Stonehill-PRM Realty has established a venture with a prominent national multi-family operator to acquire, reposition and develop multi-family projects in targeted markets where this operator has a demonstrated ability to add value through its management expertise. The venture has acquired a 10 property portfolio of class 'A' multi-family projects in Texas and Louisiana. Four of these projects have a phase II development component whereby 412 incremental units can be developed. The ten properties comprise 1,782 units and are located in the following markets:
Houston
156 units
Port Arthur
144 units
Harlingen
144 units
Lake Charles
176 units
Brownsville
144 units
Baton Rouge
408 units (two projects)
McAllen
232 units
New Orleans
234 units
Beaumont
144 units
The portfolio was acquired for $128,900,000 which equates to $72,334 per unit including the phase II land parcels. All of the properties were developed by a well known multi-family operator based in Houston. Each of the assets are encumbered with favorable fixed rate financing with approximately 7 years of remaining term. All of the loans 'stand alone' and are not cross-collateralized. Each of the loans are non-recourse.
The institutional equity investor is a New York-based investment management company. Cash flow is shared equally (97/3) between the institutional equity investor and the General Partner until a 10% IRR is achieved. Thereafter, the institutional investor receives 75% of the incremental profits and the General Partner venture receives 25% of the profits as its carried interest. The five-year internal rate of return to the General Partner venture is 45.67%. This does not include incremental profits that the venture may receive from developing the phase II units. The average cash on cash return to the equity partners over the projected five-year holding period is 9.11%.
