Property Details
Below Market Rents  Below Market Occupancy 
Asset Profile
Value Add

LURIN: Bridgewater Apartments

Huntsville, AL

Multi-Family Property
Lurin Dallas, TX
Lurin
  • IRR 23.36%
  • Equity Multiple 1.65x
  • Hold Period 32M
  • Minimum Investment $25K
  • Year 1 Cash on Cash 7.11%
  • Stabilized Cash on Cash 8.14% Y3
  • First Distribution Mar 2021
  • Distribution Frequency Quarterly
  • Asset Profile Value Add
  • Loan-to-Value 74.25%
  • Current Occupancy 92%

About this Property

"Bridgewater Apartments, a Class-A property in Huntsville, Alabama consists of 334 units built in 2008 and is well poised for LURIN to implement a targeted value-add program to reposition the property."

-Jon Venetos, LURIN

 

Address 1501 Old Monrovia Road
Square Footage 298,631 sq. ft.
# of Units 334
Year Built 2008
Year Renovated N/A
Current Occupancy 92%
Market Occupancy 94%
Current Average Rents $986
Average Market Rents $1,453/unit
Purchase Price $51,850,000
Price/Sq. Ft. $173.63/Sq. Ft.

Top Questions

All answers are provided by the sponsor, LURIN, or its representatives.

 

Why are you buying this property?

Jon Venetos, LURIN:

  • HISTORY: Bridgewater was built in 2008 by LIV and then purchased in December 2011 under a Tenancy in Common or “TIC” structure with 4 partners, including an equity group (ERI), a property management group (SPM) and two Real Estate Investment Groups (WeldenField/BREC). At the time, this asset was considered top-tier in the submarket. Although the property experienced steady occupancy growth, rent growth was suboptimal due to poor operational management. In the last 5 years, several new developments, both commercial and residential, have come to market. These surrounding developments have dramatically improved both the location and opportunity for rent growth; however, based on the TIC structure of ownership, the property has not seen substantial reinvestment since ownership took over. Additionally, the current owners have a LIHTC (Low-Income Housing Tax Credit) focus vs a market rate focus, and as such, operationally the property has lagged competitors in the market. This disposition is prompted by the current owner’s desire to re-focus their efforts on the LIHTC development allocation within their portfolio."
    "LURIN has been tracking the Research Park submarket of Huntsville since its entrance into the Alabama market in 2016. Over the last 4 years, LURIN has underwritten numerous deals in this submarket and closely tracked the market fundamentals. Utilizing LURIN’s network of brokers and owners, they became aware of the Bridgewater opportunity before it went to market. Given the cumbersome ownership structure, the broker gave LURIN an opportunity to take this down at ‘their ask’ before the marketed process took place. Understanding the submarket and the opportunity the asset had for rent growth, LURIN moved quickly to get this deal under contract at a discount to what we believed this would get in a marketed process."
  • "STRONG MARKET FUNDAMENTALS: Nicknamed “Rocket City USA,” Huntsville is recognized nationally as one of America’s leading advanced technology communities. Huntsville currently holds the number one position in Alabama for population growth and number two in the southeast for GDP growth, per the U.S. Census Bureau and Bureau of Economic Analysis, respectively. Investors continue to be attracted to this high-growth market, as market pricing trends indicate that cap rates are still compressing and sit in the low 5% range."
  • "RENT GROWTH: The rent growth story for Huntsville is one that commands considerable attention, not solely from the state level, but from a national perspective as well. More specifically, this submarket is arguably the most prominent multifamily market in Huntsville. Below you will find some important statistics that support the strong rent growth story:"
    • "Per RealPage, as of Q4 2019, Huntsville ranked number one in annual rent growth at ~7.9% for small metros surveyed across the country, and it has experienced 9.7% annualized apartment rent growth in Q1 2020."
    • "Huntsville’s rental growth rate outpaced every large metro area surveyed except one market, Phoenix (source: RealPage)."
    • "Furthermore, per Costar, vacancy rates are forecasted to hover around 5.5% over the next six quarters and it ranked #1 for fastest rent growth in the nation as of March 2020."
    • "With regard to Bridgewater specifically, when taking a sample set from the last forty leases in February 2020, the average rental increase across all floor plans was 12% or $135. This trend has continued through the second quarter of 2020, which includes COVID-19 headwinds, where the asset continues to see double digit rental increases above market rents, exceeding $100. Additionally, as of late, management has been phasing out their discounted corporate bulk lease units. The last bulk lease tenant remaining is Adtran, a defense company, which has 15 units the property chose to non-renew at the steeply discounted rents. Based on the last four Adtran bulk leases renewed at market rents, there has been an average dollar increase of $276, or 31%."
    • "LURIN believes the above rent growth data along with in-place rents provide LURIN with the opportunity to implement its reposition strategy, and LURIN has confidence in achieving the proforma rents of an average increase of $280, or 22%, within this submarket of Huntsville.”

 

What are the most important aspects of this investment opportunity for the investors?

Jon Venetos, LURIN:

  1. Workforce: Nicknamed “Rocket City USA,” Huntsville is recognized nationally as one of America’s leading advanced technology communities. It boasts the highest concentration of engineers in the country along with a highly educated workforce. Huntsville currently holds the number one position in Alabama for population growth and number two in the southeast for GDP growth (source: U.S. Census Bureau and Bureau of Economic Analysis, respectively). A range of economic drivers such as a favorable business environment, low cost of living, and favorable tax incentives have attracted businesses to Huntsville."
  2. "Rent Growth: The rent growth story for Huntsville is one that commands considerable attention, not solely from the state level, but from a national perspective as well. More specifically, this submarket is arguably the most prominent multifamily market in Huntsville. Huntsville’s rental growth rate outpaced every large metro area surveyed except one market, Phoenix."
  3. "Cash Distributions: Due to the core nature of this asset, LURIN plans to send cash distributions quarterly starting after Q1 2021. The projected annualized cash-on-cash return for this investment is approximately 8.83% over a 32 month hold."
  4. "Management: Operationally the property has lagged competitors in the market, predominantly due to being mismanaged by the current owners and operators. LURIN will utilize their in-house operations and construction teams, which have a proven track record of success in efficiently delivering renovated units and repositioning assets."
  5. "Value Add: LURIN will implement a targeted value-add program to bring the property in line with the newer deliveries in the market while keeping the cost basis well below replacement cost and recent trades of similar vintage assets in the market."
  6. "Location: Located less than three miles south of the property is Cummings Research Park. As the second largest research and technology park in the U.S. and fourth largest in the world, the 3,843-acre CRP campus is home to nearly 300 companies, 27,000+ employees, and 12,500+ students. Anchored by Fortune 1000 giants Boeing (2,900 employed), Northrop Grumman (1,100), Lockheed Martin (764), and SAIC (2,746), the park is populated with a vibrant mix of local and international high-tech enterprises, U.S. space and defense agencies, a thriving business incubator, and competitive higher-education institutions."

 

What is your investment strategy/business plan?

Jon Venetos, LURIN: "LURIN will implement a targeted value-add program to bring the property in line with the newer deliveries in the market while keeping the cost basis well below replacement cost."

"With regards to management, LURIN also intends to introduce a sense of consistency, as it relates to servicing tenants, through their own in-house management team, LURIN Property Management (“LPM”). Additionally, LURIN Construction Management (“LCM”) & LURIN Construction Services (“LCS”), will efficiently deliver newly renovated units rivaling the quality of the newer assets in the area, at a discount, while achieving pro-forma rents. LURIN discusses the business plan in further detail in the following sections."

 

How has COVID-19 impacted your business plan?

Jon Venetos, LURIN: "COVID-19 has not impacted our business plan."

 

What are the risks and how are you mitigating those risks?

Jon Venetos, LURIN: "There are a number of potential operational risks associated with this investment, including but not limited to:"

  1. "Expiration of leases"
  2. "Lease termination and tenant defaults"
  3. "Due diligence may not reveal all property conditions"
  4. "Unexpected delays in construction"
  5. "Financing and refinancing risk"
  6. "General local market risk for Huntsville, AL"
    1. "Although there is always a risk of unforeseen issues or events, LURIN believes these risks are mitigated by the use of their vertically integrated platform, controlling construction and operations. Additionally, LURIN engages third party consultants to individually insure each property against unforeseen circumstances."

      NOTE: All answers provided by the sponsor, LURIN, or its representatives.

About this Property

"Bridgewater Apartments, a Class-A property in Huntsville, Alabama consists of 334 units built in 2008 and is well poised for LURIN to implement a targeted value-add program to reposition the property."

-Jon Venetos, LURIN

 

Address 1501 Old Monrovia Road
Square Footage 298,631 sq. ft.
# of Units 334
Year Built 2008
Year Renovated N/A
Current Occupancy 92%
Market Occupancy 94%
Current Average Rents $986
Average Market Rents $1,453/unit
Purchase Price $51,850,000
Price/Sq. Ft. $173.63/Sq. Ft.

Top Questions

All answers are provided by the sponsor, LURIN, or its representatives.

 

Why are you buying this property?

Jon Venetos, LURIN:

  • HISTORY: Bridgewater was built in 2008 by LIV and then purchased in December 2011 under a Tenancy in Common or “TIC” structure with 4 partners, including an equity group (ERI), a property management group (SPM) and two Real Estate Investment Groups (WeldenField/BREC). At the time, this asset was considered top-tier in the submarket. Although the property experienced steady occupancy growth, rent growth was suboptimal due to poor operational management. In the last 5 years, several new developments, both commercial and residential, have come to market. These surrounding developments have dramatically improved both the location and opportunity for rent growth; however, based on the TIC structure of ownership, the property has not seen substantial reinvestment since ownership took over. Additionally, the current owners have a LIHTC (Low-Income Housing Tax Credit) focus vs a market rate focus, and as such, operationally the property has lagged competitors in the market. This disposition is prompted by the current owner’s desire to re-focus their efforts on the LIHTC development allocation within their portfolio."
    "LURIN has been tracking the Research Park submarket of Huntsville since its entrance into the Alabama market in 2016. Over the last 4 years, LURIN has underwritten numerous deals in this submarket and closely tracked the market fundamentals. Utilizing LURIN’s network of brokers and owners, they became aware of the Bridgewater opportunity before it went to market. Given the cumbersome ownership structure, the broker gave LURIN an opportunity to take this down at ‘their ask’ before the marketed process took place. Understanding the submarket and the opportunity the asset had for rent growth, LURIN moved quickly to get this deal under contract at a discount to what we believed this would get in a marketed process."
  • "STRONG MARKET FUNDAMENTALS: Nicknamed “Rocket City USA,” Huntsville is recognized nationally as one of America’s leading advanced technology communities. Huntsville currently holds the number one position in Alabama for population growth and number two in the southeast for GDP growth, per the U.S. Census Bureau and Bureau of Economic Analysis, respectively. Investors continue to be attracted to this high-growth market, as market pricing trends indicate that cap rates are still compressing and sit in the low 5% range."
  • "RENT GROWTH: The rent growth story for Huntsville is one that commands considerable attention, not solely from the state level, but from a national perspective as well. More specifically, this submarket is arguably the most prominent multifamily market in Huntsville. Below you will find some important statistics that support the strong rent growth story:"
    • "Per RealPage, as of Q4 2019, Huntsville ranked number one in annual rent growth at ~7.9% for small metros surveyed across the country, and it has experienced 9.7% annualized apartment rent growth in Q1 2020."
    • "Huntsville’s rental growth rate outpaced every large metro area surveyed except one market, Phoenix (source: RealPage)."
    • "Furthermore, per Costar, vacancy rates are forecasted to hover around 5.5% over the next six quarters and it ranked #1 for fastest rent growth in the nation as of March 2020."
    • "With regard to Bridgewater specifically, when taking a sample set from the last forty leases in February 2020, the average rental increase across all floor plans was 12% or $135. This trend has continued through the second quarter of 2020, which includes COVID-19 headwinds, where the asset continues to see double digit rental increases above market rents, exceeding $100. Additionally, as of late, management has been phasing out their discounted corporate bulk lease units. The last bulk lease tenant remaining is Adtran, a defense company, which has 15 units the property chose to non-renew at the steeply discounted rents. Based on the last four Adtran bulk leases renewed at market rents, there has been an average dollar increase of $276, or 31%."
    • "LURIN believes the above rent growth data along with in-place rents provide LURIN with the opportunity to implement its reposition strategy, and LURIN has confidence in achieving the proforma rents of an average increase of $280, or 22%, within this submarket of Huntsville.”

 

What are the most important aspects of this investment opportunity for the investors?

Jon Venetos, LURIN:

  1. Workforce: Nicknamed “Rocket City USA,” Huntsville is recognized nationally as one of America’s leading advanced technology communities. It boasts the highest concentration of engineers in the country along with a highly educated workforce. Huntsville currently holds the number one position in Alabama for population growth and number two in the southeast for GDP growth (source: U.S. Census Bureau and Bureau of Economic Analysis, respectively). A range of economic drivers such as a favorable business environment, low cost of living, and favorable tax incentives have attracted businesses to Huntsville."
  2. "Rent Growth: The rent growth story for Huntsville is one that commands considerable attention, not solely from the state level, but from a national perspective as well. More specifically, this submarket is arguably the most prominent multifamily market in Huntsville. Huntsville’s rental growth rate outpaced every large metro area surveyed except one market, Phoenix."
  3. "Cash Distributions: Due to the core nature of this asset, LURIN plans to send cash distributions quarterly starting after Q1 2021. The projected annualized cash-on-cash return for this investment is approximately 8.83% over a 32 month hold."
  4. "Management: Operationally the property has lagged competitors in the market, predominantly due to being mismanaged by the current owners and operators. LURIN will utilize their in-house operations and construction teams, which have a proven track record of success in efficiently delivering renovated units and repositioning assets."
  5. "Value Add: LURIN will implement a targeted value-add program to bring the property in line with the newer deliveries in the market while keeping the cost basis well below replacement cost and recent trades of similar vintage assets in the market."
  6. "Location: Located less than three miles south of the property is Cummings Research Park. As the second largest research and technology park in the U.S. and fourth largest in the world, the 3,843-acre CRP campus is home to nearly 300 companies, 27,000+ employees, and 12,500+ students. Anchored by Fortune 1000 giants Boeing (2,900 employed), Northrop Grumman (1,100), Lockheed Martin (764), and SAIC (2,746), the park is populated with a vibrant mix of local and international high-tech enterprises, U.S. space and defense agencies, a thriving business incubator, and competitive higher-education institutions."

 

What is your investment strategy/business plan?

Jon Venetos, LURIN: "LURIN will implement a targeted value-add program to bring the property in line with the newer deliveries in the market while keeping the cost basis well below replacement cost."

"With regards to management, LURIN also intends to introduce a sense of consistency, as it relates to servicing tenants, through their own in-house management team, LURIN Property Management (“LPM”). Additionally, LURIN Construction Management (“LCM”) & LURIN Construction Services (“LCS”), will efficiently deliver newly renovated units rivaling the quality of the newer assets in the area, at a discount, while achieving pro-forma rents. LURIN discusses the business plan in further detail in the following sections."

 

How has COVID-19 impacted your business plan?

Jon Venetos, LURIN: "COVID-19 has not impacted our business plan."

 

What are the risks and how are you mitigating those risks?

Jon Venetos, LURIN: "There are a number of potential operational risks associated with this investment, including but not limited to:"

  1. "Expiration of leases"
  2. "Lease termination and tenant defaults"
  3. "Due diligence may not reveal all property conditions"
  4. "Unexpected delays in construction"
  5. "Financing and refinancing risk"
  6. "General local market risk for Huntsville, AL"
    1. "Although there is always a risk of unforeseen issues or events, LURIN believes these risks are mitigated by the use of their vertically integrated platform, controlling construction and operations. Additionally, LURIN engages third party consultants to individually insure each property against unforeseen circumstances."

      NOTE: All answers provided by the sponsor, LURIN, or its representatives.

Offered By

Lurin

Lurin

Dallas, TX

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Assets Under
Management

Currently
$753MM 10+ assets
Exited
$167.3MM less than 10 assets
Portfolio LTV
72.8%  
Historical
Realized Returns

Total IRR
31.1%  
Equity Multiple
2.1x  
Annual Cash
N/R  
Years Of
Experience

As Principals
less than 5 years  
In Business
5 years  
Size
125 Staff * Dedicated investor relations
* All information is reported by Lurin as of 11/9/2020.
Assets Under
Management

Currently
$753MM 10+ assets
Exited
$167.3MM less than 10 assets
Portfolio LTV
72.8%  
Historical
Returns

Total IRR
31.1%  
Equity Multiple
2.1x  
Annual Cash
N/R  
Years Of
Experience

As Principals
less than 5 years  
In Business
5 years  
Size
125 Staff * Dedicated investor relations
* All information is reported by Lurin as of 11/9/2020.

Financials

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Offering Financial

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Location Details

Huntsville, AL

Jon Venetos, LURIN: "A range of economic drivers such as a favorable business environment, low cost of living, and favorable tax incentives have attracted businesses to Huntsville. As mentioned before, nicknamed “Rocket City USA,” companies including Google and Boeing, along with many of the nation’s premier defense and civil space programs (Redstone Arsenal, NASA’s Marshall Flight Center, and Cummings Research park), are just a few of the many companies with a large presence here. According to CoStar, the Huntsville MSA is the economic focal point of North Alabama and a national leader in the space and defense arena. It boasts the highest concentration of engineers in the country and offers a unique set of powerful economic drivers and a highly educated workforce. The FBI is also investing $1 billion to build a new outpost in Huntsville, which will welcome 1,500 of the bureau’s headquarters staff from the Washington region next year and possibly thousands more in coming years. The area is an economic leader in the state and the US, as advanced technical services, healthcare, and a reinvigorated manufacturing sector are driving growth. Highly desirable to renters, this submarket provides housing for 30% of the metro’s rental stock, the Cummings Research Park, and the University of Alabama, Huntsville. Located less than three miles south of the property is Cummings Research Park. As the second largest research and technology park in the U.S. and fourth largest in the world, the 3,843-acre CRP campus is home to nearly 300 companies, 27,000+ employees, and 12,500+ students. Anchored by Fortune 1000 giants Boeing (2,900 employed), Northrop Grumman (1,100), Lockheed Martin (764), and SAIC (2,746), the park is populated with a vibrant mix of local and international high-tech enterprises, U.S. space and defense agencies, a thriving business incubator, and competitive higher-education institutions. Twelve other prominent research and manufacturing parks operate in Huntsville, including Thornton Research Park (400 acres), Jetplex (2,870 acres), Lowe (900 acres), Gateway (956 acres), and Chase (1,700 acres). As a point of reiteration, Huntsville has the highest concentration of engineers in the country which is vital to supporting U.S. Army and NASA contract programs."

Documents

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Offering Agreement Documents

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