BR Churchill Downs, DST

Overview

A 272-unit Class B, direct-entry townhome and garden-style apartment community at 800 Churchill Downs Drive, Aberdeen NC, in the Pinehurst Metro (Moore County), on ~21.31 acres with 288,480 rentable SF (one-, two-, and three-bedroom units averaging 1,061 SF), completed in 2000 and 2003. The Trust acquired the Property in April 2025 for $56.6M, ~$1.3M below appraised value, financed with a $30,739,000 KeyBank/Fannie Mae DUS first mortgage (44.86% loan-to-capitalization, 5.13% fixed, interest-only, maturing May 2035) and equity. The business plan is value-add: in-unit washer/dryer installation, light interior upgrades to classic finishes, and exterior/landscaping/signage improvements atop $1.5M of prior-owner capex, supported by revenue-management software and third-party management (RPM Living). The Property is leased to an affiliated Master Tenant under a 10-year master lease paying Base Rent (debt service), Additional Rent (monthly distributions), and Supplemental Rent (performance distributions). The Pinehurst Metro sits ~70-90 miles from the high-growth Charlotte and Raleigh-Durham metros, with a golf-tourism-anchored economy and proximity to Fort Liberty. Exit options include an optional Section 721 FMV rollover into a Bluerock-affiliated operating partnership.

Investment highlights

• The investment thesis is operational value creation on a Class B community with below-market rents (income-to-rent ratio ~4.5x on ~$79,000 average household income). The program installs in-unit washers and dryers at a rent premium, applies light interior upgrades to original finishes, and refreshes exteriors, landscaping, and signage, layered on $1.5M of capital already deployed by prior owners, with revenue-management software and a national third-party manager (RPM Living) engaged to drive rate growth.
• The Property was acquired for $56.6M, approximately $1.3M below appraised value, providing a measure of day-one valuation cushion against the 44.86% leverage. The discount is modest in percentage terms (~2.3% of purchase price), so the equity margin of safety is real but thin.
• The asset sits in the Pinehurst Metro, ranked the top micropolitan area in North Carolina for seven consecutive years and tenth nationally, positioned roughly equidistant (70-90 miles) between the high-growth Charlotte and Raleigh-Durham metros. The local economy is anchored by golf tourism (Home of American Golf, the USGA's second headquarters, and future U.S. Opens including 2029, with ~$805M in annual golf-tourism impact) and supported by healthcare and Fort Liberty defense employment.
• Financing is a $30.74M KeyBank loan originated under the Fannie Mae DUS program, fixed at 5.13% and interest-only for the full 10-year term (maturing May 2035), at 44.86% loan-to-capitalization. The agency execution provides institutional terms and the interest-only structure maximizes current distributions and supports a healthy 2.04x Year 1 coverage, but the full principal balloons at maturity and prepayment/defeasance provisions constrain the exit window.
• The master lease channels return through three layers: Base Rent covering debt service, Additional Rent producing a flat ~4.25% monthly distribution, and Supplemental Rent equal to 90% of revenue above a stated breakpoint. As the value-add program lifts revenue, investor cash-on-cash is forecast to ramp from 4.28% to 6.33%, a performance-linked upside atypical of stabilized DSTs, though the affiliated master tenant retains the Base Rent spread and 10% of the Supplemental Rent.

Sponsor

This offering is sponsored by Bluerock. Baker 1031 Investments is independent of the sponsor and provides advisory and brokerage services to accredited investors.