41 Units

$3.6M

91817 OR 202, Astoria OR 97103

Executive Summary

Download the 1-page PDF summary

Deal Highlights

Purchase Price

$3.6M

Hold Period

5 years

Stabilization Cost

$472K

Total Project Cost

$4.5M

Annualized
Return

19.9%

Cash on Cash
Return

5.1%

Equity
Multiple

2.19x

Internal Rate of Return

15.0%

Location

The Cavalier Court Apartments seamlessly blends a serene rural atmosphere with the convenience of public utilities. Located directly across from the esteemed Olney Walluski Fire & Rescue District and only a brief 4-mile drive from downtown Astoria, this property benefits from its proximity to the vibrant historic town and county seat.

Opportunities

With rents 58% below market rates and a track record of successful remodels and repairs completed by the current owners, this investment presents a compelling proposition.
One storage unit will be rented, and an unfinished unit will be converted into an additional unit.
The owners currently pay for water and sewer, which can be converted to ratio billing (called RUBS).
The expansive 3.95-acre site further enhances its appeal by providing opportunities for future development. This is NOT in the projections. We wanted to make sure this project makes sense without further development.

41 Units

11 Buildings

1 - 10 plex
6 - 4 plex
1 - 3 plex
1 - 2 plex
1 - workshop
1 - laundry & unfinished 1/1

Unit Mix

7 - 1/1 (bed/bath)
31 - 2/1
1 - 3/1
1 - workshop

Investment Details

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Cavalier Investment Summary

Key Dates

PSA
Executed

September 14th

Offering Docs Released

October
6th

Soft Commits Due

October
20th

Investor Funds Due

November
27th

Close Date

December
13th

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This document contains privileged and confidential information, and unauthorized use of this information in any manner is strictly prohibited. If you are not the intended recipient, please notify the sender immediately. This document is for informational purposes and is not intended to be a general solicitation or a securities offering of any kind. The information contained herein is from sources believed to be reliable, however, no representation by Sponsor(s), either expressed or implied, is made as to the accuracy of any information on this property, and all investors should conduct their own research to determine the accuracy of any statements made. An investment in this offering will be a speculative investment and subject to significant risks; therefore, investors are encouraged to consult with their personal legal and tax advisors. Neither the Sponsor(s), nor their representatives, officers, employees, affiliates, sub-contractors, or vendors provide tax, legal, or investment advice. Nothing in this document is intended to be or should be construed as such advice.

The SEC has not passed upon the merits of or given its approval to the securities, the terms of the offering, or the accuracy or completeness of any offering materials. However, prior to making any decision to contribute capital, all investors must review and execute the Private Placement Memorandum and related offering documents. The securities are subject to legal restrictions on transfer, and investors should not assume they will be able to resell their securities.

Potential investors and other readers are also cautioned that these forward-looking statements are predictions only based on current information, assumptions, and expectations that are inherently subject to risks and uncertainties that could cause future events or results to differ materially from those set forth or implied by such forward-looking statements. These forward-looking statements can be identified by the use of forward-looking terminology, such as “may,” “will,” “seek,” “should,” “expect,” “anticipate,” “project, “estimate,” “intend,” “continue,” or “believe” or the negatives thereof or other variations thereon or comparable terminology. These forward-looking statements are only made as of the date of this executive summary, and Sponsors undertake no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.

This document further contains several future financial projections and forecasts. These estimated projections are based on numerous hypothetical scenarios, and the Sponsor(s) explicitly makes no representation or warranty of any kind with respect to any financial projection or forecast delivered in connection with the Offering or any of the assumptions underlying them.

This document further contains performance data that represents past performances. Past performance does not guarantee future results. Current performance may be lower or higher than the performance data presented.

All return examples provided are based on assumptions and expectations in light of currently available information, industry trends, and comparisons to competitor's financials. Therefore, actual performance may, and most likely will, substantially differ from these projections, and no guarantee is presented or implied as to the accuracy of specific forecasts, projections, or predictive statements contained in this document. The Sponsor further makes no representations or warranties that any investor will, or is likely to, achieve profits similar to those shown in the pro forma or other financial projections.

Property Overview

Business Plan

Acquisition Summary

Seller-Disclosed Financials

Financial Projections

Investor Waterfall

The Team

Next Steps

Frequently Asked Questions

Property Overview

Property Information

Cavalier Court Apartments seamlessly blends a serene rural atmosphere with the convenience of public sewer and water infrastructure. Located directly across from the esteemed Olney Walluski Fire & Rescue District, and only a brief 4-mile drive from downtown Astoria, this property benefits from its proximity to the vibrant historic town and county seat. The expansive 3.95-acre site further enhances its appeal by providing opportunities for future development.

Size and Density: a
Buildings: 11
Parking: Plenty
Exterior: Cedar siding
Exterior Paint Age: Needs repainting
Roof: shingle
Year Built: 1943

Foundation: Concrete piers. Post and beam.
Framing: wood
Wiring: Updated from original, panels have been replaced, and GFCI outlets are present.
Plumbing: Most galvanized plumbing has been removed
HVAC: Electric heat
Hot Water: Electric

Amenities

Hardwood floor underneath the carpet
On-site 24/7 coin-operated laundry
Plenty of parking

Units have porches and/or decks
Spacious lawn area
Quiet country setting

Unit Mix

Cavalier Unit Mix

My contractor and I inspected every single unit, but we could only take pictures of vacant units and the outside. So, here's a 360 tour of those units. If you're on a phone or tablet, you can move your device to look all around. If you're on a desktop, you can use your mouse (click and drag) to look around. It goes quickly, but this gives you a good sense of size, layout, and average condition (some units are better... some are much worse).

Area Highlights

Astoria is a beautiful coastal city located in the northwest corner of Oregon with a population of around 10,000 residents and offers plenty of outdoor recreational opportunities, historical landmarks, and cultural events. One of the most prominent attractions in Astoria is the Astoria Column, a towering monument that offers panoramic views of the city and the surrounding area.

Demographics

Income

$52,917

Median Household Income

4.32K

Number of Households

In 2020, the median household income of the 4.32k households grew to $52,817 from the previous year's value of $48,813.

The following chart displays the households distributed between income buckets compared to the national averages. The largest share of households have an income in the $75k - $100k range.

Source: datausa.io

Why Income Matters: When screening tenants, we want an income of at least 3 times the rent. Our average target rent will be $1437. That means, when screening applicants, they must have an annual income of at least $51,717. The higher-end income households are likely owners, but this is a good sign that our rent targets are achievable in this area.

Housing

Source: datausa.io

60.7%

Homeownership

$298,000

Mean Property Value

In 2020, 60.7% of the housing units in Astoria were occupied by their owner. This percentage dropped from the previous year's rate of 62.2%. Another way to think about it is that there are ~60 fewer owner-occupied homes (assuming 2.5 people per home) vs. last year.

The largest share of households have a property value in the $300k - $400k range.

Education

Clatsop Community College teaches 1400-1500 students each year. The most popular majors in Astoria are Liberal Arts & Sciences, Registered Nursing, and General Studies.

Source: datausa.io

Jobs

Source: datausa.io

Astoria’s economy is primarily driven by its fishing industry, one of the largest on the West Coast. Major employers in Astoria include seafood processing plants, commercial fishing companies, and boat-building facilities. The Port of Astoria is also a significant economic contributor, providing shipping and logistical services to businesses throughout the region.

In addition to its fishing industry, Astoria is also home to a thriving tourism sector. Visitors come from all over to enjoy the city’s picturesque coastline, hike in the nearby mountains, and explore the local museums and historical sites. Astoria’s most popular attractions include the Columbia River Maritime Museum, the Lewis and Clark National Historical Park, and the Astoria Riverwalk. With its unique blend of natural beauty, history, and industry, Astoria is truly a one-of-a-kind destination.

One potential concern is that from 2019 to 2020, employment declined at a rate of −0.257%, from 4.66k employees to 4.65k employees.

Source: datausa.io

Additional Resources

Business Plan

This is a "classic" value-add multi-family project: some units need updating, and all the rents are low. We can improve the condition of the units and professionally manage the property. Here's the plan we'll do in the first 30 months.

Rents are 58% below market rates. On average, they're $832 a month, but should be closer to $1,400 a month!
- 26 units have already been updated and only need a light refresh to bring rents up to market levels.
- The remaining 12 units will need updating: new flooring, paint, appliances, and refinished cabinets.
- All 11 buildings need to be repainted.
The property includes one storage unit and a large workshop. These will be rented out for at least $400 a month.
Next to the laundry room is an unfinished unit. We plan to finish it and rent it out. We may turn this unit into a gym, but only if we can net more than $1,200 from the other 39 units (~$31/month each).
The owners currently pay for water and sewer, which can be converted to ratio billing (called RUBS). Not only does it improve the property's performance, but it also helps save water.
There's enough land that it provides an opportunity for future development. This is NOT in the projections. We wanted to make sure this project makes sense without building anything.

Risks

No investment is perfect. Here's what I see as risk:

11 buildings is a lot! That's 11 roofs... 11 foundations... To mitigate this, we save $10,250 annually for future capital expenses.
Astoria's population and job growth are flat. Ideally, these would be growing more. Thankfully, there are few housing starts, so the demand remains strong.
The future of the economy is unknown. Will there be a hard or soft landing from interest rate increases? Will inflation skyrocket or go back down to 2%? Will unemployment rise or stay low? Nobody knows. But, buying when interest rates are at 20+ year highs means they'll probably be lower in 5 years, which helps to increase the final sales price.
Oregon's rent caps prevent us from immediately raising existing tenants' rents to market levels. As much as the investor in me doesn't like it, it gives existing tenants time to adjust their budgets. Plus, we build that into our underwriting plan. One perk of having a professional property manager is that they’ll stay on top of timelines and raise them to the extent they’re legally allowed to.

Capital Improvement Budget

An exact scope of work is coming, but here's the high-level budget.

Cavalier CapEx Plan

Rent Comps

How to read the chart

The gray bars are the average across all our different sources for rent.
The dark green is the current average rents
The light green is our target rent after renovations. We're being conservative, so we know we can hit these targets.

Our best source of insights came from two local property managers. They have a pulse on the market and know this specific property. We verified their numbers by looking at local listings such as Craigslist and Facebook Marketplace.

Stress Tests

Rent Growth & Expenses

Rent may grow more or less than 2%. Similarly, expsenses, might be different than 4%. This looks at how those will impact on the Internal Rate of Return (IRR). In a worse case scenario: rent is flat and expsnes increase by 8% annually, the IRR drops to 4.9%, which is still positive.

Stabilization

Stabilization includes the renovation and getting rents to market rates. 30 months - almost 2 years - is conservative, but this looks at the impact of a different schedule. It also looks at the impact of different costs for the renovation.

Acquisition Summary

Sources and Uses of Funds

Cavalier Sources and Uses

Seller-Disclosed Financials

Rent Roll

Cavalier Seller's Rent Roll

Income and Expenses

Cavalier Seller's Profit & Loss

Financial Projections

Cavalier Financial Projections

NOTE: The rates of return displayed on this page are only projections, and are not guarantees of any sort. Actual returns may vary widely, due to many economic and marketplace factors beyond our control.

Key Assumptions

Cavalier Assumptions

Investor Waterfall

Organizational Structure

Waterfall Distributions

Operating Cash Flow:

98.5% to Class A Members until their unpaid preferred return equals an 8% IRR (pro-rated by equity contributed by all members).
80% to Class A Members until their unpaid preferred return equals a 15% IRR.
Remaining profits to be split 50% between Class A and Class B Members.

Capital Event (Refi/Sale)

Pay any remaining balance of debt, including any fees or interest remaining.
98.5% to Class A Members until their unpaid preferred return equals a 15% IRR (pro-rated by equtiy contributed by all members).
Remaining profits to be split 50% between Class A and Class B Members.

The Team

James Furlo

Managing Principal, Furlo Capital

After getting his MBA, Mr. Furlo started working for HP Inc. and actively investing. Over the last 14 years, he purchased over $4 million in real estate. His investments include 10 properties that span apartments, storage, and warehouses. He's also a limited partner in a 112-unit development project. Learn more

TBH

Property Management

We're currently evaluating two local PMs: Sean Raffington and Nan Schoenwald. We're putting them through the interview ringer.

Aaron Fulcher

Contractor, Basecamp Construction

Mr. Fulcher has a passion for helping people navigate their real estate journey. He has been specializing in buying, remodeling, and selling residential properties since 2012. To date Mr. Fulcher has helped hundreds of clients remodel their dream homes.

Bjorn Beer

Real Estate Broker, SVN - Imbrie Realty

Mr. Beer advises investors and sellers on transactions and long-term strategy. He leverages his background in software partnerships with his own personal experience investing in apartments to help clients leverage the resources, technology, relationships, and experience in his local office, as well as SVN at the national level. Mr. Beer helped us purchase a 15-bedroom investment in February. Learn more

William Caffee

Attorney, White Summers Caffee & James

Mr. Caffee has extensive experience in corporate finance, securities law matters as well as in the formation and related compliance matters of investment partnerships. Mr. Caffee is a founding partner of White Summers Caffee & James Pacific Northwest Office and was voted the Best of the Bar in Securities Regulation by the Portland Business Journal in 2005. Learn more

Matthew Paresi

Lender, Evergreen Capital

Mr. Paresi has worked in Commercial Real Estate Finance since 2012 and has a wealth of knowledge in commercial business banking and relationship management. He specializes in commercial multifamily and mixed-use properties, and has experience in financing both private client portfolios, as well as institutional properties over $55 million. Learn more

Don Leavitt

CPA, DPW Certified Public Accountants

Mr. Leavitt is a Senior Tax Manager at DPW as well as an Accounting Adjunct Professor at Corban University. He specializes in many industries: Manufacturing, Real Estate, and State and Local taxes. He's been doing our taxes since 2009 and has been a wonderful source of tax planning. Learn more

Ben Lebitty

Insurance Agent, Country Financial

Mr. Lebitty gets it done! Earlier this year, we needed help insuring a tricky property. After calling dozens of agents - who all said no - we found Mr. Lebitty. Not only did he help us get the property insured, but he also looked at our entire portfolio and saved us thousands a year in insurance premiums. Finally, we share similar values, which makes him a pleasure to work with. Learn more

Next Steps