The Element, DST

6730 4th Ave Sac ramento, CA 95817

Total Offering Price $91,497,679

Investor Equity $37,997,679

  • Total Loan Amount $53,500,000
  • Loan-to-Value 58.4%
  • Minimum Investment $50,000
  • 1st Year Targeted Cash-on-Cash Return 6.00%

The Element, located within a half-mile of California State University, Sacramento  is one of the most popular student housing communities in Sacramento, boasting an extensive list of resort style amenities.

6730 4th Ave Sac ramento, CA

The Property features 288 units and 792 beds with a diverse mix of one, two, three and four-bedroom floor plans. The Element was originally constructed in 2003 and renovated in 2016.

Investment Highlights

The Element is one of the only purpose-built off-campus housing options for students. The market features four purposebuilt properties totaling 2,318 beds, which is less than 10% of the total campus enrollment. Sacramento State’s on-campus housing accommodates less than 10% of the total campus enrollment (no residency requirement). Sacramento State has grown 9% in the past five years, and over the last two years enrollment has exceeded 30,000 students. The Master Plan calls for an enrollment of 35,000 students by 2020.

property Profile

  • Address: 6730 4th Ave, Sacramento, CA 95817
  • Year Built 2003
  • Beds 792
  • Net Rentable Area 262,116
  • Current Occupancy 100%
  • Pre-Leased Occupancy 100%

Loan Details

Term: 10 year term, Interest Only ‑ 6 years. Type: Fixed. Interest Rate ‑ 4.20%. Amortization: 30 years.

The renovation plan encompassed interior unit upgrades of stainless steel appliances, common area furniture, light fixtures, TVs and window treatments. In addition, community improvements were made including cosmetic upgrades to the leasing office and new fitness equipment. Nelson Brothers plans to build on the property’s recent exterior renovations by steadily upgrading unit interiors with more modern accessories, light fixtures, upgraded and more durable flooring (luxury vinyl), new countertops, etc. and by adding additional amenities, like barbeques and fire pits. The property’s top competitor, The Foundation, has current asking rents on two and four bedroom units that are 20%+ greater than The Element, highlighting the rental rate upside that remains at the Property.

Target Strategy

Nelson Brothers’ goal for The Element is to leverage the historical stability of the property and of the university to potentially offer investors a variety of benefits. These include stable occupancy, monthly cash flow, tax efficiency through depreciation and capital appreciation. The company believes that U.S. college enrollment has historically shown minimal correlation to real estate cycles and to the greater economy (see chart on 3). Our goal is to maintain these benefits even if the economy returns to recession or starts to slow – due to the consistent demand for higher education.

Community Amenities

  • Close Proximity to Campus
  • Resort-Style Swimming Pool & Spa
  • Hi-Tech Fitness Center
  • Covered Half-Court Basketball
  • Lighted Sand Volleyball
  • Game Room with Billiards
  • Resident Business Center
  • Study Lounge
  • BBQ & Entertainment Space
  • Resident Coffee Bar
  • Private Shuttle to Campus
  • Walking distance to Target
Unit Amenities
  • Fully Furnished
  • Washer and Dryer
  • Intrusion Alarms
  • Ceiling Fans
  • Apple TV (select units)
  • Breakfast bar
  • Oversized closets

The Market

The Element is currently 100% occupied with leases running through August 2018.

Nelson Brothers believes the key to maintaining steady rental rate growth at The Element is the overall strength of the student housing market, continued enrollment growth at Sacramento State, the continued influx of affluent Bay Area students, the rental rate growth of the greater Sacramento market and management’s ability to potentially leverage some of The Element’s unique differentiating factors in the marketplace.

Nelson Brothers understands that the property has several competitive advantages. First, The Element has one of the strongest retention rates in the market. This can be attributed to weekly activities and an excellent sense of community. Built in 2003 and renovated in 2016, the property is newer than several competitors and boasts a contemporary, modern look. On the flip side, any of the newer properties, or potential new properties, will likely have been built to maximize efficiency, with little campus space, fewer amenities, small unit/bedroom sizes and 3-5 students per unit. The Element can provide a great contrast with its expansive open campus space: a large pool and BBQ area, game room and other community amenities along with larger unit/bedroom square footage and a favorable unit mix with several 1-2 bedroom units. The smaller unit mix at the affordable price and social amenities are fairly unique to the market and helps differentiate The Element by potentially offering students more privacy, more space and more of a social community.

 

ABOUT Nelson Brothers

16B Journey | Aliso Viejo, CA 92656 (800) 580-1031

Current Management Portfolio At-A-Glance:

Founded in 2007, Nelson Brothers specializes in what the firm considers to be well-positioned student housing properties. Headquartered in Orange County, CA, Nelson Brothers manages over $500 million in real estate with more than 100 employees.