What's First Chair Capital's relationship with WhiteHaven Capital?

WhiteHaven Capital (Ben and Sam) is our sister company and we partner exclusively with them on all of the deals. Ben and Sam live in Phoenix, AZ and work full time managing the assets and the construction team. First Chair Capital (Jeff and Tommy) support investor relationships, technology implementation, and acquisitions due diligence. Together with a few other partners, we collectively make up the general partnership team.
 

Have you been out to Phoenix?

We visit Phoenix 4-6 times a year. Every time we’re under contract on a new property, we visit the nearby apartments to see how competitors’ units compare to our property’s units. We also drive the local neighborhoods and explore the retail plazas adjacent to the complex.

Additionally our two key partners, Ben & Sam, live in Phoenix and work full-time on our projects.

How are your other apartment complexes doing?

Great! We’re hitting our rent projections which is always a big unknown before purchasing. We’ve actually exited two properties and you can see our transactions history below.

Do you personally invest in the deals?

Yes. We wouldn’t bring deals to you unless we felt great about it and are willing to personally invest alongside you.

How do the general partners make money?

The general partners spend months to source the deal, inspect the entire complex, comb through the leases, and line up lender financing. We front the cost of all these things, as well as the non-refundable earnest money deposit, which is substantial on transactions this large.

General partner fees include acquisition fee, a finance fee, asset management fee, refinance fee, and a disposition fee.

Any profits in excess of the 10% cumulative preferred return are split 70/30, with 30% going to the general partners. This 30% is also known as the promote.

All of the fees and the promote are included in the underwriting, accounted for in the return projections, and are addressed in detail in the legal documentation, including the PPM (Private Placement Memorandum).

How do you stress test the deals to account for a changing market?

The team underwrites our deals conservatively using metrics like 9% vacancy while Phoenix’s historic vacancy is 7.5%. Even if our stabilized apartments fell to 75% occupancy we would still be cash flow positive. Additionally we run our underwriting through the worst, and highly unlikely, scenario accounting for an additional .5% higher cap rate at the time of sale, rents falling short by $100/unit, and a .5% bump to refinance rate. The result of all of these factors combined still deliver an average projected 11% internal rate of return over a 10 year period to investors.

I'm on the fence about investing passively.

We completely understand. This approach is clearly our personal preference and we think you should consider your preferred style of investing. Some investors enjoy the hands-on aspect of flipping a house while others like managing their own rental properties. Whatever your style may be, we’re here to have an honest discussion and help you consider how this investment may or may not fit into your time horizon.

What are some potential tax implications?

You will receive an annual K1 tax form showing your earnings or losses. Because we typically spend $2-4M in renovations and are also depreciating the asset, there will be significant paper losses. We encourage you to speak to a tax professional as we’re not certified to speak on your specific situation.

What are the minimum requirements for your deal?

We typically raise money from accredited investors. Accredited investors are those who have a net worth of at least $1M (excluding their primary residence) or have earned $200K+ ($300K if married) annually in the previous two years. Beyond these requirements, the minimum investment for our deals is $50K.
 

I have more questions. Can we chat?

We’d love nothing more than to chat real estate with you. Please send us a message hello@firstchaircapital.com