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Altus Mid-Month Update

September 2022

The kids are headed back to school, football season is officially underway, and we have so many things to be grateful for. As the Summer wraps up and Fall begins to set in, we welcome the changing of the seasons. Just like the changing of the seasons, there are exciting transitional undertones taking place at Altus. We have numerous deals in the pipeline, and we continue build our core team. Our investing community is stronger than ever, and we look forward to the many opportunities afforded by these strengthening relationships. See below to get a glimpse of what Altus has been up to…

Activity Abuzz:

294-Unit Duplex Development- Highfill, AR (RAISED): Thanks to our investor base, we were able to fully subscribe for this investment in record time. The investment structure provides investors with a 13.5% annualized preferred return. As added security, Altus is subordinating the net value of the fully entitled land and earned fees, so investors will get paid their return of equity and accrued preferred return before Altus or any other common equity receives a distribution. Last fall we purchased land just outside of Bentonville, AR to build 147 duplexes (294 units). This will be our third multifamily property in this MSA, with the other two performing ahead of expectations. The entitlements are complete and horizontal work is ongoing.

Oxford QOZ (Fully Raised Currently, with Future Investment Opportunities): We have partnered on the ownership of QOZ land with experienced developers that live in Oxford, MS (Forrest’s favorite small town, and the home of Ole Miss). The project consists of a fully entitled master plan QOZ development. The development is slated for up to thirteen individual construction projects that will be offered to investors as they come to fruition. Proformas continue to be sharpened for the first two of the thirteen individual projects with all pre-construction approvals already obtained. The projects are expected to be structured for QOZ eligibility. Equity funding for the first two phases has been secured and the first tranche of debt has been approved. Additional projects and the associated investment opportunities are expected to continue throughout the next year.

Murrieta Mixed-Use Development: The project consists of bottom floor restaurants and retail with three floors of apartments above the street level. The land is located on a hard corner at a signalized intersection on the main thoroughfare in Old Town Murrieta. This is one of the most attractive developable sites in the immediate area. Submission for building permits is expected to occur this week, at which point our direct involvement in the project will commence and we will determine the best route for debt and equity options.

New Industrial (Charleston, SC) and New Multi-Family (KC MSA) Construction and Lease-up: We originally closed out the equity raise in July of 2021 for the investment in the pre-construction of a new 1.4m sq ft. industrial development in the Charleston, SC MSA, and the construction of a 375-unit (estimated) luxury apartment complex located in a 200-acre master planned development in a high-end Kansas City, MO suburb.

Due to a rising hard cost environment, we have been navigating our way through several variables for both projects. Regarding the Camp Hall industrial property, the land has been purchased, the construction contract signed, and construction has commenced. We closed on the purchase of the land at the end of May. We have received term sheets for the LP equity slice, and we are close to agreeing to terms with an institutional equity player. A term sheet is close to finalized with a lender as well. We are putting together a separate investment structure in which investors can participate solely in the Camp Hall Industrial project. The returns will mirror the return structure that is negotiated with the institutional LP investor. Details will be forthcoming in the next week or two.

We have separately received interest in the equity and debt for the Kansas City apartments. We have agreed to terms in theory with our investment partner and are in the midst of ironing out the final details. This LP investor will contribute the majority of the needed equity investment, and we are currently evaluating options for the remainder. The rapidly changing economic inputs have brought about some challenges, but we are working through different angles to make the deal work.

Debt Liquidity Fund (As of 9/1/22, the Preferred Return Increased to 4.39%): The Debt Liquidity Fund continues to be a popular place to park cash for investors that want to invest cash in a safe, liquid investment vehicle. The fund provides investors with a solid monthly yield (4.39% per annum) on funds that may otherwise be sitting around in a CD or a bank account not earning much interest. The fund is comprised of a portfolio of real estate loans that are in 1st lien position and are all individually below 50% LTV. This is an open-ended fund that allows investors to redeem their position (or a portion of their position) with 30-days-notice. We are in the midst of adding to the fund portfolio, so reservations have opened up to the largest amount of investment since we launched the fund last July. We likely will also be raising common equity within the fund to ensure we keep the preferred/common prorations in compliance.

Arrow’s Edge Apartments, Sherwood AR: This property is anticipated to close by the end of this month, with the buyer having increased their non-refundable deposit by $1.5 Million. We anticipate completing a 1031 exchange with the sales proceeds into a new, yet to be identified investment. We are currently evaluating multiple different options, which we will present to investors once each option has been fully vetted.

Miscellaneous: We are close to finalizing a deal for a fully entitled apartment opportunity in the north part of the Dallas metro. Assuming we are able to proceed, this deal structure may end up as part of our new fund opportunity. More details will be available soon.

ACG (Altus Capital Group): Private Money Lending:

There was considerable interest in new loans this past month, but our pricing was consistently higher than other options in the market. It is an interesting time in the private money business. Many lenders want higher interest in line with high inflation and bank borrowing rates. However, many other lenders are desperate to get their money working to avoid losing purchasing power as that same inflation erodes the value of cash. This has led to considerable variation in pricing between lending sources. Taking a broader viewpoint, the spreads between bank financing and private debt have narrowed considerably (even the more expensive private debt). Along with increased difficulty to obtain bank debt, this has increased the attractiveness of private financing relative to other options in the market. We expect volume to build substantially over the coming 12 to 24 months.

In line with that thinking, we look forward to sharing some news with you in the coming weeks regarding our own investment into growing our capacity to increase loan volume. Stay tuned for an exciting announcement.

As always, opportunities are first offered to our active investor interest list. Please reach out to us if you have funds for lending and would like to be added to the list. If you are trying to figure out the capital stack for your own project, feel free to reach out and we are happy to brainstorm possibilities with you.

If you have interest in discussing equity or lending opportunities in greater detail, please reply to this email or call our office at (707) 932-5887.  We will gladly add you to our distribution list and/or schedule an appointment to discuss your investing needs.

Happy Investing,

The Altus Investment Team

This message is not an offer or solicitation of an offer to buy or sell any securities.  Offers are made only by prospectus or other offering materials.  The information contained herein has been obtained from a variety of sources which are believed to be reliable, but have not been independently verified, and may be subject to change without notice.  To obtain further information, you must complete our investor questionnaire and meet the suitability standards required by law.