GZ Portfolio V

This portfolio consists of 105 units in five buildings, within two submarkets:

South Los Angeles and Panorama City (San Fernando Valley)

BUSINESS PLAN

The plan for these assets is multi-pronged depending on if the asset is rent controlled or not:

  • Roscoe (non rent controlled) – gut and rehab all 25 units within nine months or so, then re-rent at market rents and bring the building up for sale within two years of purchase. To accomplish this we intend to use a $1 million capital improvement budget, spending on average $40,000 per unit to upgrade kitchens, baths, floors, and paint.  On the exterior we intend to clean up landscaping, add lighting and paint, as necessary.
  • Crenshaw/108th/West/Roscoe (RC) (rent controlled) – rehab units as they become available and refinance within three years.  To accomplish this, we intend to use $1 million in capital improvements across all four buildings.  We anticipate turning over approximately 22 units over three years as well as improving infrastructure and exteriors, as necessary.

INVESTMENT SUMMARY FAST FACTS

Limited partners will receive a guaranteed and accrued 8% preferred return with a 55% (paripasu) share of the distributable cash after all fees are paid.

Investor level internal rate of return (IRR) is projected to be approximately 21% over the five year term. Investor’s equity multiple is 2.1 at the end of five years.

  • Investor Capital Contribution – 90%
  • Hold Period ~5 years
  • Investor Preferred Return – 8.0%
  • Property Level Internal Rate of Return – 27%
  • Investor Level Internal Rate of Return – 21%
  • Investor Equity Multiple – 2.11

SOURCES AND USES

The sponsor is placing approximately $240,000 of its own funds into this investment opportunity.

Approximately $15.2 million will come in the form of debt from two different lenders (one for the four rent controlled properties and another bridge lender for the one non rent controlled property).  There will also be a layer of preferred equity in the amount of $4.4 million.  The remaining $2.16 million will come from a limited partner equity position.

Limited partners will receive a guaranteed 8% preferred return with a 55% (paripasu) share of the distributable cash after all fees are paid.

Property Statistics

The five assets in the portfolio are being purchased at an average of $172,000 per unit with an actual cap rate of 5.4%.  Current gross income is $1.55 million with approximately $550,000 of operating expenses.  The cash flow is expected to grow by 25% over the five year hold period.