A ground-up, Class A multifamily project in one of the nation's fastest-growing metros — 185 apartment homes, structured retail, and a 217-stall parking garage on a 58,370 sq ft site, financed through a bank construction loan converting to HUD 221(d)(4) permanent debt.
Construction-to-Permanent: Two-Phase Capital Strategy
The financing plan is engineered for capital efficiency and risk management. During the 24-month construction window, the bank loan capitalizes all interest — eliminating cash drag during the build. Upon certificate of occupancy, the HUD 221(d)(4) takes out the bank, delivering fixed-rate, non-recourse permanence for the full 40-year term.
The project follows a disciplined five-stage schedule — from pre-closing through stabilized operations and an ultimate exit event. Each phase carries distinct risk and return characteristics, with personal recourse limited exclusively to the 24-month construction window and fully extinguished at HUD conversion.
1
Mar 2026 — Pre-Closing
Month 0. Bank loan closes. Land debt of $11.5M retired. Phases I–III cross-collateralized.
2
Apr 2026 — Construction
Months 1–24. Monthly draws. Interest capitalizes into loan balance. No cash carry required.
3
May 2028 — HUD Conversion
Month 25. HUD loan closes at $63.86M / 5.65% fixed. Phases II & III returned unencumbered.
4
May 2029+ — Operations
Years 1–3+. Lease-up to stabilization. 2.5% annual rent growth assumption applied.
5
2033–2038 — Exit Options
Year 5, 7, or 10. Sale or refinance. HUD loan balance paid off at disposition.
5-Year Exit — May 2033
IRR: ~32% · MOIC: 3.48x
Highest IRR — development profit realized early relative to hold period.
7-Year Exit — May 2035
IRR: ~28% · Greater Total Distributions
More operating cash flow years captured before the sale event.
10-Year Exit — May 2038
IRR: ~24% · Maximum Wealth Accumulation
HUD loan ~8 years amortized at exit, maximizing equity build.
All three plots are cross-pledged to the bank as construction loan collateral. The bank retires existing land debt at closing and holds a first-lien position across all parcels. At HUD permanent loan conversion (Month 25), Phase II & III plots are returned to Don free and clear — providing a built-in equity recovery mechanism for the sponsor.
$29.75M
Total Cross-Collateral Value
2026 updated appraisals across all three pledged parcels
$11.5M
Existing Land Debt Retired
Paid in full by the bank at construction closing
$18.25M
Don's Net Land Equity at Risk
Sponsor's net equity position secured across all three parcels
100% Bank-Financed Construction → HUD 221(d)(4) Permanent Conversion at Month 25. The bank funds all hard, soft, and land debt costs during the 24-month construction period. At Month 25, HUD permanent loan proceeds of $63.9M retire the bank in full.
Uses — Bank Construction Loan Draws
Hard & Soft Construction Costs: $50,013,377
Existing Land Debt Payoff (incl. carry): $11,571,875
Year 1 GPR: $6,560,295 · 5% Economic Vacancy · Year 1 EGI: $6,232,280. The unit mix is calibrated to Boise's demand profile, with 1BR units comprising the majority of the portfolio. Ancillary income from media services, structured parking, and utility billing (RUBS) contributes meaningfully to total revenue.
Expenses are calibrated to the Greystar Boise comparable asset at a 23.9% expense ratio — a conservative, market-validated benchmark. Year 1 NOI of $4,740,255 reflects disciplined cost management and strong top-line revenue, yielding a 7.70% yield on total project cost.
The base case underwrites conservative lease-up assumptions at 5.0% economic vacancy, 2.5% annual rent growth, and a 5.0% exit cap rate. The resulting metrics demonstrate robust debt coverage, compelling spread to exit, and strong unleveraged returns relative to total project cost.
$4.74M
Year 1 NOI
Net Operating Income at stabilization — the core earnings engine of the asset.
7.70%
Yield on Cost
Year 1 NOI ÷ $61.59M total project cost — unleveraged build yield.
270bps
Development Spread
Yield on cost minus 5.0% exit cap rate — the fundamental value creation engine.
1.176x
DSCR
HUD minimum — sized to exact compliance with agency underwriting requirements.
Don Veasey / Kal Pacific, Inc. · 100% equity · No LP · No promote. The sponsor retains the entire economics of the project with no promoted interest or limited partner dilution. Returns are driven by strong NOI growth, disciplined leverage, and a favorable HUD exit structure.
5-Year Hold
32.9% Annual IRR
Equity Multiple (MOIC): 3.45x
Net Profit: $44.7M
Net Sale Proceeds: $46.5M
Equity Invested (Year 0): ($18.25M)
Yield on Cost: 7.70%
7-Year Hold
28.8% Annual IRR
Equity Multiple (MOIC): 4.29x
Net Profit: $60.0M
Net Sale Proceeds: $61.3M
Equity Invested (Year 0): ($18.25M)
Yield on Cost: 7.70%
10-Year Hold
24.4% Annual IRR
Equity Multiple (MOIC): 5.64x
Equity Invested (Year 0): ($18.25M)
Yield on Cost: 7.70%
All return scenarios assume 2.5% annual NOI growth and a 5.0% exit cap rate. Equity invested represents Don's net land equity at risk ($18.25M), fully recovered at HUD permanent closing.
Returns are modeled across three hold periods to give investors a complete view of the risk-return profile. All three scenarios use identical equity of $18.25M, a 5.0% base exit cap rate, and a 270 bps development spread — the only variable is time. Shorter holds maximize IRR; longer holds maximize total wealth accumulation through additional operating distributions and loan amortization.
The 5-year exit represents the base case recommendation — development profit is realized while IRR dilution from extended hold has not yet compounded. The 7- and 10-year scenarios are presented for institutional partners modeling longer hold durations.
Build at a 7.70% unleveraged yield — Year 1 NOI of $4.74M on $61.59M total project cost.
5.00% Exit Cap Rate
Institutional buyers in Boise Class A multifamily underwrite to ~5.0% — implying a ~$94.8M stabilized value.
270 bps Spread = Value Created
The gap between build yield and market cap rate is the fundamental engine of development profit. Build cheaper than the market values.
How the Math Works
Year 1 NOI of $4.74M divided by a 5.0% exit cap rate implies a stabilized asset value of approximately $94.8M — against a total project cost of $61.59M. That delta is real, realized value created through the development process itself, not through market appreciation or leverage engineering.
Building at a yield materially above the market's pricing cap rate is the foundational thesis of ground-up development. At 270 bps, this project sits well within institutional standards for a viable development spread.
Phase II & III Land Release at HUD Closing
At Month 25, the bank releases Phases II & III from the cross-collateral pledge. Combined appraised value: $20.55M. The HUD takes a first lien on Phase I only.
Don begins stabilized operations with $20.55M in fully unencumbered land — available for Phase II development, new debt collateral, or outright sale. This materially enhances total sponsor returns beyond what Phase I alone generates.
The scenario matrix stress-tests the three variables most sensitive to market conditions: achieved rents, economic vacancy, and exit capitalization rate. The base case reflects conservative Boise Class A underwriting. The stress case illustrates conditions under which HUD sizing would require recalibration; the bull case reflects upside achievable in a tightening supply environment.
The stress case is not a loss scenario — it is a signal to resize the HUD loan accordingly. The project's 270 bps development spread provides meaningful cushion before value creation is materially impaired. A 50 bps cap rate expansion (5.0% → 5.5%) reduces implied exit value by approximately $8.6M but does not eliminate the development premium.
Stress Case
0% GPR growth · 6% vacancy · 6.0% exit cap
Conservative downside — HUD debt still serviceable
The bank holds a first-lien position on Phase I plus cross-collateral security over Phase II ($16.05M) and Phase III ($4.5M), providing $29.75M in total pledged collateral against a $61.6M construction draw. The bank is taken out in full by the HUD 221(d)(4) permanent loan at Month 25.
Bank's Security Package
First Lien: Phase I Development Site ($9.2M CBRE 2026)
Cross-Collateral: Phase II ($16.05M) + Phase III ($4.5M) pledged
Total Collateral Value: $29,750,000 (2026 appraisals)
Existing Debt Payoff: $11,500,000 — paid at construction closing
Don's Net Equity at Risk: $18,250,000 — recovered at HUD closing
LTC (informational): ~103.7% on hard/soft costs only
Construction → Permanent Loan Mechanics
Construction Rate: 8.25% — interest capitalizes monthly
Draw Schedule: Monthly draws over 24-month build period
Month 1 Draw: $13,655,766 (land debt payoff + first costs)
27th & Fletcher Phase I represents a compelling, fully structured financing opportunity for a lender seeking strong collateral coverage, a clearly defined HUD permanent takeout, and a proven sponsor with 100% equity at risk.
Class A Multifamily · HUD Permanent Takeout
185-unit development with a 24-month construction period and a defined HUD 221(d)(4) permanent conversion at Month 25. Non-recourse, 5.65% fixed, 40-year fully amortizing.
$29.75M Cross-Collateral Land Security
All three parcels pledged; $11.5M existing debt retired at closing. Don's net equity at risk: $18.25M — recovered in full at HUD conversion.
100% Bank-Financed Construction · No Sponsor Equity Drawn
Bank funds all hard, soft, land debt, and carry costs at 8.25%. No LP, no promote, no sponsor equity drawn during the build period.
Strong NOI & Yield · Year 1 NOI $4,740,255 · 7.70% Yield on Cost
5.0% exit cap rate · 1.176x DSCR (Year 1, HUD minimum). Expenses benchmarked to Greystar Boise comp at 23.9% expense ratio.
Exceptional Sponsor Returns Across All Hold Periods
5-Year IRR: 32.9% / 3.45x MOIC · 7-Year IRR: 28.8% / 4.29x · 10-Year IRR: 24.4% / 5.64x. Sole sponsor: Don Veasey / Kal Pacific, Inc. · 100% equity ownership.
Don Veasey / Kal Pacific, Inc. · Confidential · March 2026
Don Veasey / Kal Pacific, Inc. — Sole Equity Sponsor
27th & Fletcher Phase I is a single-sponsor, single-tier structure. All equity, risk, and returns flow directly to Don Veasey through Kal Pacific, Inc. — there is no LP partner, no promote structure, and no waterfall split. This simplicity benefits institutional lenders by eliminating subordinate capital complexity and aligning all decision-making authority with a single accountable principal.
Sponsor Structure
Key Investment Highlights
Ground-up Class A multifamily in Boise's high-growth corridor — one of the top-performing Sun Belt markets