The #RETwit (very short) version of the most complicated deal that I have ever done starts here. I suppose it was BRRRR strategy but man there were a lot of twists and turns 1/11
A friendly broker brought us the deal off market 3 years ago. He wasn’t getting the listing but knew the strike price and we liked it…a lot. We got it tied up quick. 2/11
Mid-80’s deal in a great location. Out-of-state seller who hadn’t done any rehab in over a decade. There was a pretty funky fractured condo component. 3/11
We used a unique capital structure. 71% Bank Debt, 27% Family Office, 2% GP. The family office money was structure like mezz debt with 12% coupon (but it was layered into the LLC) with a small back end 4/11
There are 5 buildings. The back 3 are apartments and the front two were condos. We bought all apartments and a majority of the condos. We had control of HOA from day 1. 5/11
We were able to push rents on the unrenovated units 15-20% and when we created vacancy the unit got a $15k facelift and we pushed the rent by $350 6/11
There was a very big fire 8 months after we closed. There was damage to 40 condos (some of which we didn’t own). Everything got put back together but it was like pulling teeth. 7/11
We smiled and dialed to buy more condos and got a super majority in the HOA. Then we used Texas property code to force the sale of the entire HOA to our entity at a market price 8/11
Talk about an awkward HOA meeting!!! We over-communicated and followed the advice of great attorneys and this actually went more smoothly than expected. 9/11
We terminated the HOA after acquiring all of the units. Expenses are lower and cap rate compressed 10/11
We closed Fannie loan today 12 y fixed, 4 year IO, & 3.16% rate which paid off the family office and now the GP owns the lion’s share of the equity. END
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