Pooled Fund (Syndicated) Real Estate Investment

CLIENT CASE STUDY

Wellington Square apartments, Acquired (through 1031 Exchange), February 2018 - $3,100,000. Realty Yield partnered in this acquisition (10% position). Realty Yield arranged acquisition financing and coordinated legal/operating agreements drafting.

Wellington Square Apartments (27 Units)

TIMELINE: 2018 - Current

ENGAGEMENT TYPE: Pooled Fund (Syndication), Acquisition, Arrange Financing

REALTY YIELD ROLE: 1031 Exchange Coordination, Buyer's Agent, Mortgage Broker, Syndication Coordinating

INVESTOR CASH / CAPITAL: Client (90% - 1031 Funds) + Realty Yield (10% - Cash) = ~$800,000

CLIENT: Ted J

INVESTOR SPOTLIGHT

As of 2018: Client now nearing retirement from a career in marketing and as a corporate communications executive. Client has been investing in real estate since his first rental house purchase at the age of 19 and has accumulated a portfolio of 10+ rentals homes over the course of four decades. In 2016, client "exchanged - 1031" by selling most of his single-family rentals and acquired a 12-unit apartment complex. The primary objective moving forward is continued capital (equity) growth.

ENGAGEMENT OBJECTIVE

Execute a 1031 Exchange out of his 12-unit apartment complex and leverage/reinvest the built-up equity through appreciation and reinvest in a larger multi-family asset.

PROCESS

Part 1: Prepare his 12-unit property to be sold (1031 exchange) and put on the market.


Part 2: Begin a search for a suitable 1031 replacement property in the $2.5M-$3.5M price range. Many properties were financially analyzed and physically screened. We looked at properties that our client could acquire with his own resources (capital) as well as larger properties that would require a co-investor and more capital.

THE OPPORTUNITY (THE PROPERTY ULTIMATELY ACQUIRED)

In the end, we focused-in on a property owned by another Realty Yield client that we were preparing to take to the market during this time frame. The subject property was owned by a California-based client of Realty Yield. However, this 27-unit apartment property would require additional capital beyond the funds available from the sale of his 12-unit property. The timing was perfect since our CA client was in the process of his own 1031 exchange and needed additional capital for his targeted acquisition.

THE CHALLENGE

The primary challenge was just the need for more capital. However, it had been discussed upfront with our client that Realty Yield could potentially partner in an acquisition. Our client liked the idea of co-investing with Realty Yield with the thought our expertise and direct investment would provide another owner that could assist in managing the asset to its fullest potential.

THE EXECUTION

Since Realty Yield was directly involved in the 1031 exchange facilitation and coordination for both clients, the respective 1031 exchanges were relatively straightforward. Realty Yield also arranged the financing on both transactions.

THE RESULTS (PROPERTY ACQUIRED)

Client's 12-unit was successfully sold (1031 exchange). 27-unit acquisition (1031 replacement) was completed with Realty Yield as a 10% co-owner/investor. Realty Yield arranged the financing. The sold property - $1,433,000, the acquired property - $3,100,000. Hence, a substantially larger asset was able to be acquired through a Pooled Fund (Syndicated) Investment approach.

REALTY YIELD COMMENTS


NOTE 1: Pooled Fund (Syndicated) Real Estate investing affords a group (2+ investors) to create greater purchasing power and acquire higher quality, better performing real estate assets than most people can achieve on their own.


NOTE 2: As of December, 2020 the estimated current value of the 27-unit replacement property is now ~$4M (up approximately $900K in 34 months).


NOTE 3: In 2021, Client and Realty Yield plan to 1031 exchange our 27-unit apartment property into yet a larger asset in the $5.5M-$6.5M range.


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