Stack House Capital

1) value add Apartments

Location: South Florida, FL

Details: A multifaceted project featuring 156 multifamily units and 7 retail units, these apartments underwent a substantial value-add transformation. Acquired in August 2015 for $14.0 million, the property saw a massive profit upon its sale in August 2021 for $30.2 million. Stackhouse played a pivotal role in the General Partner.

2) Self Storage conversion

Location: Miami-Dade County, FL

Details: Converted a blighted manufacturing / showroom facility into a world-class climate-controlled self-storage facility, including boat & RV storage. This deal serves as a testament to the success of adaptive reuse into self storage. Purchased in October 2016 for $10.0 million. Stackhouse played a pivotal role in the General Partner.

3) Self Storage conversion

Location: Miami-Dade County, FL

Details: The conversion of an existing music store facility into Extra Space Self Storage exemplifies our ability to identify and capitalize on unique opportunities. Acquired for $8.7 million in January 2017, the property was successfully sold 4 years later for $21.0 million, with Stackhouse Capital playing a vital role in the General Partner.

4) Value add APARTMENTS

Location: Jacksonville, FL

Details: A 1,112-unit value-add multifamily acquisition, the project highlights our success in the multifamily sector. The Partnership purchased the asset for $120.0 million, immediately implemented an improvement plan. Later sold one of the subdivisions, refinanced the remainder for a tax-free exit of nearly all equity out of the deal. Stackhouse raised the equity for the transaction and retains a financial interest in the venture.

PROPERTY MANAGEMENT

Upon takeover, the partnership hired a professional property manager with experience in improving operations in similar parks through data collection, processes, and policy improvement.

E-Payment SERVICE

Implemented fully electronic payment options to streamline accounting and receivables processes.

SELL ALL POH

Management sold off all of the community owned homes, which reduced the maintenance and repair expenses. In addition, new homeowners will bring more pride of ownership to the community.

CAPEX IMPROVEMENTS

All necessary deferred maintenance has largely been completed. Improvements such as signage, and upgrades to the park’s septic system, or, if feasible, a connection of water and sewer to the city services, will improve the quality of the community. By making these improvements, we will not only extend the life of the property, but we will make the community more attractive, which will demand a higher quality tenant and higher rents, and lower cap rate upon sale.

Increase Rents

Like most mom-and-pop owned Manufactured Housing/RV Parks, the rents are significantly below market. Over time, and commensurate with the improvements made at the park, we will be raising rents to market.

Utilities: We have begun to bill back certain utilities.

We have implemented a utility bill back system, which the seller did not have, to improve margins.

Projected returns (7-year hold period, NET TO INVESTORS)

We love the location, relatively straightforward business plan, highly experienced operating partner and especially the low basis offered by the non-institutional seller. This deal closed in the 2023 tax year and generated abnormally high 2023 bonus depreciation of 80% times infrastructure, creating roughly $1.30 - 1.50 of tax loss per $1.00 invested, which made the investment particularly attractive on an after-tax basis. The plan has been very successful thus far and our estimates below are likely overly conservative.

IRR: 28.0% (before tax incentive adjustments)
Equity Multiple: 2.6x

Stackhouse partnered with a manager to acquire two Manufactured Housing Communities (MHC) consisting of a total of 181 pads. The Partnership purchased the properties at a highly attractive price of approx $20,000 per lot, , including park owned units, and has begun to invest approximately $5,000 per pad) in capital expenditures for overall improvements. In addition, the partnership plans to invest nearly $1 million on new manufactured homes, to infill the parks and increase overall occupancy, increase margins and maximize NOI.

As part of the overall improvement story, enhancements are being made to both the exterior and interior units as well as improvements to the roads, sewer and water systems, landscaping, curb appeal, and amenities at each Property. See below for more details on the plan.

Professional Management

The partnership has implemented hands-on, institutional-quality property management at each location, and are actively enforcing resident rules and regulations.

Payment Processing

Modernized resident payment process using online payment platform. We are creating partnerships with Walmart and Western Union to allow residents to continue to pay cash.

CAPEX IMPROVEMENTS

Improving signage, lighting and landscaping at each property to increase the overall curb appeal and resident security. Updating existing infrastructure and roads at each property.

Infill

Over time, as dictated by the market, we will actively and efficiently be infilling the parks with brand new homes, which will increase the occupancy, drive down operating expense ratios, improve the tenant base and vastly increase NOI.

Increase Rents to market (currently 25% below market).

Commensurate with the improvements and infill, we will increase rents to market rates over time.

Projected returns (5-year hold period, NET TO INVESTORS):

Overall, this investment had very limited downside given the basis and therefore presents an excellent investment on a risk-adjusted basis. In addition, this deal closed in the 2023 tax year and generated abnormally high 2023 bonus depreciation of 80% times infrastructure, creating roughly $1.30 - 1.50 of tax loss per $1.00 invested, which made the investment particularly attractive on an after-tax basis. Eventually, cap rate compression and improved NOI from the various measures should improve the value of the property for a sale or refinance in 3 to 5 years.

IRR: 22.0% (before tax incentive adjustments)
Equity Multiple: 2.3x

Stackhouse invested alongside a major institutional quality operator to acquire a 96 lot value-add manufactured housing community (MHC) portfolio, consisting of three small parks, in the thriving Raleigh/Durham, NC market (AKA the "Research Triangle”) — a national hub for higher education, healthcare, pharma, and tech innovation.

The partnership bought the deal at a great basis: our price was less than $35k per lot), including park owned units, and the appraised "as stabilized" value came in at nearly double that. The deal involves relatively straightforward capex improvements, professionalization of services/collections, and adding about 30 infill homes. The sellers urgently need cash, and our partnership was able to negotiate a below-market price based on our ability to execute a fast closing.

We expect extraordinarily high returns in this transaction. The project should perform to a 6.8% cap rate in Year 1, even with in-place occupancy at 69%. As we boost occupancy, we expect returns to increase to at least a 10% cap in the near future, and eventually closer to a 15% cap rate.

Over a 10 year hold we expect to more than triple our money (3.3x equity multiple, net). In addition, this deal closed in the 2023 tax year and generated the aforementioned abnormally high 2023 bonus depreciation of 80% times infrastructure.

Property management

Our partner has a regional manager for the Carolinas who already operates 5 of their parks in NC and seamlessly incorporated these 3 new parks into his portfolio.

Rents

Although rents are at market, we project consistent 3% annual increases. Our partner has started billing back trash to residents ($15 per month, which was previously paid by the park).

Water and sewer sub-metering

The partnership has begun sub-metering as needed in the parks.

Occupancy

The big “value-add” here is raising occupancy. Our partner plans to bring new single-wide manufactured homes on to the 30 vacant lots, install them, and sell them to home-buyers, who will then start paying lot rent. We are projecting no infill in Year 1, and 6 new homes per year in Years 2 through 6.

Projected returns (10-year hold period, net to investors)

Between the excellent operator, great location, straightforward business plan, and below market price we were able to get comfortable with this investment. It will prove to be an excellent, long-term hold in an area with great demographic trends.

IRR: 19.8% (before tax incentive adjustments)
Equity Multiple: 3.3x