The plan builds at 60 percent loan to cost, stabilises the community, refinances into permanent debt, and holds for income. The return comes from a yield on cost above the exit cap, not from cap rate compression.

LP equity funds the gap between total cost and the construction loan. The general partner co-invests $0.3M, so total equity is $34.3M and the sponsor is aligned with limited partners from day one.

The community reaches a stabilised NOI of $5.62M. Valued at a 5.0 percent cap rate, that is $112.4M, roughly $26.7M above the $85.75M cost basis.

Building to a 6.55 percent yield on cost and valuing at a 5.0 percent cap is a 155 basis point spread. That spread is the margin between cost and stabilised value, and it is where the equity return is earned.

The mix runs from 720 square foot one-bed cottages at $2,095 to 1,750 square foot detached homes at $3,995. Family-sized rentals with yards and garages carry the premium rents and hold occupancy.

From $9.13M of gross rent plus $0.37M of other income, a 6 percent vacancy allowance and a 37 percent expense ratio leave $5.62M of NOI. The expense load reflects single-family maintenance across a spread-out community.

Hard construction is the largest line at $53.0M, with land at $16.0M. Professional fees of $5.3M and finance of $5.6M sit alongside $3.2M of impact fees and reserves to complete the $85.75M basis.

The construction loan funds 60 percent of cost. At stabilisation it refinances into a $59.4M permanent loan sized to a 1.35 times cover, releasing about $8.0M back to equity while debt service stays comfortably covered.

Limited partners receive an 8 percent preferred return, then a 70/30 split above it. Net of the promote, the LP return is about 16 percent IRR and 1.95 times equity, against a project-level IRR near 19 percent.

Cadence follows a develop-to-core path. Horizontal work and first verticals come first, homes deliver and lease in phases, occupancy stabilises near 94 percent, and the project refinances before settling into income through a year-five exit.

Homes lease as they deliver, so absorption spreads across the build rather than landing all at once. Underwriting holds a 6 percent vacancy and credit allowance and reaches stabilised occupancy near 94 percent.

The main risks are cap rate and rent. A 1.35 times cover holds debt service to about 79 percent occupancy, and the 155 basis point development spread absorbs a modest rise in the exit cap before returns are impaired.

Phoenix draws steady in-migration and job growth, and family-sized rentals with yards are in short supply. Renters priced out of ownership stay longer, which supports occupancy and gives institutional buyers a reason to hold stabilised BTR as core income.