NEW YORK--(BUSINESS WIRE)--ArborCrowd, the first crowdfunding platform launched by a real estate institution, today announced a new offering that allows investors to acquire equity interests in the Sioux Falls Multifamily Portfolio, a collection of class-B apartment communities located in Sioux Falls, S.D. The properties exhibit strong upside potential due to Sioux Falls’ sound multifamily real estate fundamentals and notable lack of professionally managed workforce housing product.
Affiliates of Tzadik Management, LLC led by Adam Hendry (“Tzadik”) acquired the 18-property, 707-unit portfolio, which represents 4 percent of the Sioux Falls multifamily market, in four simultaneous transactions in October 2018. An ArborCrowd affiliate invested in the portfolio in January and ArborCrowd now seeks to raise $3.2 million from investors. The transaction’s total capitalization is approximately $50.06 million, and Tzadik’s equity group has invested more than 75 percent of the total equity in the deal.
The Sioux Falls metro area is supported by a strong job market and sustained population growth – both key drivers of demand for quality multifamily housing. Its unemployment rate is currently 2.5 percent, well below the national rate of 4 percent. Moreover, the city’s diverse employment base ensures that its economy is not reliant on one industry, with the healthcare, retail, manufacturing and finance industries making up the majority of the job market. Throughout the Great Recession, Sioux Falls’ economy demonstrated resilience as multifamily rents and vacancies remained steady. Additionally, when the national unemployment rate peaked at 10 percent in October 2009, Sioux Falls’ unemployment was just 4.7 percent.
“Sioux Falls is a particularly attractive market for us, because it is a city with very strong fundamentals and was uniquely insulated against the global financial crisis, yet there are investment opportunities available that are not overpriced,” said ArborCrowd Co-Founder and Managing Director Adam Kaufman. “The Sioux Falls multifamily market has seen a number of class-A developments come online in recent years, but there is a shortage of quality, professionally run workforce housing. Significant renovations coupled with institutional property management are expected to propel the portfolio’s rent growth, while it is still anticipated to present a significant discount compared to class-A rents in the area.”
The investment has a targeted internal rate of return (IRR) of 12 to 14 percent over a three- to five-year hold period. Tzadik has budgeted $5.2 million to perform a comprehensive capital improvement plan that will include upgrades to all renovated units, common areas and public spaces. As part of the repositioning efforts, the properties – which were previously managed independently – will be unified under a single managerial umbrella, creating economies of scale, a heightened level of service, and a recognizable brand in the marketplace. These efforts are projected to generate an average rental premium of more than $100 per unit per month.
The Sioux Falls Multifamily Portfolio is the eighth equity offering made by ArborCrowd since its inception. Most recently, ArborCrowd’s Cove West Hartford deal in West Hartford, Conn., subscribed $3.55 million worth of investments in less than two weeks, reflecting the high investor demand for its offerings. In total, ArborCrowd has raised more than $22 million of equity for assets with a total capitalization of roughly $220 million, comprising approximately 1,790 apartments.
To learn more about the Sioux Falls Multifamily Portfolio and access the offering overview and private placement memorandum, which includes market reports, property details, risks, financial pro formas and more, please visit www.arborcrowd.com/offerings.
ArborCrowd is the first real estate crowdfunding platform launched by a real estate institution, opening up an exclusive network to a new class of investors. As part of The Arbor Family of Companies, which includes Arbor Realty Trust (NYSE: ABR), a leading publicly traded commercial mortgage real estate investment trust, ArborCrowd is backed by more than 30 years of leadership experience. ArborCrowd reviews more than 500 deals a year from its proprietary network and only chooses the ones that survive its rigorous underwriting process. ArborCrowd commits capital to a deal prior to launching the offering to investors. This ensures the deal closes and allows ArborCrowd to offer investors accurate and detailed information about the property. Additionally, ArborCrowd chooses to present one deal at a time, so there is no guessing what property investors will actually own.