ROOK
REAL ESTATE DEAL ANALYSIS & FINANCIAL MODELING
Rook Opportunity Fund I — Value-Add Mfu
“Four Sun Belt value-add assets, one European waterfall — diversification plus a 33% blended NOI lift.”
§1 · Investment Highlights
Why this deal, in six lines
$18.0M LP raise · $48.0M total capitalization
Four metros: Nashville, Charlotte, Tampa, San Antonio
5.73% blended in-place → 7.64% stabilized on cost
15.2% LP IRR · 2.44x; GP promote above 15%
European waterfall, 8% pref, aligned GP co-invest
Exit at 5.75% on $3.78M stabilized NOI
§2 · Executive Thesis
Diversify single-market risk across four Sun Belt value-add multifamily assets
The deal in brief. Rook Opportunity Fund I is a $18.0M LP equity vehicle deploying into a diversified four-asset Sun Belt value-add multifamily portfolio ($48.0M total capitalization). A portfolio renovation program lifts blended NOI from ~$2.52M to ~$3.36M stabilized; under a European waterfall the fund returns a 15.15% LP IRR and 2.44x equity multiple over a 7-year hold, with the GP earning promote only above the hurdles.
Diversified Hold & Distribute
Four-asset Sun Belt portfolio reduces single-market risk and delivers a blended, growing distributable yield through the hold.
Value-Add Execution
A portfolio renovation program marks blended rents to market, lifting NOI from ~$2.52M (Year 1) to ~$3.36M (Year 3 stabilized).
Aligned Promote
European waterfall returns all LP capital and an 8% pref before the GP earns promote — institutional LP protection with GP upside above the hurdles.
§3 · Headline Returns — Base Case
Base-case returns, clearing the institutional hurdle
LP IRR
15.1%
Hurdle ≥ 12%
LP Equity Multiple
2.44x
7-year hold
Project IRR
15.5%
> LP IRR
DSCR · Year 3
1.56x
stabilized
Entry Cap
5.73%
in-place
Exit Cap
5.75%
disposition
§4 · Value Creation
A portfolio renovation lifts blended NOI from $2.52M to $3.36M
A $2.4M portfolio renovation marks blended rents to market, lifting fund NOI from $2.52M (Year 1) to $3.36M (Year 3, stabilized) — a 33% lift diversified across four metros.
| NOI bridge | Year 1 | Year 3 (stab.) | Year 7 (exit) | Lift |
|---|---|---|---|---|
| Net Operating Income | $2,520,000 | $3,360,000 | $3,781,710 | +50% |
Capital Stack — total project cost $48,000,000 · 62.5% loan-to-cost
Sources & Uses
| Uses | Amount |
|---|---|
| Purchase Price | $44,000,000 |
| Closing & Acquisition | $880,000 |
| Portfolio Renovation Program | $2,400,000 |
| Reserve | $720,000 |
| Total Uses | $48,000,000 |
| Sources | Amount |
|---|---|
| Senior Debt | $30,000,000 |
| LP Equity | $16,200,000 |
| GP Co-Invest | $1,800,000 |
| Total Sources | $48,000,000 |
§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, an upside and a downside stress, an unlevered all-cash case, a cash-out refinance-and-hold, and an early exit. The spread frames the risk envelope around the base case.
| Scenario | Structure / Exit | LP IRR | LP EM | Project IRR | DSCR | Hold |
|---|---|---|---|---|---|---|
| Base Case | Levered 62% LTC · sell Year 7 · exit 5.75% | 15.1% | 2.44x | 15.5% | 1.56x | 7-yr |
| Upside | Income +4% · exit 5.50% · Year 7 | 17.2% | 2.71x | 18.0% | 1.62x | 7-yr |
| Downside / Stress | Income -5% · exit 6.25% · Year 7 | 11.5% | 1.99x | 11.4% | 1.48x | 7-yr |
| All-Cash (unlevered) | No debt · sell Year 7 · exit 5.75% | 10.5% | 1.84x | 10.2% | n/a | 7-yr |
| Refinance & Hold | Cash-out refi Year 3 · hold to Year 10 | 15.5% | 2.84x | 16.0% | 1.27x | 10-yr |
| Early Exit | Levered · sell Year 5 · exit 5.75% | 16.2% | 2.01x | 16.7% | 1.56x | 5-yr |
Read-through. Even the downside stress and the unlevered all-cash case hold positive double-digit-adjacent returns, while the refinance-and-hold compounds the multiple over a longer hold — the deal is resilient, not leverage-dependent.
§6 · Replacement-Cost Arbitrage — Cost-to-Build vs. Acquisition
Acquired below the cost to build it new
Replacement-cost-new indicates a $46,800,000–$57,700,000 band (mid $51,700,000), before any value for the in-place income or operating platform. At $44,000,000 the buyer acquires -15% versus mid replacement cost — structural downside protection independent of the income thesis.
| Component | Low | Mid | High | Basis |
|---|---|---|---|---|
| Asset 1 — Nashville MFU | $14,500,000 | $16,000,000 | $17,800,000 | Replacement cost new |
| Asset 2 — Charlotte MFU | $12,500,000 | $13,800,000 | $15,400,000 | Replacement cost new |
| Asset 3 — Tampa MFU | $11,000,000 | $12,200,000 | $13,600,000 | Replacement cost new |
| Asset 4 — San Antonio MFU | $8,800,000 | $9,700,000 | $10,900,000 | Replacement cost new |
| Total Replacement Cost (new) | $46,800,000 | $51,700,000 | $57,700,000 | Sum, undepreciated |
| Acquisition Price | $44,000,000 | $44,000,000 | $44,000,000 | Rook primary offer |
| Acquisition vs. Replacement Cost | $-2,800,000 (-6%) | $-7,700,000 (-15%) | $-13,700,000 (-24%) | Green = below replacement (value); red = above |
Why it matters. Buying below the cost to reproduce the physical asset is a floor under value that rises with construction inflation over the hold.
§7 · Market Overview
Sun Belt multifamily: in-migration, fading supply, four-metro diversification
Executive Summary. The Sun Belt multifamily thesis rests on sustained domestic in-migration, job growth, and a moderating new-supply pipeline after the 2023–2024 delivery peak. A diversified four-metro fund (Nashville, Charlotte, Tampa, San Antonio) reduces single-market supply and concentration risk.
Cap-Rate Environment. Sun Belt value-add multifamily clears ~5.5–6.5% in-place with stabilized trades in the mid-5% range; cap rates have normalized from the 2021–2022 compression. Underwriting assumes no compression — exit at a 5.75% blended cap on stabilized NOI.
Supply & Demand. Forward supply is decelerating across Sun Belt metros as construction starts and permits retreat; absorption is recovering on job growth and no-/low-income-tax in-migration, tightening occupancy into the stabilization window.
Implication for the Fund. Diversification across four metros and a portfolio renovation program drive a blended NOI lift; the European waterfall aligns the GP to LP outperformance above an 8% pref, with the return earned through execution rather than cap-rate compression.
Cap-Rate Framework
| Sun Belt (Tier 2) Multifamily — Fund Level | Stabilized | Value-Add / In-Place |
|---|---|---|
| Sun Belt MFU — Class A | 4.50 – 5.25% | — |
| Sun Belt MFU — Class B | 5.50 – 6.25% | 6.00 – 6.50% |
| Sun Belt MFU — value-add (in-place) | 5.50 – 6.50% | — |
| Subject — blended 4-asset value-add fund | 5.75% exit | 5.73% in-place |
§8 · Highest & Best Use
The maximally productive use
Diversified value-add MFU fund (7-yr)
~15.2%
Maximally productive — blended execution under aligned promote.
Single-market concentration
~14–16%
Higher idiosyncratic risk for similar return.
Core-plus stabilized fund
~10–12%
Lower risk; below the value-add hurdle.
§9 · Valuation — Triangulated CMA
Aggregate value reconciled at $50M; the fund acquires at $44M
Low
$45M
cost-floor weighted
Midpoint
$50M
reconciled opinion
High
$54M
stabilized-income weighted
Aggregate income approach (60%) · Sales comparison (30%) · Cost (10%). Fund total capitalization $48M.
Comparable Sales — illustrative composites
| # | Status | Location | Detail | $/unit | Cap | Adj. Note |
|---|---|---|---|---|---|---|
| 1 | Sold | Nashville, TN | value-add MFU, 220 units | $182K/unit | 5.6% | Blended comp. |
| 2 | Sold | Charlotte, NC | value-add MFU, 180 units | $175K/unit | 5.7% | Blended comp. |
| 3 | Sold | Tampa, FL | value-add MFU, 160 units | $190K/unit | 5.4% | Blended comp. |
| 4 | Sold | San Antonio, TX | value-add MFU, 200 units | $150K/unit | 6.0% | Blended comp. |
| 5 | Active | Sun Belt | portfolio, 760 units | $176K/unit | 5.6% | Direct portfolio comp. |
§10 · Financial Projections
NOI, levered cash flow, and coverage
| Year | EGI / Revenue | NOI | Levered CF | DSCR |
|---|---|---|---|---|
| Year 1 | $4,200,000 | $2,520,000 | $720,000 | 1.40x |
| Year 2 | $4,900,000 | $2,940,000 | $1,140,000 | 1.63x |
| Year 3 | $5,600,000 | $3,360,000 | $1,201,618 | 1.56x |
| Year 4 | $5,768,000 | $3,460,800 | $1,302,418 | 1.60x |
| Year 5 | $5,941,040 | $3,564,624 | $1,406,242 | 1.65x |
| Year 6 | $6,119,272 | $3,671,563 | $1,513,181 | 1.70x |
| Year 7 | $6,302,850 | $3,781,710 | $1,623,328 | 1.75x |
Sensitivity — LP IRR by price × exit cap
| Price \ Exit Cap | 5.25% | 5.50% | 5.75% | 6.00% | 6.25% |
|---|---|---|---|---|---|
| $40,480,000 | 19.2% | 18.3% | 17.5% | 16.7% | 15.9% |
| $42,240,000 | 18.0% | 17.1% | 16.3% | 15.5% | 14.6% |
| $44,000,000 | 16.9% | 16.0% | 15.1% | 14.2% | 13.3% |
| $45,760,000 | 15.8% | 14.9% | 13.9% | 13.0% | 12.0% |
| $47,520,000 | 14.8% | 13.7% | 12.7% | 11.7% | 10.8% |
Green ≥ 12% · Yellow 8–12% · Red below. 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 | $720,000 | $648,000 | $72,000 |
| Year 2 | $1,140,000 | $1,026,000 | $114,000 |
| Year 3 | $1,201,618 | $1,081,456 | $120,162 |
| Year 4 | $1,302,418 | $1,172,176 | $130,242 |
| Year 5 | $1,406,242 | $1,265,618 | $140,624 |
| Year 6 | $1,513,181 | $1,361,863 | $151,318 |
| Year 7 | $37,502,825 | $32,962,086 | $4,540,738 |
| Total | $44,786,284 | $39,517,200 | $5,269,084 |
§12 · LP Waterfall — European Structure
All LP capital and an 8% preferred return before the GP earns a dollar of promote
| 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 15.1% IRR / 2.44x · GP 18.3% IRR / 2.93x (promote earned only above the hurdles) · Project 15.5% IRR. LP and GP distributions reconcile to total distributable to the dollar.
§13 · Risk Register
Portfolio renovation cost and blended rent achievability
| Risk / Exposure | Adverse Impact | Mitigant |
|---|---|---|
| Asset-level renovation scope / cost (4 assets) | −$1.2M to −$2.5M | Portfolio capex is the largest swing. |
| Blended in-place rent roll & loss-to-lease | −$900K to −$2.0M | Drives stabilized NOI and exit across 4 assets. |
| Market concentration / submarket supply | −$600K to −$1.5M | Sun Belt supply varies by metro. |
| Property-tax reassessment (4 jurisdictions) | −$400K to −$1.0M | Each asset reassesses on transfer. |
| Fund-level financing terms / rate | −$500K to −$1.2M | Blended agency execution at stabilization. |
§14 · Asset Inventory
Component value — Aggregate Income Approach
| Component | Value | Basis |
|---|---|---|
| Asset 1 — Value-add MFU (Nashville) | $13,500,000 | Income approach, in-place |
| Asset 2 — Value-add MFU (Charlotte) | $11,800,000 | Income approach, in-place |
| Asset 3 — Value-add MFU (Tampa) | $10,400,000 | Income approach, in-place |
| Asset 4 — Value-add MFU (San Antonio) | $8,300,000 | Income approach, in-place |
| Total | $44,000,000 | — |