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The Capital Stack

232 unit portfolio, 12 locations, 1950's-1970's Value-Add Metro Detroit

Let's take a closer look at Sheffer Capital's first Multifamily purchase:Sheffer Capital’s first acquisition was a 232-unit portfolio in Oakland County, MI. All 232 units are in the class A and B+ markets of Royal Oak, Ferndale, and Farmington Hills. (See map above for reference)We were able to get in touch with the owner of the portfolio through a direct mail campaign. After the owner had initiated contact and expressed the desire to sell, we sent the first LOI for $13.1M. The portfolio was in a strong market and we planned to purchase through the syndication model.Being new to the industry and to ensure a quick and efficient close for the seller, we decided to partner with an associate already regularly active in the multifamily space. This deal structure is one of the ways that we were able to gain knowledge on each step of multifamily acquisition. Working in partnerships with other like minded real estate investors is a habit that we continue on most deals today (more on productive partnerships in future letters). After the partnership was established, extensive analysis was completed, and the renovation budget was established.We ended up going under contract for $13.8M. Approximately six weeks prior to closing we received an LOI from another investment firm expressing their desire to purchase 184 units from the portfolio for $1.4M higher than it was under contract for. This was great news for us as we could then arrange a “double closing” and walk away from the deal with $1.4M in profit and only ~$200,000 invested up to this point. We decided it was too good of an opportunity to pass up and transferred ownership at closing on all but 48 units.Update since closing on the 48 units we kept: 20 units Royal Oakland, and 28 units Ferndale 28. Ferndale 28 sold in October of 2021 for $3.7M. 2.3X equity multiple in 12 months. Royal Oakland received offers just under $4M in November 2021. Tory and partners are in process on refinancing this and will be able to pull out ~2X initial investor capital. Royal Oakland will be held for the foreseeable future. Below are before and after photos of the completed renovation at Royal Oakland.Link here to several podcasts discussing this deal & others: https://sheffercapital.com/media/

Major Market News

Cardone Capital purchases for $438,000 per unit:According to Multi Family News, Grant Cardone and Cardone Capital recently purchased 1,688 multifamily units in Fort Lauderdale, FL. This total transaction reportedly cost $740 million dollars and is the largest deal in Grant Cardone's career. "The Capital Stack" for this deal consisted of floating rate, 3-year loans issued by MF1, with the remainder funded by retail investors through Cardone Capital’s Fund model. Read the full article here >> https://www.multihousingnews.com/cardone-capital-buys-4-florida-properties-for-740m/For reference on pricing, we recently purchased Hollyvillage Apartments in Holly, MI for $61,000 per unit & Altitude Apartments in Royal Oak for $107,000 per unit. 

Tips and Tricks

Check out some popular real estate terms:

1. Class A location- a term to describe the absolute best real estate market to buy in. There are also class B+- and class C+- locations. A building that needs updating in a Class A location is the best for value add opportunities like the one we talked about in this newsletter.

2. LOI- stands for letter of intent. This document is used for almost all multifamily purchases and lays out the terms and price a buyer is willing to pay the seller for their property prior to going into contract officially.

3. Double Closing- is when buyer A has their own buyer, Buyer B who is ready to close on the property as soon as buyer A takes ownership. Buyer A is able to do this without having the full amount of funds needed for the purchase as Buyer B is the one providing full financing. Sometimes this happens in the same meeting or a day apart.

Seller > Buyer A > Buyer B In retail terms this is Manufacturer > Retailer > Consumer

Thank you for reading and your interest in Sheffer Capital. We look forward to having you follow along on the journey. Feel free to reach out anytime with questions and connect further using the buttons below. 

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DisclaimerNothing in this communication shall be construed as an offer for investment in Sheffer Capital, LLC (the “Company”). Solicitations for investments by the Company will only be made through a Published Investment Opportunity in the Company's investor portal provided by the Company to potential investors for such purpose.

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