A California company completed the acquisition of a 356-unit Las Vegas senior apartment complex by soliciting investors online.
OpenPath Investments announced Monday that it’s closed the sale to acquire Lake Tonopah Apartments, 2151 Citrus Hills Ave.
While the transaction was valued at $16.8 million, OpenPath needed to raise $6 million from investors and rely on bank financing for the remainder. It drew $4 million from a core of investors and turned to the public for the remaining $2 million in an online investment platform referred to as crowdfunding.
Raising the combined $6 million took about 30 days, said OpenPath Managing Director Peter Slaugh. This marks the second time the company has turned to crowdfunding to finance an acquisition.
OpenPath has a portfolio of 14 complexes with more than 2,500 multifamily units across half a dozen Western states, including Oregon, Utah, Texas, Colorado and Arizona. This is its first Nevada project and Slaugh said the venture will consider other acquisitions now that it’s in the market.
OpenPath said some of its investors are from Las Vegas but would not name them. Slaugh estimates that the new Lake Tonopah Apartments investment will garner investors a 19 percent rate of return.
The platform isn’t open to small investors. OpenPath said only those with $200,000 in annual income or a net worth of more than $1 million, not including their homes, were eligible to participate.
Under this crowdfunding platform, investors are able to access tax documents, financials and deal documents throughout the life of their investments via an online dashboard, Slaugh said.
The complex caters to those 55 and older and is considered affordable housing with an occupancy rate of 92 percent. The average rents are $550 and are restricted because the property was developed using federal tax credits.
OpenPath has no plans to raise its rents at this time, but Slaugh said there’s the potential to increase them by $80 to $90 a month in the future and generate more revenue. Some residents would qualify for Section 8 housing and help them cover any rent increase.
OpenPath has touted to investors that its management style boosts occupancy rates. It seeks to create a sense of community within complexes book clubs, community gardens and workout groups so that the residents encourage others to relocate there.
“When OpenPath’s residents and employees are thriving, so are OpenPath’s investors,” said Slaugh who said they’re looking forward to implementing the approach at Lake Tonopah “and to share this investment model with a wide group of partners through our online platform.”
Lake Tonopah Apartments will receive approximately $1.1 million in interior and exterior upgrades, Slaugh said. The 22-building, garden-style and gated apartment property features a fitness center, swimming pool, picnic area and covered parking, Slaugh said.
The use of soliciting investors online is a considered a sign the commercial real estate market is improving. Prior to the Great Recession, investment companies placed ads in national publications such as the Wall Street Journal to solicit investors.
Real estate analysts said acquisitions within the Las Vegas apartment market are picking up with the improvement in the economy and demand for housing. Vacancy rates have dropped and rental rates are rising sharply.
OpenPath said it plans to hold the property for five to 10 years. The rent restrictions on the property expire in 2027, Slaugh said.