34 apartments over 11,400 SF of ground-floor retail
Two income streams that behave nothing alike. The homes run on unit count and average rent. The four commercial bays roll tenant by tenant on NNN terms. They meet at NOI, under one loan.
Sable & Vine is not a real property. Every property in this library is fabricated. There is no address, no listing, no broker, no lender and no transaction behind any of it. The figures are model outputs for illustration, not a valuation, an offer, or investment, legal, tax, appraisal or brokerage advice.
The assumptions
Everything below is an input. Nothing here was inferred, smoothed, or filled in from a market average.
Property and business plan
- Residential
- 34 units at $2,150 / month
- Commercial
- 11,400 SF, $31.81 / SF on the three occupied bays
- Tenants
- 3, plus one vacant bay
- Lease structure
- NNN retail, $6.08 / SF recovered
- Hold
- 5 years
- Asking price
- $13,400,000
Debt and exit
- Sizing
- 62% loan-to-value
- Rate
- 6.40% fixed
- Interest-only
- 1 year
- Amortization
- 30 years
- Exit cap
- 5.75% on forward NOI
Two models, one NOI
The 34 apartments produce $877,200 of gross rent on a 36% expense ratio. The four retail bays carry $367,700 of gross potential rent, $289,500 of it in place across the three occupied bays, on a $6.40 per SF operating cost that the NNN leases largely reimburse. Those two lines add to the year-one gross potential rent of $1,245k on this page.
Rolling the retail into a residential expense ratio, or the apartments into a per-SF commercial model, is the standard way a mixed-use pro forma goes wrong. A 36% residential expense ratio applied to the retail rent would charge about $132,000 of expense against bays that cost $73,000 a year to run, understating NOI by roughly $59,000, which at a 5.75% exit cap is $1.0M of value.
The vacant bay is the deal
One of the four bays is empty. It leases at $34.00 per SF after nine months of downtime, with $45 per SF of improvements and a 6% commission. Rent plus recoveries on that bay is about $92,000 stabilized, of which year one collects three months, so it is the largest single piece of the $170,000 move from year-one to year-two NOI, roughly $72,000 of it.
One capital stack, one waterfall
Both income streams sit under a single 62% loan at 6.40%. Year-one coverage of 1.33x is carried by the apartments while the retail bay is being leased. The debt does not care which half of the building paid it.
Operating pro forma
Figures in thousands of dollars. Negative amounts are in parentheses, the way an operating statement writes them.
| Line | Yr 1 | Yr 2 | Yr 3 | Yr 4 | Yr 5 |
|---|---|---|---|---|---|
| Gross potential rent | 1,245 | 1,282 | 1,319 | 1,356 | 1,396 |
| Other income and recoveries | 48 | 71 | 71 | 72 | 78 |
| Vacancy and credit loss | (198) | (76) | (94) | (100) | (83) |
| Effective gross income | 1,096 | 1,277 | 1,296 | 1,328 | 1,391 |
| Operating expenses | (389) | (400) | (412) | (425) | (438) |
| Net operating income | 707 | 877 | 883 | 903 | 953 |
| Capital items | (219) | (3) | (45) | (64) | (3) |
| Debt service | (532) | (624) | (624) | (624) | (624) |
| Levered cash flow (final year includes the sale) | (44) | 250 | 215 | 216 | 9,170 |
| DSCR | 1.33x | 1.41x | 1.42x | 1.45x | 1.53x |
Sources and uses, and the exit
Uses at close
- Purchase price
- $13,400,000
- Acquisition costs
- $281,400
- Financing fees
- $83,080
- Total uses
- $13,764,480
Sources at close
- Senior loan
- $8,308,000
- Equity at close
- $5,456,480
- Total sources
- $13,764,480
Exit
- Forward NOI at exit
- $981,858
- Sale price
- $17,075,786
- Selling costs
- ($341,516)
- Loan payoff
- ($7,890,357)
- Net sale proceeds
- $8,843,912
Downside and upside
The same three cases the product runs on every deal. The downside is not a haircut on the answer, it is a full re-underwrite with the assumptions moved.
| Case | Levered IRR | Equity multiple | Year-1 DSCR | What moved |
|---|---|---|---|---|
| Downside | -3.2% | 0.85x | 1.09x | Rent growth at 40% of base, expenses growing 20% faster, exit cap 75 bps wider, vacancy 3 points higher, rate 100 bps higher. |
| Base | 12.8% | 1.79x | 1.33x | The assumptions listed on this page, unchanged. |
| Upside | 20.6% | 2.48x | 1.41x | Rent growth at 140% of base, expenses growing 10% slower, exit cap 50 bps tighter, vacancy 1 point lower, rate 25 bps lower. |
Levered IRR against price and exit cap
Rows are the exit cap rate, columns the purchase price. The centre cell is the base case on this page, so the grid checks itself.
| Exit cap | $12,060,000 | $12,730,000 | $13,400,000 | $14,070,000 | $14,740,000 |
|---|---|---|---|---|---|
| 5.25% | 21.4% | 18.8% | 16.3% | 13.9% | 11.6% |
| 5.50% | 19.7% | 17.1% | 14.5% | 12.1% | 9.7% |
| 5.75% | 18.1% | 15.4% | 12.8% | 10.3% | 7.9% |
| 6.00% | 16.5% | 13.8% | 11.1% | 8.6% | 6.1% |
| 6.25% | 15.0% | 12.2% | 9.5% | 6.9% | 4.3% |
Against these hurdles
A recommendation is only worth anything next to the targets it was measured against. These are this example's own hurdles. In the product they are yours, and you edit them.
The hurdles used here
- Target levered IRR
- 12.00%
- Minimum year-1 DSCR
- 1.25x
- Minimum equity multiple
- 1.70x
Altyst does not supply a target return. It tests the model against the numbers you set.
Advance
- Levered IRR of 12.82% clears the 12.00% target.
- Coverage clears at 1.33x against a 1.25x minimum.
- Equity multiple clears at 1.79x against 1.70x.
- All three hurdles still hold at $13.62M, 1.63% above the asking price.
What clears, and at what price
Each price below is solved by re-underwriting the whole model at that price until the constraint is met. The binding price is the lowest of the three, because a deal has to satisfy every hurdle, not the easiest one.
- Asking price
- $13,400,000
- Price for the target levered IRR
- $13,618,617
- Price for the minimum DSCR
- $14,250,668
- Price for the minimum equity multiple
- $13,726,075
- Value at the target going-in cap (5.75%)
- $12,292,637
- Binding price, the lowest of the three hurdle prices
- $13,618,617
- How the six pages in this library were classified, against the hurdles printed above and nothing else.
- Advance: all three hurdles clear at the asking price.
- IC Review: coverage and equity multiple clear, and the levered IRR misses by less than 100 basis points.
- Reprice: a hurdle fails at the asking price, and a lower price is published at which all three clear.
- Reject: no price in the search band clears every hurdle.
- In the product the same six words come from a wider test that also weighs average cash-on-cash, the downside case and a composite score. Three hurdles clearing is necessary for Advance, not sufficient, and Reject there is a downside test rather than a price search.
Checking this yourself
Every figure came from the same deterministic engine the product runs, in exact decimal arithmetic. The same inputs produce the same result every time, which is what makes a page like this worth publishing at all.
The inputs are on this page in full. Rebuild it in a spreadsheet and the lines should agree. Where a number surprises you, the line above it is usually the reason, and the calculation methodology states the convention used for every one.
Permanent link: https://altyst.ai/models/mixed-use-apartments-over-retail
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