What a good deal looks like

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Sometimes, this is what victory looks like:

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That’s a wire from Crown Escrow (a Silver Lake-based, family-owned escrow company which I strongly endorse, fyi) for $2.59MM, the net proceeds of our refinance of 201 N Ave 55, a 12 unit building we purchased in Highland Park in June 2014.

As I believe I’ve mentioned here before, the total investment on this deal was ~$2.8MM. So, between this wire and the operating cash accumulated to date, we’re going to distribute ~$2.7MM to the investors today.

That means the investors will have back 96% of their total investment, plus own a building that’s levered to something like 65% LTV (in other words, not so highly levered that we risk default in the event of a 15-20% rent decrease).

Because the loan is interest-only for the first three years, we expect to get the investors the rest of their capital back in the next 24 months or so. Then, it will take a while for us to pay down the preferred return accumulated by the investors since purchase.

Depending on operating performance, Adaptive will start to share in the ownership and cashflow from around 2020-2021 and then have a meaningful stake from around 2027.

By then, I hope we’ll be doing more and bigger deals. But I’m always going to look back on this one as the first deal where we truly executed on our business model.

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