Download Offering Memorandum
Vivo Investments, LLC
Targeted Hold Period:
183 Apartments Units
Jointly, the Co-Managers have acquired more than 23 projects together as part of this opportunistic strategy to acquire functionally obsolete hotels at attractive all-in cost basis and convert them into competitively-priced studio, one- or two-bedroom apartments. Once the conversion is complete, the Co-Managers intend to refinance or sell the Property.
- Well-Located to Meet Renter Demand: The Property is a 7-minute drive from downtown Durham and a 6-minute drive from Duke University. It has direct access to I-85 to commute to Research Triangle Park, the Raleigh-Durham Airport, and the greater Triangle region. There is also walking access via Ellerbee Trail to a 17-acre wooded preserve.
- Shortage of Affordable Housing: Population and job growth above the national average continues to create net new demand for housing.1 Despite steady Class A new construction, Durham’s vacancy has remained steady between 5-6%, and market rent growth has continued to outpace inflation and the US overall at 16.8% year over year.2 With rapid growth, supply is expected to trail demand, especially for affordable units. Post-conversion market rents at the Property are priced $536 (35.5%) cheaper than the average market studio and $341 (25.9%) cheaper than renovated comparable studios.3, 4
- Highly Liquid, Growing Market: Investor appetite for multifamily product in Durham has created competitive market pricing and extraordinary liquidity for sellers in the market. $2.4 billion sold last year alone, with an average price of $215K/unit, 22.3% higher than the projected sale price per unit for this Property.5 Capital markets demand is supported by thousands of new jobs and residents being created in the Triangle each year alongside a fundamental supply shortage of affordable housing.6
1 ESRI Community Profile, June 2022
2 CoStar Analytics, Durham Multifamily Market Report, June 2022
3 CoStar Market Studio Study, Property Summary Reports, August 2022
4 CoStar Property Summary Reports – The Forest 800 White Pine Dr, SoHo Apartment Homes, Venable Durham, The Ramsey, West Village, 605 West End Gregson, Icon Downtown Durham – June 2022
5 CoStar Analytics, Durham Capital Markets Report, June 2022
Property & Renovation Summary
The information provided in this FAQ is intended only to supplement an investor’s review of the formal Offering Memorandum. All projections, targets, timelines, or business plans described below are preliminary, may not be achieved, and are subject to change. Like all real estate investments, this opportunity is speculative and involves substantial risks including, but not limited to, illiquidity, lack of diversification, complete loss of capital, construction/renovation risk, default risk, and capital call risk. No investment decision should be made based solely on the information in this FAQ. Each prospective investor should review the formal Offering Memorandum, including the Risk Factors and Fee Disclosures, with competent legal, tax, or other advisers.
Will the Property undergo immediate closure and renovations?
What deferred maintenance needs to be completed to receive the conversion permitting?
Who is the target renter and why do we think they will want to live at this Property?
Why are we confident we can lease up the Property that is 100% studios?
We believe current studio rents, vacancy rates, and new construction of studios indicates a wide and growing demand for studio units in Durham. Our targeted rents will be at least $341 cheaper per month than renovated studio product in the submarket.7 Please see the Offering Memorandum for more detail.
What are targeted rents after conversion, and how does that compare to the market?
We anticipate charging $975 per month for rent, which is $536 per month cheaper than the average market rate studio and $341 per month cheaper than renovated comparable studios.8,9
Why do we like the Raleigh-Durham MSA?
It checks a lot of the boxes we look for in all our investments: job growth, population growth, economic diversity, strong education centers, and a relatively high quality of life and low cost of living.10, 11, 12 Raleigh-Durham’s Research Triangle Park in particular has garnered national attention as the US economy increasingly shifts to research and innovation jobs in life sciences, technology, and related.13 We believe Google and Apple’s new office announcements in the area bolster investor confidence in the market as a growing talent hub, as shown by $2.4 billion in year-over-year multifamily sales in Durham alone.14, 15, 16
What are the major capital items that the Co-Managers intend to be address?
Do the Co-Managers need to attain a change in zoning?
Is there a variance required for parking?
Do we get a discount on the purchase price due to the asset being distressed?
Why are we comfortable projecting a 5.25% cap rate on exit? Won’t micro studios be less attractive when we go to sale?
Compared to the Durham apartment market cap rate of 4.5%,16 a 5.25% represents both cap rate expansion of 15 basis points per year and 45 basis points of expansion in consideration of the liquidity and investor interest for studio-only properties. We believe this is conservative and reasonable underwriting, especially given the exit price per unit.
What is being done to hedge interest rate risk?
Who is the likely buyer?
If market conditions worsen and we can’t exit in month 24 at our targeted sale price, what will we do?
8 CoStar Property Summary Reports – The Forest 800 White Pine Dr, SoHo Apartment Homes, Venable Durham, The Ramsey, West Village, 605 West End Gregson, Icon Downtown Durham – June 2022
9 CoStar Market Studio Study, Property Summary Reports, August 2022
10 CoStar Property Summary Reports – The Forest 800 White Pine Dr, SoHo Apartment Homes, Venable Durham, The Ramsey, West Village, 605 West End Gregson, Icon Downtown Durham – June 2022
11 ESRI Community Profile, June 2022
17 CoStar Analytics, Durham Capital Markets Report, June 2022