Investors Anticipate A 20.9% IRR On This Multifamily Investment Thanks To A 99-Year Property Tax Exemption

A private market real estate investment opportunity is available for a Class A multifamily housing project in Houston. 

The COOP @ EaDo is a ground-up development resulting in a five-story, 284-unit mid-rise structure east of downtown Houston. Strategically located in the EaDo submarket, the area surrounding the project has seen increased development in recent years and become a more sought-after area for residents.

The investment offering comes with benefits and perceived downside protection for investors. First, the advantageous initial basis cost of the land, which was acquired for $7.1 million. The land purchase breaks down to $56 per leaseable square foot (LSF) or $25,000 per unit, a 32% discount compared to comparable acquisitions in the area that are averaging $82 per LSF, according to RealtyMogul. 

Second, the development has qualified as a public facility corporation (PFC), a government program that creates a 99-year property tax exemption, including a 100% sales tax exemption on construction materials. This Texas incentivization program was created in 2015 and is designed to provide an increase in affordable housing throughout the state. The program creates a 100% annual property tax exemption by placing rent restrictions on 50% of an apartment's units. 

The project has received the necessary permits and is shovel-ready. Construction is projected to be completed in November 2025 with a total development budget of $59.5 million. The Class A facility will provide tenants with a top-tier amenity package, including a pool, parking spaces, outdoor grilling and lounge areas, a gated pet park and private workspace areas. 

• Minimum investment: $35,000
• Target internal rate of return (IRR): 20.9%
• Target equity multiple: 2.13x
• Target cash yield: 6.8%
• Target investment term: four years

Project sponsor Urban Genesis brings extensive experience with ground-up developments under the PFC structure to the investment. The group was founded in 2014 and manages a portfolio consisting of 26 assets valued at approximately $1.6 billion. 

Urban Genesis focuses on Class A projects in unaffordable urban locations. The COOP @ EaDo development is being funded through the RealtyMogul real estate platform. 

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