Join The Webinar
Tuesday, Aug 6th @5pm PST
(Los Angeles Time)
344-unit Class A Investment Opportunity
EXCLUSIVE 10% Preferred Returns for every GW Capital Investor
CORTLAND MED CENTER
Acquired September 2024
6% Fixed Rate | 22-25% AAR
PROPERTY WALK-THROUGH WITH PARAM ⬇️
DEAL WEBINAR REPLAY ⬇️
CORTLAND MED CENTER DRONE TOUR ⬇️
Cortland Med Center, Houston, TX
Investment Summary
GW Capital and partners are pleased to present Cortland Med Center, a 344-unit, 2003-built apartment complex in the Med Center submarket of Houston.
Cortland Med Center, Houston, TX
Business Plan
PROPERTY SUMMARY
A 344-Unit
Class A Investment Opportunity
EXCLUSIVE 10% Preferred Returns for GW Capital Investors
6% Fixed Rate | 22-25% AAR
After months of due diligence and underwriting multiple projects across different markets, we finally have an opportunity that meets our stringent criteria for being conservative and provides our portfolio with diversification in the Fast growing Med Center submarket of Houston, Texas. And the best part is that EVERY GW Capital investor gets 10% Preferred Returns on this deal! Class A is filling fast so if you know you want to invest we recommend you submit your Soft Commit ASAP.
Why We Love This Deal?
Market Highlights:
Cortland Med Center benefits strongly from Houston’s ongoing population growth. The property offers excellent connectivity to Central Houston’s employment with 326,000 jobs within a five-mile radius and 983,000 jobs within a 10-mile radius.
Strong cash flow day 1, with an average cash on cash of 6.5%. Less than 10 minutes away, the Texas Medical Center (TMC) is the largest life sciences destination in the world with 106,000 employees.
Given that most of the land is occupied by TMC institutions, there is limited available land for development, mitigating the threat of new supply.
Investment Highlights:
Institutional-quality, 2003-built product, with a conservative core-plus business plan to reach a 7.65% yield on cost
Since 2018, the owners of Cortland Med Center have completed ~$6.9M of major renovations, leading to substantial rental increases and 94% average occupancy over the past 18 months. All units have been renovated to a platinum finish level with stainless steel appliances, granite countertops, tile backsplashes, modern sinks, and full-size washers and dryers. We will take over a turnkey community with stable returns and minimal concern about major capital projects in the future.
The $50M acquisition price ($2M discount) is below replacement cost giving us a strong going in basis
Cortland Med Center has top-of-line amenities, driving resident satisfaction and retention, as evidenced by receiving the 2023 Kingsley Excellence Award for resident satisfaction and retention.
Business Plan:
Conservative 75% LTV 5 yr fixed agency debt at 6% rate.
Low risk Core Plus strategy with 5% revenue lift over 24-month stabilization.
Our Local Partners will partner on their 10th deal with the Houston Housing Authority (HHA) to receive an 85% tax exemption providing a defensive business plan.
In addition, GW Capital & partners will push Other Income through the implementation of a bulk Wi-Fi package, generating $35/unit in net income.
Strong cash flow day 1, with an average cash on cash of 6.5%.
Class A Projected IRR: 17.8% | ARR 23% | EM: 2.15% (5-year hold)
Class B Projected IRR: 18.7% | ARR 24.6% | EM: 2.23% (5-year hold)
Funding Deadline: September 6, 2024
Target Closing Date: September 20, 2024
Property Tour
Exterior Overview
Roofs are Pitched with asphalt shingles
Exterior built with Brick veneer and hardiplank siding
Foundation built Concrete slab on grade
Ceiling Height: 9’
Framing: Wood
Wiring: Copper
Plumbing: CPVC and PVC
HVAC: Individual
# of Buildings: 22
Parking: 636 (1.85/unit)
Interiors Overview
Full-Size Washer/dryer machines
Soft-close cabinets, granite countertops, and stainless-steel appliances
Fully equipped kitchen with dishwasher and disposal
Built-in desks
Gooseneck faucet with undermount dual-basin kitchen sinks
Designer hardware and tile backsplashes
Amenities Overview
Cortland Med Center has top-of-line amenities,
driving resident satisfaction and retention.
Clubhouse
Business Center
Cyber cafe
Fitness Center
Pool with sundeck
Outdoor kitchen
Lounge
24/7 lockers
Bark park
Onsite trails
Covered parking
Storage units
CATALYST FOR HOUSTON, TX GROWTH
Med Center is a strong workforce area, with extensive employment and local retail.
Cortland Med Center benefits strongly from Houston’s ongoing population growth. The property offers excellent connectivity to Central Houston’s employment with 326,000 jobs within a five-mile radius and 983,000 jobs within a 10-mile radius.
Texas Medical Center
Houston has quickly ascended to become the US “Third Coast” for life sciences and biotech, surpassing Boston and San Francisco in advancing medical research, innovation, and collaboration. The new TMC BioPort, a 500-acre development, will focus on cell and gene therapy, as well as biomanufacturing and medical supplies distribution. CEO Bill McKeon anticipates this will create 100,000 jobs and have an annual economic impact of $54 billion.
NRG Stadium
2 miles from the property, NRG Stadium hosts 500 events annually, including Texans games and the Houston Rodeo.
The Galleria
12 minutes from Cortland Med Center, The Galleria is the largest mall in Texas with 30M+ visitors per year.
For Accredited Investors
GET ON THE WAITLIST
Cortland Med Center, Houston
SOFT COMMIT
* This is a Rule 506(c) offering for Accredited Investors Only
TIMELINE
DEFINITION OF ACCREDITED INVESTOR (PLACE HOLDER)
You qualify as an Accredited Investor if you meet any of the following criteria:
a) You earn over $200,000 in annual income,
b) You, together with your spouse earn over $300,000 in joint annual income,
c) You have a net worth, exceeding $1,000,000 (excluding the value of primary residence) individually or together with spouse.
FAQ
How is the tax abatement documented for the new owner?
By entering into this structure, the tax abatement is granted as of right. We will have an opinion from council confirming this conclusion. It may take some time for the exemption to be reflected in the assessor's office. It takes up to 180 days from the date of closing.
Does the HHA become a member of the JV or ProCo owning the asset?
Please see org chart for the structure. The HHA will be the ground lessor in the Ground Lease and own a fee simple interest in the Land; the JV will maintain ownership of the improvements.
What are the consequences for failure to implement the income restrictions within the 12 month period after closing?
From Counsel: I believe there is a cure period to ensure compliance. However, there should be no reason why the property is not in compliance within a 12 month period. The statute requires that 50% of the units are “reserved for or occupied by” tenants with household incomes of 80% AMI or less. This means that upon closing, the Property Manager will designate which vacant units must be “converted” to affordable units and then reserve (or simply mark) the units that are next available (upon their vacancy) to be reserved for an affordable tenant upon their vacancy. As long as the PM can show this reserved or occupied list the project is in compliance. Please note the PM is not required to remove tenants to make space for affordable ones but can simply reserve the unit to be converted to affordable upon the exit of a market rate tenant
Does the property need to have a deed restriction or be subject to a LURA as part of the abatement process?
Yes, the JV And HHA will enter into a Regulatory Agreement that will govern the rental restrictions to be imposed on the Project.
Can you provide an example of the legal structure with the HHA that has been implemented on prior tax abated deals
We've successfully used this structure on 3 properties we closed on late last year, including the Meritage deal which the org chart was for. I've also attached the MOU from the Meritage deal. We can provide additional documents as well.
Can the tax abatement be transferred to a new buyer?
Yes. The abatement can be transferred by a “Leasehold Sale” in which the JV transfer its leasehold interest in the land to a third-party purchaser who then will assume the role as the “Tenant” in the Ground Lease and Regulatory Agreement and enter into a JV Agreement with the HHA GP Affiliate. Also, the abatement can be transferred by an “Entity Interest Sale” in which the Sponsor or Investor Member (with controlling interest in the JV) transfers its membership interests to a third party who will then have controlling rights over that JV entity that continues to hold the abatement.
Does a change in ownership change the abatement it sounds like new owner only receives 90% of the abatement?
This business term has recenty changed. Instead of paying a PILOT upon transfer of ownership, the HHA is now requiring a 15% PILOT payment out of net cash flow permanent (therefore, the Project will receive only an 85% abatement throughout no matter if the projects exchanges hands or not).
Does the HHA also get profit sharing in the new ownership?
The HHA receives a 10% profit participation on the back after a return of capital and a preferred return to Investors.
Does the HHA need to approve of the new buyer?
Yes.
GOT QUESTIONS?
If you have any questions please feel free to message us
at [email protected]
or if would like to talk to us about how this asset would fit into your portfolio and goals, feel free to reach out to schedule a call:
