"Acquisition of 185 condominium units and controlling interest in 240-unit complex in suburban Chicago which permits Sponsor to either acquire or cause sale of the remaining 55 units, de-convert and add-value through multiple strategies."

-Jonathan Saliterman, Randolph Street Realty Capital, LLC

Top Questions

All answers are provided by the sponsor, Randolph Street Realty Capital, LLC, or its representatives.

Why are you buying this property?

Jack von Albade, Randolph Street Realty Capital, LLC: "The Project was constructed in 1989 in suburban Arlington Heights, Illinois. RSRC is acquiring the 185 units in a bulk purchase from the current unit owners and will also acquire rights to all the HOA Board Seats and appurtenant management rights. The 185 units being acquired by RSRC exceed the 75% statutory threshold which will permit RSRC to purchase or cause sale of the remaining 55 condominium units by right, without need of any consent. Acquiring the remaining units, de-converting the condominium and operating the property as an integrated rental apartment community will significantly increase the value of the asset."

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

Jack von Albade, Randolph Street Realty Capital, LLC:

• "Acquire 185 condominium units from current owners"
• "Build to stabilized cap rate of 6.6% cap versus low 5% cap rates for 80s vintage value-add projects in current environment"
• "Projected 1.85x LP cash multiple/18% LP IRR"
• "Finance with loan from TCF at a low 3% interest rate; will provide for a facility to buy back units"
• "Opportunities to improve rental revenue and cut expenses"
• "Improve management and further renovate units (quartz, stainless appliances) and clubhouse and outdoor amenities; HOA funds to be used for common area rehab"
• "Install in-unit washers/dryers and increase rents."
• "De-convert condo regime either through buy-backs or forced sale through the IL Condo Act 75% rule"
• "De-conversion will add value by expanding buyer pool to conventional multi-family operators."

 

What is your investment strategy/business plan?

Jack von Albade, Randolph Street Realty Capital, LLC: "RSRC will acquire the 185 rental units as a bulk purchase, direct the HOA to renovate the clubhouse and improve the fitness room as well as invest up to $1,050,000 in interior renovations to the units including adding in-unit washers and dryers. Ag in-unit washer dryers and other upgrade packages will allow Sponsor to increase revenue throughout the hold and support strong cash annual yield throughout the investment. The average projected annual yield for a four-year hold is 7.6%. RSRC will also move to acquire as many of the remaining 55 units as possible at pricing which is accretive to projected cash yield or alternatively force de-conversion of the condominium at sale. By selling the property as a Value-Add multifamily property the pool of potential buyers at exit with be greatly enhanced."

 

How has COVID-19 impacted your business plan?

Jack von Albade, Randolph Street Realty Capital, LLC: "Despite in-place rents being 6.1% below market levels, RSRC has underwritten a more modest 2% rent growth through years 1 & 2 of the investment to account for the impact of COVID-19 limiting rent growth. We are focused on adding washers and dryers as value-add strategy during years 1-2 rather than cosmetic upgrades as we believe that will be a stronger value-add strategy during the COVID (and hopefully post-COVID) environment."

 

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

Jack von Albade, Randolph Street Realty Capital, LLC: "The extension of eviction moratoria related to COVID-19 may impact revenues. RSRC will stay up to speed on programs to help residents pay rent. Pushing a value-add strategy may be impacted if a prolonged economic recession occurs resulting from COIVD, but risk is mitigated by good in place income for the property."

NOTE: All answers provided by the sponsor, Randolph Street Realty Capital, LLC, or its representatives.