HUB13 Apartments
Oak Creek, WI
HUB13 is a 300-unit Class A apartment and townhome community, built in 2022, and located in the fast-growing Milwaukee suburb of Oak Creek, Wisconsin.
Open Now
Projections
14.0% - 14.2%
1.82x - 1.83x
5 years
Multi Family
Investment Documents
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Investment Overview
HUB13 apartments is a 300-unit Class A apartment and townhome community located in the growing Milwaukee suburb of Oak Creek, Wisconsin. The luxury apartment complex was built in 2022 and offers residents high-end apartment finishes, a comprehensive top-of-market amenity set, all while being a quick drive from downtown Milwaukee and all of Oak Creek’s suburban charm.
The property was built by Wingspan Development, a Chicago-based developer, for a total cost of approximately $73M. The property was delivered during a period of significant apartment construction in Oak Creek, and despite strong market demand, supply headwinds caused a delay in lease-up and a drag on rental rates. Since delivery, the market has seen a rebalance in supply and demand with rental rates growing 2.7% year over year and submarket vacancy falling back to 3.2%. Despite the tailwinds that are helping drive property performance, Wingspan was being forced to sell the property given an upcoming loan maturity. Following a marketing effort that generated numerous offers of $66M - $67M, Wingspan elected to pursue an off-market recapitalization of the property with Midloch in order to participate in the next phase of the business plan.
Midloch has negotiated a deal with Wingspan where Midloch’s last dollar basis is $63.7M which is a ±13% discount to Wingspan’s development basis and a ±5% discount to the current market value. Additionally, Midloch investors have priority of cash flow and sale proceeds over the remaining Wingspan equity until Midloch’s investment receives a ±15% annualized IRR. This provides Midloch investors with strong cash flow and upside all while being in a protected position.
In addition to acquiring HUB13 with Wingspan Development, Midloch is also allowing Harmoniq Residential, the current 3 party management company at HUB13 and a current partner of Midloch’s, to invest in the sidecar offering. Midloch and Harmoniq jointly own Harbor Estates, The Corridor (formerly known as The Oscar), and The Malt House. Having Harmoniq in the deal will further align incentives at the property and allow the management team to participate in the future upside at the property.
Property Location
1310 S Nicholas Drive
Oack Creek, WI 53154
HUB13 is a 300-unit Class A apartment and townhome community, built in 2022, and located in the fast-growing Milwaukee suburb of Oak Creek, Wisconsin.
Built
2022
Building Size
287,712 SF
NUMBER OF UNITS
300
Number of BUILDINGS
9
Business Plan
Acquire at a Discount
Midloch is investing in HUB13 through an off-market recapitalization with the developer, Wingspan Development. Wingspan built the property in 2022 for a total cost basis of ±$73M, and through a lender-driven marketing process received offers between $66M and $67M. Given the loss of equity and recent operational improvements at the property, Wingspan elected to work with Midloch to recapitalize HUB13 to participate in the future value creation. Through this structure Midloch was able to invest at a discounted basis of $63.7M, which is a ±13% discount to construction costs and a ±5% discount to market pricing.
Improve Operations & Reduce Expenses
Upon acquiring the property, the management team is projecting to focus efforts on further driving operational efficiencies at the property. There are several expense categories that provide an opportunity for savings such as insurance and the various service contracts at the property. Additionally, the team will focus efforts on improving the already comprehensive amenity set while also hosting a variety of resident events to further create a sense of community at the property.
Maximize Rental Rates & Occupancy
In addition to expense savings opportunities, Midloch projects there to be an ability to further increase rental rates and occupancy at the property as supply and demand continue to remain in balance throughout the market. Current occupancy of ±92% sits below the submarket average occupancy of 96.8%, and rental rates on 1-bedroom, 2-bedroom, and 3-bedroom units trail the nearby comparable properties by $50 - $200 depending on the unit type and comparable property.
Cash Flow & Liquidity Options
Given the strong in-place cash flow and value-add potential, investors are projected to receive a ±7.3% average annualized cash yield during the 5- year hold period with projected cash yields reaching ±9.0% at stabilization. At that time, Midloch projects there to be several options to create liquidity for investors including a full market sale, a partial sale of the townhome portion of the property, or a partial cash-out refinance. Midloch will continue to evaluate all opportunities for creating investor liquidity throughout the hold period.
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