KEY DEAL POINTS
Underwriting Based on Next-door Comparable and Pandemic Leasing: The Sponsor has underwritten the Project based on the rents at Tamarac Village, a comparable Class A property located just down the road. Despite having delivered and begun leasing during the depths of the COVID-19 pandemic, Tamarac Village has posted strong leasing numbers, with new-lease concessions continuing to decline. Sponsorship has conservatively underwritten the Project’s rents based on leases that were signed at Tamarac Village during the worst of the pandemic which should represent upside as the market continues to recover.
Conservative Underwriting Strategies: A distinct municipality, Tamarac is a city located within the broader Coral Springs submarket. Despite Coral Springs seeing positive rent growth through the COVID-19 pandemic, to err on the conservative side, the Sponsor is leaving the base rent projections completely untrended for the first year, meaning they assume no market rent growth in the submarket. There is potential upside in the base case underwriting should the lack of available product continue to drive rents in the area.
All-In Development Costs Below Submarket Trades: The total development costs for Eden West amount to approximately $226k per unit. There have been numerous trades in the submarket above the Project’s all-in basis, meaning that the 30% rise in prices since 2015 has made it cheaper to build new than to acquire existing assets. Despite the relatively inexpensive cost per unit, Eden West is expected to achieve 4-star property rents.
Great Schools, Low Crime, and Easy Access to Downtown Fort Lauderdale, Palm Beach, and Miami: The submarket of Coral Springs consistently attracts families, as it is known for great schools and low crime rates. Furthermore, the Project will be located within 20 minutes to Downtown Fort Lauderdale, FLL Airport, and Port Everglades.
94% Occupied Submarket with Positive Rent Growth Throughout Pandemic: The Coral Springs submarket has very healthy occupancy and rents metrics. 4- and 5-Star properties have 91.8% occupancy with $1,715 per month average rents; 3-Star properties have 95.4% occupancy with $1,578 per month average rents; and 1- and 2-Star properties have 95.9% occupancy with $1,228 per month average rents.
Robust Population and Economic Growth of Florida: Population growth is the state’s primary economic driver, fueling both employment and income growth. In 2020, the New York Times reported that almost 1,000 people move to Florida every day, 45% of which are moving to South Florida.
Tenured Sponsor, JV Returns Average 40% IRR: CEI is an Tenured Level Sponsor with a primary focus on multifamily/mixed-use assets. Since 2001, they have amassed a portfolio amounting to more than $6 billion in value. Their current 2020-2021 pipeline totals over $1.5 billion in capitalization. To date, realized returns on equity in CEI-managed joint ventures have amounted to an equity-weighted average 40% IRR and 2.52x equity multiple. CEI is partnering once again with Eden Multifamily to provide boots-on-the-ground oversight and expertise. Eden is an experienced group in their own right, with 1,500 units in Florida.
THE INVESTMENT
Cypress Equity Investments (“Cypress”, “CEI”) and Eden Multifamily (“Eden”) (together, the “Sponsorship”) is pleased to offer investors the opportunity to invest up to approximately $9.2 million in Class A membership interests of CE Tamarac Investor LLC, a Delaware limited liability company (the “Company”). The Company will be a Member and Limited Partner of CE Development Partners Tamarac, LLC (the “Manager”). Affiliates of CEI and Eden will be investing 10% of the required equity as General Partner Sponsors, and the Company will invest 90% of the equity, as described above. Sponsor already owns the land for development and intends to use the proceeds of the offering to recapitalize the existing property, bringing the Investors into the entity. CE Tamarac, LLC will own the property directly. Tamarac CE/FCP JV LLC (“Pref Equity LLC”) will own 100% of the interests of CE Tamarac, LLC. The Pref Equity LLC constitutes the joint venture between CE Development Partners Tamarac, LLC and our preferred equity investor, FCP. All cash flow payable to equity will flow from the Pref Equity LLC to CE Development Partners Tamarac, LLC, and further through the waterfall between Sponsor entities and the Company. The entities have been formed for the development, stabilization, and ultimate sale of Eden West, a to-be-constructed 212-unit Class A, garden-style multifamily apartment development in Tamarac, FL (the “Project”). Investment Manager, LLC, a Delaware limited liability company and affiliate of the Sponsor (the “Manager”), will serve as the manager of both the Company and the Property Owner. The Sponsorship is contributing 10.0% of the total equity requirement.
THE BUSINESS PLAN
CEI and Eden Multifamily are developing a Class-A multifamily Project in Tamarac, F.L., an area west of Downtown Fort Lauderdale that has shown strong multifamily market fundamentals. The Sponsorship purchased the site in 2019 and have since secured the entitlements and permits in order to break ground on the Project following the equity and loan close. The Project seeks to capitalize on the robust multifamily occupancy and rent growth in this submarket. This location offers ease of access to the Fort Lauderdale Airport, Sawgrass Expressway and Florida’s Turnpike running north/south, and major employers such as Magic Leap, Convergys, KSM Electronics, University Hospital & Medical Center, City Furniture. With an all-in Project basis of $226k per unit, Eden West will aim to achieve 4-star property rents despite the relatively inexpensive build.
With a targeted construction commencement date in March 2021, the Sponsorship expects the Project to deliver the first of the two buildings in June 2022. The second building’s targeted completion date is August 2022, two months after the delivery of the first building. CEI and Eden Multifamily are projecting leasing at a rate of 15 units a month, which would stabilize the Project eleven months after first move-in. The Project is expected to be held until February 2024, resulting in a 36-month hold to investors.
THE PROJECT
Eden West will be a 212-unit, garden-style community consisting of two 4-story apartment buildings and one 1-story clubhouse. The total net rentable area of the Project will be 207,375 SF, consisting of 1-, 2-, and 3-bedroom units with an average unit size of 978 SF. The Project will have 327 parking spaces, which equals 1.54 spaces per unit. The Sponsorship is targeting a Class A finish with numerous community amenities such as a 24-hour fitness center with Fitness-on-Demand, a Yoga/Group exercise room, heated saltwater pool, sundeck courtyard with shaded cabanas, and a veranda featuring an outdoor kitchen and gas BBQ grills. The in-unit amenities include white quartz countertops in kitchen and bathroom, whirlpool stainless steel Energy Star appliances, ceramic tile backsplash in kitchen, wood-style plank flooring throughout kitchen and living room, and energy-efficient full-size washer and dryer.
THE LOCATION
Located on the corner of West McNab Road and North Pine Island Road, the Eden West will be located within 20 minutes to Downtown Fort Lauderdale, FLL Airport, and Port Everglades. Within this drive, there are over 370,000 jobs. Major city employers like Magic Leap, Convergys, KSM Electronics, University Hospital & Medical Center, City Furniture operate in a 3 - 4 mile range of the subject site. Additionally, the Project is within close proximity to Sawgrass Expressway and Florida’s Turnpike making it highly accessible for commuters working in Miami, Fort Lauderdale, or Palm Beach. The Coral Springs submarket, known for great schools and low crime rates, consistently attracts families. Compared with other western Broward suburbs, the population of Coral Springs is more budget- conscious than the prestigious Weston and Pembroke Pines. Also, if residents are employed in the Sawgrass Corporate Parkway, they can live more affordably in the Coral Springs submarket or Tamarac and still commute to work in less than 25 minutes via the Sawgrass Expressway.
The Coral Springs submarket has seen vacancies drop significantly due to construction grinding to a halt. No new projects hit the submarket over the past two years, after close to 2,300 units delivered from 2013–17. The newest buildings in the submarket, which delivered a couple of years ago, are now achieving a rent premium compared to the older inventory. These new builds are asking about $2,000/month, a more than 25% premium over assets built before 2010. One of the priciest developments in Coral Springs is the 250-unit Marquis Coral Springs that was built in 2016 and has asking rents of more than $1,900/month, dependent on size.
NEARBY AMENITIES
DEMOGRAPHICS
ASSET CLASS MARKET
Coral Springs Submarket Report (CoStar)
The Project is located within Tamarac, a distinct municipality located within the broader Coral Springs submarket. Coral Springs is Fort Lauderdale’s largest submarket with an apartment stock of 20,000 units. But this submarket is located on the west side of Broward County, tucked away near the Everglades and absent from the current construction flurry underway in the metro. Despite its large size, there is currently a very low level of construction activity in the area. Coral Springs saw some development earlier in the cycle but no deliveries over the past year.
Limited supply and moderate absorption have brought the vacancy rate below the metro average to 5.1%. More than half of the apartment stock in this submarket is comprised of 3 Star properties, and rents are currently at $1,580/month, not far from the metro average. Most of Fort Lauderdale's new supply is comprised of higher-end apartments, making this submarket very popular with those that don't want to pay the upwards of $2,000/month price tag that new builds command.
Sales volume over the past year totaled $213 million and is disproportionately low to the submarket's size. Commensurate with the broader Fort Lauderdale metro at an average price of approximately $220,000/unit, recent market trades within the Coral Springs submarket have primarily consisted of 1990s and early 2000s product.
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