KeyCity Capital and Arbor Realty Trust are pleased to announce the closing of the M6 Portfolio Acquisition comprising 1,240 apartment units across six separate multi-family properties in Memphis, Tennessee. KeyCity Capital partnered its equity with Arbor Realty Trust's senior financing to complete the $82 million purchase and the $14 million capital expenditure plan to upgrade the properties. This portfolio of properties is a mixture of B and C Class workforce housing units with the potential to become upper B Class with the business plan and market growth.
The M6 Portfolio is the first asset acquired in KeyCity Capital's most recent investment offering, the KCAP RE Fund III. It serves as our fourth equity fund and the eighth fund managed. This acquisition is part of our strategy to reach $1 billion in Real Estate AUM in three years while building communities and creating opportunities for its investors to achieve financial independence.
Memphis falls within KeyCity Capital's four main target market criteria: universities, major medical, strong financial market, and diversity of employers. Therefore, making the city an ideal location to invest in real estate - specifically workforce housing. Each property in the M6 Portfolio is conveniently located near major highways, local shopping, dining, and entertainment and is close to the largest employers in Memphis, including Amazon, FedEx, and St. Jude's Research Hospital.
"The M6 Portfolio is located in the heart of workforce Memphis and more specifically centrally located to the up-and-coming area known as Germantown," says Tie Lasater, CEO of KeyCity Capital. "The migration trend to Tennessee and, more specifically, Memphis is due to central logistics locations exploding. Amazon, St. Jude’s, and FedEx are all growing at a rapid pace and creating significant job growth, therefore, we are on the front end of huge opportunity."
“We are pleased to partner with KeyCity Capital, an experienced investment team with a strong track record,” said Samuel Schwass, Director at Arbor Realty Trust. “The M6 Portfolio is an asset with a lot of potential situated in a strong market, and we believe that the talented KeyCity Capital team will be able to unlock that value.”
The business plan for the properties has four components - improving the operating efficiency, extending the existing Property Tax PILOT Program, implementing a crime mitigation program, and continuing the seller's renovation program, which includes repairs and upgrades to the interior and exterior of each building.
Once renovations are complete, KeyCity Capital anticipates achieving average rent premiums of approximately $150-$250/unit per month to bring the properties in line with comparable renovated complexes in the area. Mr. Lasater adds, "The PILOT Tax Program, which locks property taxes for the next ten years at historical rates, is a huge benefit to our company and our investors. It adds a 2% increase to net cash flows, which has a significant impact on our investors in return."
Additionally, KeyCity Capital strives to add value to communities and improve the lives of those who occupy their properties.
"This acquisition supplies housing to a growing workforce and, more importantly, creates nearly 100 local jobs. We are changing cities as we build, manage, secure, and connect communities to the very people who make the community." - Tie Lasater, CEO of KeyCity Capital