extended future, outpacing the state and the nation on most major measures. Oxford Economics is forecasting that DFW will generate 306,730 new jobs from 2020 through 2025. The large concentrations of technology businesses and corporate headquarters, along with the large, young, educated, and growing workforce, are critical assets to this region. The resilient local economy, access to skilled workers, and relatively low costs of living and doing business should continue to drive business startups, expansions, and relocations to the area, allowing DFW to remain one of the strongest economies in the nation.
Submarket Overview
Despite Rocco Apartment Homes underperforming under the current management, fundamentals in the Randol Mill submarket of East Fort Worth have remained strong. Over the trailing twelve months ending Q2 2023, rental rates have increased 5.2% year over year. Currently, there are not any multifamily developments underway due to the strict zoning restrictions of Tarrant County and lack of land on which to develop. Rocco's desirable East Fort Worth address boasts a 3-mile median household income of over $70,000 which is favorable to quickly improve the resident base at the Property. The population within the submarket is expected to grow by almost 4% in the next 5 years. The Property is located within the sought-after Fort Worth Independent School District.
The East Fort Worth / North Arlington submarkets continue to be in demand due to it being equidistant from Downtown Dallas and Downtown Fort Worth. Because of its central location, the mid-cities have historically been a hub for entertainment, business parks, and various employment centers. Some large employment centers include in the area include Dallas-Forth Worth International Airport, American Airlines Headquarters, AT&T Stadium, Globe Life Field, and General Motors Assembly Plant.
Total Capitalization
| Sources of Funds | $ Amount | $ / Unit |
| Benefit Street - Senior Mortgage | $28,225,000 | $90,465 |
| Equity Contributed by Sponsor Principals/Officers/Immediate Family | $1,950,000 | $6,250 |
| LP Equity | $11,325,000 | $9,615 |
| Total Sources of Funds | $41,500,000 | $133,013 |
| Uses of Funds | $ Amount | $/Unit |
| Purchase Price | $35,000,000 | $112,179 |
| Capital Budget | $1,200,000 | $3,846 |
| Closing Costs | $1,010,925 | $3,240 |
| Interest Reserve | $500,000 | $1,603 |
| Working Capital | $791,000 | $2,535 |
| Debt Fees and Closing Costs | $998,075 | $3,199 |
| Rate Cap Premium | $2,000,000 | $6,410 |
| Total Uses of Funds | $41,500,000 | $133,013 |
(1) The Sponsor’s equity contribution may consist of friends and family equity and equity from funds controlled by the Sponsor.
The expected terms of the debt financing are as follows:
- Lender: Benefit Street Partners
- Loan Type: Bridge Loan
- Term: 36 Months & Two 1-year extension options
- Interest Rate Cap Detail: 2.00% cap for 3 year term; $2,000,000 premium paid at closing
- Loan-to-Value (LTV): 77.2%
- Loan-to-Cost (LTC): 68.0%
- Estimated Proceeds (Initial and Future Funding): $28,225,000 ($27,025,000 upfront and $1,200,000 future funding)
- Interest Type: Floating
- Spread about SOFR: 4.25%
- Interest-Only Period: 36 Months
- Amortization: 30 Years
- Prepayment Terms: Open to prepayment at anytime. 15 months minimus interest
- Extension Requirements: A minimum 8.0% debt yield for the first extension;
A minimum 8.5% debt yield for the second extension;
A maximum LTV of 70.0% based on a current Property appraisal;
0.25% extension fee paid for each extension;
No continuing Event of Default;
Borrower’s purchase of interest rate protection acceptable to and assigned to Lender at the time of the Loan extension - Recourse Description: Completion guarantee
(1) A substantial portion of the total acquisition for the Property will be paid with borrowed funds, i.e., debt. Please carefully review the Disclaimers section below for additional information concerning the Sponsors use of debt.
Sentinel Peak Capital Partners intends to make distributions from SPCP31 RM Reese LP as follows:
- Pari passu all cash flow available for distribution to the Equity Investors(1) until a 10% Preferred Return, compounded monthly;
- Pari passu all cash flow available for distribution to the Equity Investors until the return of Equity Investors' capital contributions;
- 70% / 30% Equity Investors/Carried Interest split until 14% IRR;
- 60% / 40% Equity Investors/Carried Interest split thereafter.
(1) Equity Investors to mean all Limited Partners including principals/officers of the Sponsor and its affiliates
Sentinel Peak Capital Partners intends to make distributions to investors after the payment of the company's liabilities (loan payments, operating expenses, and other fees as more specifically set forth in the LLC agreements, in addition to any member loans or returns due on member loan).
Distributions are expected to start in August 2024 and are projected to continue on a quarterly basis thereafter. Distributions are at the discretion of Sentinel Peak Capital Partners, who may decide to delay distributions for any reason, including maintenance or capital reserves.
Sentinel Peak Capital Partners will receive a promoted/carried interest as indicated above.
| Cash Flow Summary | ||||
| Year 0 | Year 1 | Year 2 | Year 3 | |
| Effective Gross Revenue | $3,958,114 | $4,813,241 | $2,550,266 | |
| Total Operating Expenses | $2,335,595 | $2,435,622 | $1,252,824 | |
| Net Operating Income | $1,622,518 | $2,435,622 | $1,297,442 | |
| Project-Level Cash Flows | ||||
| Year 0 | Year 1 | Year 2 | Year 3 | |
| Net Cash Flow | ($13,275,000) | $380,000 | $560,000 | $24,433,529 |
| Investor-Level Cash Flows(1) | ||||
| Year 0 | Year 1 | Year 2 | Year 3 | |
| Net Cash Flow | ($3,045,000) | $85,876 | $111,554 | $4,788,309 |
| Investor-Level Cash Flows - Hypothetical $50,000 Investment(1) | ||||
| Year 0 | Year 1 | Year 2 | Year 3 | |
| Net Cash Flow | ($50,000) | $1,410 | $1,832 | $78,626 |
(1) RM Technologies, LLC and its affiliates do not provide any assurance of returns. Returns presented are net of all fees. Please carefully review the Fees and Disclaimers sections below for additional information concerning Sponsor’s use or projected returns and fees paid to Sponsor and RM Technologies, LLC.
Certain fees and compensation will be paid over the life of the transaction; please refer to Sentinel Peak Capital Partners' materials for details. The following fees and compensation will be paid(1)(2):
| One-Time Fees: | |||
| Type of Fee | Amount of Fee | Received By | Paid From |
| Acquisition Fee | 2.0% of Purchase Price | Sentinel Peak Capital Partners | Capitalization |
| Technology Solution Licensing Fee(2) | Flat one-time licensing fees of $15,000 plus $1,500 per each prospective investor onboarded by Sponsor through its license and use of RM Technologies’ Technology Solution | RM Technologies, LLC |
Capitalization (at Sponsor’s discretion) |
| Recurring Fees: | |||
| Type of Fee | Amount of Fee | Received By | Paid From |
| Asset Management Fee | Greater of 1.0% of EGI or $1,000 Monthly | Sentinel Peak Capital Partners | Cash Flow |
| Property Management Fee | 2.5% of Effective Gross Income | SPCP/Summit Property Management | Cash Flow |
| Construction Management Fee | 6.0% of Hard Costs | SPCP/Summit Property Management | Construction Expenditure Budget |
| Administration Solution Licensing Fee(2) | Flat quarterly licensing fee of $125 per investor serviced by Sponsor through the license and use of RM Technologies’ Administration Solution | RM Technologies, LLC | Cash Flow |
(1) Fees may be deferred to reduce impact to investor distributions.
(2) Please see the Fees and Disclaimers sections below for additional information concerning fees paid to RM Technologies, LLC.
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Sponsor’s Projects and Targets
*Assumptions and projections included in the information on this Page, including pro forma projections (collectively “Projections”) were provided by the Sponsor or an affiliate thereof and are not reflective of the position or opinions of, nor are they endorsed by, RM Technologies, LLC or its affiliates, or any other person or entity other than the Sponsor or its affiliates. RM Technologies, LLC and its affiliates do not provide any assurance of returns or the accuracy or reasonableness of the Projections provided by the Sponsor or its affiliates. There can be no assurance that the Sponsor’s methodology used for calculating any Projections, including Target IRR, Target Annualized Cash-on-Cash Return, and Target Equity Multiple (“Targets”), are appropriate or adequate. The Sponsor’s Projections and Targets are hypothetical, are not based on actual investment results, and are presented solely for the purpose of providing insight into the Sponsor’s investment objectives, detailing its anticipated risk and reward characteristics and for establishing a benchmark for future evaluation of the Sponsor’s performance. The Sponsor’s Projections and Targets are not a predictor, projection or guarantee of future performance. There can be no assurance that the Sponsor’s Projections or Targets will be met or that the Sponsor will be successful in meeting these Projections and Targets. Projections and Target returns should not be used as a primary basis for an investor’s decision to invest.
No Approval, Opinion or Representation, or Warranty by RM Technologies, LLC or it Affiliates
The information on this Page, including the Sponsor’s offering documentation, which may include without limitation the Private Placement Memorandum, Operating or Limited Partnership Agreement, Subscription Agreement, the Project Summary and all exhibits and other documents attached thereto or referenced therein (collectively, the “Investment Documents”) was provided by the Sponsor or an affiliate thereof. RM Technologies, LLC makes no representations or warranties as to the accuracy of such information and accepts no liability therefor. No part of the information on this Page is intended to be binding on RM Technologies, LLC or its affiliates, or to supersede any of the Sponsor’s Investment Documents. The opinions expressed on this page are solely the opinions of the Sponsor and its affiliates and none of the opinions expressed on this Page are the opinions of, nor are they endorsed by, RM Technologies, LLC or its affiliates.
Sponsor’s Information Qualified by Investment Documents
The Information on this Page, including of the principal terms of the Sponsor’s offering, is qualified in its entirety by reference to the more complete information about the offering contained in the Sponsor’s Investment Documents. The information on this Page 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. The information on this page should not be used as a primary basis for an investor’s decision to invest. In the event of an inconsistency between the information on this Page and the Investment Documents, investors should rely on the information contained in the Investment Documents. The information on this Page and the information in the Investment Documents are subject to last minute changes up to the closing date at the sole discretion of the Sponsor and its affiliates.
Risk of Investment
This real estate investment is speculative and involves substantial risk. There can be no assurances that all or any of the assumptions will be true or that actual performance will bear any relation to the hypothetical illustrations herein, and no guarantee or representation is made that investment objectives of the Sponsor will be achieved. In the event that actual performance is below the Sponsor’s Targets, your investment could be materially and adversely affected, and there can be no assurance that investors will not suffer significant losses. A loss of part or all of the principal value of your investment may occur. You should not invest unless you can readily bear the consequences of such loss. Please see the Sponsor’s Investment Documents for additional information, including the Sponsor’s discussion concerning risk factors.
Risk of Forward-Looking Statements
Forward-looking statements are found here and in the applicable Investment Documents and may include words like “expects,” “intends,” “anticipates,” “estimates” and other similar words. These statements are intended to convey the Project Sponsor’s projections or expectations as of the date made. These statements are inherently subject to a variety of risks and uncertainties. Please see the applicable Investment Documents for disclosure relating to forward-looking statements. All forward-looking statements attributable to the Sponsor or its affiliates apply only as of the date of the offering and are expressly qualified in their entirety by the cautionary statements included elsewhere in the Investment Documents. Any financial projections are preliminary and subject to change; the Sponsor undertakes no obligation to update or revise these forward-looking statements to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events. Inevitably, some assumptions will not materialize, and unanticipated events and circumstances may affect the ultimate financial results. Projections are inherently subject to substantial and numerous uncertainties and to a wide variety of significant business, economic and competitive risks, and the assumptions underlying the projections may be inaccurate in any material respect. Therefore, the actual results achieved may vary significantly from the forecasts, and the variations may be material.
Sponsor’s use of Debt
A substantial portion of the total acquisition for the Property will be paid with borrowed funds, i.e., debt. There can be no assurance that the Sponsor will secure debt on the rates and terms noted above, or at all. All of the Sponsor’s estimated rates and terms of the debt financing are subject to lender approval, including but not limited to the annual interest rate and possible increases in capital reserve requirements for funds to be held in a lender-controlled capital reserve account. The use of borrowed money to acquire real estate is referred to as leveraging. Leveraging increases the risk of loss. If the Sponsor were unable to pay the payments on the borrowed funds (called a "default"), the lender might foreclose, and the Sponsor could lose its investment in its property.
In addition, unless the debt provides for a fixed rate of interest during the term of the loan and/or any subsequent extensions, the total amount of interest paid over the term of the debt will increase by the same amount as the related index. For example, if the index rate increases by 0.50% (50 basis points) the interest rate on the loan will increase by the same amount. The amount of such interest rate increases may be capped either by its terms or as the result of the Sponsor entering into an arrangement that caps the interest rate with respect to the debt at a particular rate.
Sponsor’s Offering is Not Registered
The interests offered by the Sponsor will not be registered under the Securities Act of 1933, as amended (the “Securities Act”) in reliance upon the exemptions from registration pursuant to Rule 506(c) of Regulation D as promulgated under the Securities Act (“Private Placement.”). In addition, the interests will not be registered under any state securities laws in reliance on exemptions from registration. Such interests are subject to restrictions on transferability and resale and may not be transferred or resold except as permitted under applicable state and federal securities laws pursuant to registration or an available exemption. All Private Placements on the RealtyMogul Platform are intended solely for “Accredited Investors,” as that term is defined Rule 501(a) of the Securities Act. Prospective investors must certify that they are Accredited Investors and provide either certain supporting documents or third party verification, and must acknowledge that they have received and read all investment materials.
RM Technologies, LLC Fees and Conflicts
RM Technologies, LLC, an affiliate of RealtyMogul, operates the RealtyMogul Platform. RM Technologies, LLC charges a fixed, non-percentage-based licensing fee for real estate companies and their sponsors to license and use the RM Technologies LLC’s proprietary Platform, including one-time flat licensing fees for its Technology Solution and an ongoing quarterly flat licensing fees for its Administration Solution. A portion of the offering proceeds may be allocated as a reserve to ensure timely payment of the ongoing licensing fees for RM Technologies’ Administration Solution. For the avoidance of doubt, the Administration Solution Fee is not due with respect to any quarter until the Administration Solution has been provided by RM Technologies and without regard to any amounts on reserve for the payment of such fees. An estimate of the Technology Solution licensing fee is included in the Closing Costs above and is intended to be capitalized into the transaction at the discretion of the Sponsor. The licensing fees received by RM Technologies, LLC are disclosed in the relevant operating agreement(s). Additionally, from time to time, employees of RM Technologies, LL C and its affiliates invest in Sponsor’s offering. RM Technologies LLC’s receipt of licensing fees and its employee’s investments in Sponsor’s offering creates a conflict of interest between RealtyMogul and its affiliates, and investors or prospective investors.
No Investment Advice
None of RM Technologies nor any affiliate are registered as a broker, dealer, investment adviser, or funding portal (except with respect to RM Adviser, LLC, which has no involvement in the transactions to be consummated hereby or contemplated herein and solely for the purposes hereof, shall not be deemed an affiliate or RM Technologies). They do not provide investment advice or recommend the purchase of any securities that are the subject of this agreement or the Sponsor’s offering with respect to the Project. Project Sponsor’s use of the Platform, including Project Sponsor’s license to utilize the Platform and any related technology, software and supporting services, Project Sponsor’s posting of offering documents and all related information on the Platform does not constitute the approval of or endorsement by RM Technologies or any of its affiliates of Project Sponsor’s securities offering with respect to the Project or signify the suitability thereof in any manner.
For additional information on risks and disclosures visit https://www.realtymogul.com/investment-disclosure.