CVS Plaza Chapel Hill

11.4%
gross ann. return*
term remaining
B
Cash Flowing to Investors
Current Ann. Return 11.4%
Accrued Ann. Return
Gross Ann. Return* 11.4%

Investment Details

Current Ann. Return 11.4%
Accrued Ann. Return
Gross Ann. Return* 11.4%
Term Remaining – of –
Min. Investment $5,000
Investment Size $790,000
Security Type Equity

Investment Summary

ACCRE Sponsor Equity Fund, LP ("ACCRE"), in partnership with a local real estate developer/operator, currently is under contract to purchase its second deal under the ACCRE platform. Our local partner has deep roots in the Research Triangle area. The property consists of two contiguous office buildings connected on each of three levels by an enclosed sky bridge. The property also includes a 291-space parking garage that is connected to the northernmost building by a sky bridge. The property contains 100,634 rentable square feet and 70 feet of retail frontage along East Franklin Street, a main retail and business corridor in Chapel Hill. The parking garage provides a parking ratio in excess of 3 spaces per 1,000 square feet of office space.

Key Deal Points

Irreplaceable location

This asset is well positioned across from the UNC campus main entrance, making it a convenient and strategic location for off-campus UNC office users. The University plans to invest approximately $2 million to renovate the walkway through campus that leads to East Franklin Street directly across from CVS Plaza. At this access point is a traffic signal and designated crosswalk. One of the main Research Triangle bus stops is located directly in front of the building as well. The East Franklin Street corridor is a high volume traffic area and is populated with many shopping, dining, and nightlife options. Finally, downtown Chapel Hill is a market that exhibits high barriers to entry.

Stable tenancy

Credit tenants occupy 76% of the building's gross leasable area. Total annual rental revenue derived from such credit tenants covers annual debt service 1.56 times. UNC is the property's largest tenant, occupying nearly 60% of the building. UNC occupies space via leases with the State of North Carolina, an excellent credit. The State of North Carolina is rated AAA by S&P and Fitch, and Aaa by Moody's. In addition, the University has occupied space in the building to some degree or another for over 30 years. UNC's real estate department has expressed that the building is a strategic location for the University and that it should remain so for UNC tenants. CVS occupies 17% of gross leasable area and is rated BBB+ by S&P and Baa1 by Moody's. CVS signed a 20-year lease in 2013. This CVS location serves as a convenient "one-stop" location to purchase groceries, snacks, and general household products for UNC students, as well as for downtown residents, workers, and visitors.

Value add opportunity

The property will be purchased at an 8.0% cap rate (based on in-place net operating income), which represents an attractive entry price. Certain of the office interiors and common areas are dated and in need of cosmetic upgrades. Performing these targeted upgrades in currently vacant spaces as well as those that are due to turn over in the near term will allow new ownership to add value through rental rate increases and extended average lease terms. Improved management efficiency will produce enhancements to the bottom line.

We have identified certain projects that we plan to complete in the immediate term and that should make the building an even more desirable location for office tenants. Such capital improvements include lighting modernization, fully modernizing the elevator equipment and cabs, targeted HVAC upgrades, and installing modern fire protection and life safety systems. Depending on the leasing market in downtown Chapel Hill, there is potential to create further value by investing in the replacement or covering of the building fa�ade, and/or reconfiguring the retail facing Rosemary Street.

Parking

The acquisition includes a parking garage containing 291 parking spaces. There is a shortage of parking in Chapel Hill, so the garage is a highly valuable asset. The parking management system that is currently in place is quite inefficient both in terms of the cost to manage the garage and in the rate structure. Our local partner engaged a cutting edge parking consulting firm that specializes in increasing parking lot and garage efficiency. By implementing a plan that includes installing modern technology, adjusting rates to capitalize on peak times, and revising monthly parking contracts, the consultants believe that we can increase parking income by approximately 30% over the next 24 months.

Fundrise Rating

The Fundrise Rating is a letter rating ranging from A to E that provides investors with the ability to easily compare investments across the Fundrise platform. The Fundrise rating measures the relative risk-adjusted return of an investment. Learn more
B3
A
1
2
3
B
1
2
3
C
1
2
3
D
1
2
3
E
1
2
3
Category Assessment Points
Capital Senior to Fundrise 50-59% 2
Capital Junior to Fundrise 10-19% 4
Location Secondary 2
Occupancy Occupied 1
Development Phase Stabilized 1
Sponsor’s Track Record $250 million or more 1
Overall 11 B3

The information contained in the Fundrise Rating is for informational purposes only. It is impersonal and not individualized for any specific investor's financial situation and is not investment advice. These ratings are not intended to be, nor should you interpret them to be, a prediction of how a particular investment will actually perform. You should always carefully consider investments in any security and be comfortable with your understanding of the investment. You may also consider consulting investment professionals.

Capital Structure

Type Source % of Total Amount
GP Equity Sponsor & Local Partner 11.4% $3,481,000
LP Equity Private Investors 24.9% $7,572,000
LP Equity Fundrise Offering 2.6% $790,000
Senior Debt CNA 61.1% $18,590,000
Total 100.0% $30,433,000

Property Summary

Typical of ACCRE's investment strategy, this transaction will include a local partner who is co-invested in the deal and is primarily responsible for the daily on the ground operations of the property. In this particular case, the local partner will play a larger than normal based on their significant market knowledge and relationships, as well as having off-market sourced the transaction.

Address 137 East Franklin Street
City & State Chapel Hill, NC
Neighborhood Adjacent to UNC
Product Type Mixed-Use / Office/Retail
Project Phase Stabilized / 94% Occupied

Market Summary

Founded in 1959, Research Triangle Park (RTP) is the largest research park in the world, located in the Triangle Region of NC, which includes Raleigh, Durham, and Chapel Hill. With close proximity to top-ranked Universities (Duke, UNC, and NCSU), RTP serves as one of the most prominent high-tech research and development centers in the United States and is currently home to over 170 companies employing approximately 42,000 workers and 10,000 contractors. Some of the more prominent companies and governmental research facilities situated within RTP include IBM, Cisco, NetApp, Syngenta, and GlaxoSmithKline.

About the Sponsor

Damon Hemmerdinger

Co-President

Neil Adamson

SVP, Acquisitions and Finance

Ryan Huber

Acquisitions Associate

Avi Itzikowitz

Director of Operations

Paola Shaddow

General Counsel and Chief Compliance Officer

Real estate defines the communities in which we live, work, and play, and ATCO invests in projects that will yield positive community returns, as well as build value for our investors. We view the future of America as taking place in the downtowns of our cities, and we see overlooked opportunities in the downtowns of America's smaller, growing cities, places such as Austin, TX; Nashville, TN; Indianapolis, IN; and Charlotte, NC.

View full profile

Other Past Investments

Atlanta Condo Pre-Development Loan

Atlanta, GA
B
Gross Ann. Return* 14.0%
Term Remaining 0 mo.
Underlying Security Senior Debt

Brooklyn 3-Unit Apartment Repositioning - Senior Loan

Brooklyn, NY
B
Gross Ann. Return* 11.0%
Term Remaining 0 mo.
Underlying Security Senior Debt