ILLUSTRATIVE SAMPLE — NOT A REAL PROPERTY OR OFFER. A fabricated deal built to lightly demonstrate Rook's deal-analysis & modeling product. With a client's real data room, the depth and specificity of a full engagement increase substantially. Not investment advice.
15.6% LP IRR · 2.52x equity multiple · 7-year hold
5.65% exit cap — no cap-rate compression assumed
Agency-financeable (Freddie SBL) at stabilization
§2 · Executive Thesis
Buy mismanaged, below-market workforce housing in the most-favored U.S. multifamily market
The deal in one paragraph. Cumberland Crossing is a 1995-vintage, 36-unit garden community in Antioch (Nashville MSA), acquired below replacement-cost-new and below stabilized value at a 6.30% in-place cap — a premium to Nashville's stabilized clearing level that reflects below-market rents, not asset impairment. A $500K interior/exterior renovation, full utility-reimbursement (RUBS) capture, and economic-vacancy compression lift NOI 37% to a $478,795 Year-3 stabilized figure, exiting Year 7 at a conservative 5.65% cap.
Hold & Distribute
Stabilize via renovation and RUBS capture; distribute a growing cash yield through the hold.
Refinance & Hold
Agency (Freddie SBL) cash-out refi at stabilization returns ~56% of LP capital while holding to Year 10 at a 2.91x multiple.
Value-Add Exit
Dispose into the deep secondary-market buyer pool at a 5.65% cap on stabilized NOI — the base-case driver.
§3 · Headline Returns — Base Case
A 15.6% LP IRR and 2.52x equity multiple, clearing every institutional hurdle
LP IRR
15.6%
Hurdle ≥ 14%
LP Equity Multiple
2.52x
7-year hold
Project IRR
16.0%
> LP IRR
DSCR · Year 3
1.36x
stabilized
Entry Cap
6.30%
Year-1 in-place
Exit Cap
5.65%
disposition
§4 · Value Creation
A 37% NOI lift — not cap-rate compression — drives the return
NOI grows from $393,831 (Year 1, in-place) to $478,795 (Year 3, stabilized) to $538,888 (Year 7) — a 37% lift funded by a $500K renovation, full utility-reimbursement capture, and economic-vacancy compression.
NOI bridge
Year 1 (in-place)
Year 3 (stabilized)
Year 7 (exit)
Lift
Net Operating Income
$393,831
$478,795
$538,888
+37%
Capital Stack — total project cost $6,995,000 · 68.0% loan-to-cost
Senior Debt (68% LTC)
$4,757,000 · 68%
LP Equity (90%)
$2,014,200 · 29%
GP Co-Invest (10%)
$223,800 · 3%
Sources & Uses
Uses
Amount
Purchase Price
$6,250,000
Closing & Acquisition
$125,000
Renovation Capex
$500,000
Operating Reserve
$120,000
Total Uses
$6,995,000
Sources
Amount
Senior Debt (68% LTC)
$4,757,000
LP Equity (90%)
$2,014,200
GP Co-Invest (10%)
$223,800
Total Sources
$6,995,000
§5 · Scenario Matrix — Six Capital & Exit Cases
The same acquisition under six structures — base, upside, downside, all-cash, refinance-and-hold, and early exit
One asset, modeled six ways. The base case clears all hurdles; the downside stress (rents −5%, exit 6.15%) still returns an 11.5% LP IRR and a 2.0x multiple; the all-cash case isolates the unlevered yield; the cash-out refinance returns ~56% of LP capital at Year 3 while compounding to a 2.91x multiple over a ten-year hold.
Scenario
Structure / Exit
LP IRR
LP EM
Project IRR
DSCR Y3
Hold
Base Case
Levered 68% LTC · sell Year 7 · exit 5.65%
15.6%
2.52x
16.0%
1.36x
7-yr
Upside
Rents +4% · exit 5.40% · sell Year 7
17.9%
2.84x
18.9%
1.42x
7-yr
Downside / Stress
Rents −5% · exit 6.15% · sell Year 7
11.5%
2.00x
11.3%
1.29x
7-yr
All-Cash (unlevered)
No debt · sell Year 7 · exit 5.65%
10.4%
1.83x
10.1%
n/a
7-yr
Refinance & Hold
Cash-out refi Year 3 · hold to Year 10
15.9%
2.91x
16.5%
1.18x
10-yr
Early Exit
Levered · sell Year 5 · exit 5.65%
16.8%
2.06x
17.5%
1.36x
5-yr
Read-through. The spread from downside (11.5%) to upside (17.9%) LP IRR is tight for a value-add deal — a function of the below-market basis and the conservative 5.65% base-case exit. Even the unlevered all-cash case clears a 10% return, confirming the deal is not leverage-dependent.
§6 · Replacement-Cost Arbitrage — Cost-to-Build vs. Acquisition
Acquired at or below the cost to build it new
Replacement-cost-new across the four physical components indicates a $6,097,200–$7,697,400 band (mid $6,897,300), before any value for the in-place income or operating platform. At the $6,250,000 primary price the buyer acquires 647,300 below mid replacement cost (-9%) and ~19% below the high estimate; at the conservative low estimate the entry is roughly at replacement. The renovation then drives NOI 37% higher — value creation layered on a near- or below-replacement entry.
Component
Low
Mid
High
Basis
Land / Site (2.5 ac)
$1,020,000
$1,200,000
$1,380,000
Infill multifamily land, $/ac band
Buildings / Units (34,740 SF)
$4,516,200
$5,037,300
$5,558,400
$130–$160/SF replacement cost new
Site Improvements
$408,000
$480,000
$552,000
Parking, drives, landscape, amenity (new)
FF&E
$153,000
$180,000
$207,000
Appliances, fixtures, common-area (new)
Total Replacement Cost (new)
$6,097,200
$6,897,300
$7,697,400
Sum of components, undepreciated
Acquisition Price (primary)
$6,250,000
$6,250,000
$6,250,000
Rook primary offer
Acquisition vs. Replacement Cost
$152,800 (+3%)
$-647,300 (-9%)
$-1,447,400 (-19%)
Green = below replacement (value); red = above
Why it matters. Buying at or below the cost to reproduce the physical asset is structural downside protection independent of the rent thesis: the floor under value is the cost to build, which rises with construction inflation over the hold.
§7 · Market Overview — Nashville Multifamily
Nashville: supply fading, demand durable, ranked the most appealing U.S. multifamily market
Macro & regional. Nashville enters mid-2026 as one of the most favorably positioned U.S. multifamily markets. After peak completions in 2023–2024 pushed vacancy higher and flattened rents, deliveries and absorption are converging; market vacancy holds near 8.5% while stabilized assets run ~94.3% occupancy. The Arbor-Chandan matrix ranked Nashville the single most appealing multifamily market for investors.
Antioch submarket. Antioch is a workforce-housing corridor in southeast Davidson County; average apartment rent runs ~$1,465 and the 2-bedroom average clusters at $1,500–$1,560, below the metro asking average of ~$1,643 — the affordability gap the value-add program is designed to close.
Supply & demand. Trailing-12 absorption reached ~8,700 units, nearly matching new supply, and forward supply is decelerating sharply: units under construction are down ~25% and annual permits off more than 50%, with deliveries projected to fall a third consecutive year. The competitive lease-up supply that pressured 2024–2025 rents is structurally diminishing into the hold.
Transaction climate & exit liquidity. Cap rates have normalized to the mid-5% range overall (Class A 4–5%; value-add/core-plus 6–7%). Tennessee's no-income-tax in-migration and ~24,000 projected new jobs support demand. A renovated, stabilized Class B asset exits into the deepest, most liquid buyer pool in the asset class — private syndicators, regional funds, and agency-financed operators.
Cap-Rate Framework — Nashville (Tier 2)
Nashville (Tier 2) Multifamily
Stabilized Cap
Value-Add In-Place
Class A — new construction / luxury
4.75 – 5.50%
—
Class B — 1990–2010 vintage
5.50 – 6.25%
6.00 – 6.50%
Class C — pre-1990 workforce
6.25 – 7.25%
6.50 – 7.50%
Subject — Class B value-add
5.65% exit
6.30% in-place
What the market says about the price. Acquiring a Class B asset at a 6.30% in-place cap is a premium to the stabilized mid-5% clearing level — the buyer is paid for taking below-market rents and execution risk, not for impaired quality. The 5.65% exit assumes no compression; the return is earned through NOI growth.
Harvests in-place yield only; leaves the spread uncaptured.
§9 · Valuation — Triangulated CMA
Three approaches converge at $6.5M; we enter at $6.25M
Low
$6.10M
cost-floor weighted
Midpoint
$6.50M
reconciled opinion
High
$6.90M
sales-comp weighted
Income approach (55%) · Sales comparison (35%) · Cost (10%). Rook primary offer $6.25M, below the midpoint.
Comparable Sales — illustrative composites
#
Status
Location
Detail
$/Unit
Cap
Adj. Note
1
Sold
Antioch, TN
44 units · 1996
$170,000
5.7%
Similar vintage; no adj.
2
Sold
Madison, TN
60 units · 1985
$155,000
6.1%
Older; +5% condition adj.
3
Sold
Donelson, TN
32 units · 1999
$185,000
5.4%
Superior location; −4% adj.
4
Sold
SE Nashville, TN
50 units · 2003
$195,000
5.2%
Newer; −7% vintage adj.
5
Active
Antioch, TN
38 units · 1994
$180,000
5.6%
Direct comp; list −3%.
6
Active
Antioch, TN
28 units · 1990
$175,000
5.9%
Smaller; +2% scale adj.
§10 · Financial Projections
Seven-year NOI, levered cash flow, and coverage
Year
EGI
NOI
Levered CF
DSCR
Year 1
$672,067
$393,831
$96,518
1.32x
Year 2
$719,940
$435,564
$138,252
1.47x
Year 3
$754,008
$478,795
$127,319
1.36x
Year 4
$776,628
$493,159
$141,683
1.40x
Year 5
$799,927
$507,954
$156,478
1.45x
Year 6
$823,925
$523,192
$171,716
1.49x
Year 7
$848,643
$538,888
$187,412
1.53x
Sensitivity — LP IRR by purchase price × exit cap
Price \ Exit Cap
5.15%
5.40%
5.65%
5.90%
6.15%
$5,750,000
20.1%
19.1%
18.1%
17.2%
16.3%
$6,000,000
18.8%
17.8%
16.8%
15.9%
15.0%
$6,250,000
17.6%
16.6%
15.6%
14.6%
13.5%
$6,500,000
16.4%
15.4%
14.3%
13.2%
12.1%
$6,750,000
15.3%
14.1%
13.0%
11.8%
10.7%
Green ≥ 14% · Yellow 10–14% · Red < 10%. Base case shaded center.
§11 · Annual Distributions to LP & GP
How the European waterfall splits each year's distributable cash
Year
Distributable
To LP
To GP
Year 1
$96,518
$86,867
$9,652
Year 2
$138,252
$124,426
$13,825
Year 3
$127,319
$114,587
$12,732
Year 4
$141,683
$127,515
$14,168
Year 5
$156,478
$140,830
$15,648
Year 6
$171,716
$154,544
$17,172
Year 7
$4,951,375
$4,320,710
$630,665
Total
$5,783,341
$5,069,480
$713,862
§12 · LP Waterfall — European Structure
LP capital and an 8% preferred come first — the GP earns 19.7% only above the hurdles
Tier
Mechanics
Split (LP / GP)
1 · Return of Capital
Pro-rata to LP & GP
100% capital
2 · Preferred Return
100% to LP until 8% LP IRR
8% pref
3 · First Promote
To a 15% LP IRR
80 / 20
4 · Second Promote
To a 20% LP IRR
70 / 30
5 · Residual
Thereafter
60 / 40
Outcome. LP 15.6% IRR / 2.52x · GP 19.7% IRR / 3.19x (promote earned only above the hurdles) · Project 16.0% IRR. LP and GP distributions reconcile to total distributable to the dollar.
§13 · Risk Register
The five diligence items that move value most
Risk / Exposure
Adverse Impact
Mitigant
Renovation scope / cost
−$250K to −$500K
GMP contracting; phased deployment
In-place rent roll & loss-to-lease
−$200K to −$450K
Home-by-home market-rent verification
Property-tax reassessment on transfer
−$120K to −$300K
Stepped-up basis reserved in stabilized opex
Deferred maintenance (roof/HVAC/plumbing)
−$150K to −$350K
PCA; capital reserve
Economic vacancy / collections
−$80K to −$220K
Trailing-12 collections review
§14 · Asset Inventory — Cost Approach
Depreciated component value — the floor beneath the income
