Equity Investment Performance Summary: 38.4% IRR, and a 2.2x equity multiple in approximately 30 months.
Tabor Terrace is a 25-unit, market-rate apartment community in the Mount Tabor community of NE Portland, consisting of 22 1-Bedroom units and 3 2-bedroom units. The 10,000 square foot lot was previously a single-family home, next to Edge Development’s other NE Glisan property (NOTA).
Development – Edge Development finalized negotiations to purchase the lot in June of 2019 for $925,000, or $92.50/SF. After 8 months of design, entitlement and permitting, Edge closed on the land purchase in February of 2020. This was the third development Edge was acting as Sponsor for our third- party Investment partner, who had already invested with Edge on the 30-unit NOTA project directly next door. This “Phase II” project was allowing Edge to scale up the operations, and further redevelop the block.
Construction – After dealing with a few permitting delays, partially related to City of Portland BDS shutting down at the start of the COVID outbreak, Edge Development, acting as the General Contractor, started construction in July of 2020. Edge Construction finished the project, under budget, and ahead of schedule, with completion in July 2021.
Management – Leasing began in July of 2021, during the ongoing pandemic, and Edge Management still managed to get tours and leases out to market. Leasing was slower than expected but the property was still able to reach stabilization in approximately 6 months around January 2022.
Sale – Edge Development decided to put the property up for sale in January 2022. The property was initially marketed as a packaged property with NOTA, totaling 55-units between the two properties. After a few failed sales with potential buyers, and the market changing quickly in the face of increasing interest rates, Edge regrouped with their brokerage partners and took both properties out to market, as individual properties. Edge was successful with this approach, and found a local exchange buyer, offering to purchase the property at our full asking price of $6,850,000, This price was $471/rsf and equates to a 4.1% cap rate base on 2022 budgeted income (better than market averages). The sale represented a value more than half a million dollars higher than our original pro forma value, and equated to a 24.3% IRR and a 1.7x equity multiple to our investment partners, and a 115% IRR and 6.6x equity multiple to Edge Development. Total profit was almost $2 million to the Project.