HSK LLC

The operator plans to acquire Venture on Colter at a 30%+ discount, recognizing it as a classic distressed opportunity. The seller originally purchased the property at a high valuation, leveraging low-interest debt. However, with rising interest rates in 2024, they are now unable to service the debt, creating a unique opportunity for us to acquire the building at its debt value directly from the bank.

By purchasing below the asset’s intrinsic value, built-in equity is immediately gained. The property is currently 75% occupied. The operator plans to enhance the asset's daily operations and property management, increasing occupancy to over 90%. Once occupancy exceeds 90% for a sustained period of 90+ days, they will position the property for refinancing through a conventional bank loan.

After a few years of stable cash flow and continued property management improvements, the operator anticipates selling the asset at an estimated strike price of $18.4 million, realizing significant value appreciation.

Target Annual IRR

20%+ IRR

Maximum Offering

$2,000,000

Target Term

3 Years

Purpose

Invest in Venture on Colter. The operator will acquire the asset at a 30%+ discount to intrinsic value, operate effectively for 3 years, and then sell.

Forward-Looking Statements

The term “forward-looking statements” means any statements, including financial projections, that relate to events or conditions in the future. Often, forward-looking statements include words like “we anticipate,” “we believe,” “we expect,” “we intend,” “we plan to,” “this might,” or “we will.” The statement “We believe interest rates will rise” is an example of a forward-looking statement.

Because we are talking about a new business, many of the statements in this Offering Circular are forward-looking statements.

Forward-looking statements are, by their nature, subject to uncertainties and assumptions. The statement “We believe interest rates will rise” is not like the statement “We believe the sun will rise in the East tomorrow.” It is impossible for us to know exactly what is going to happen in the future, or even to anticipate all the things that could happen. Our business could be subject to many unanticipated events, including all the things we talk about in “Risks of Investing.”

Consequently, the actual result of investing in the Company could (and almost certainly will) differ from those anticipated or implied in any forward-looking statement, and the differences could be both material and adverse. We do not undertake any obligation to revise, or publicly release the results of any revision to, any forward-looking statements, except as required by applicable law.

The Opportunity: Venture on Colter LLC

HSK LLC offers a compelling opportunity to participate in the acquisition of a distressed multifamily asset for $13,000,000, representing a 30%+ discount from its bank-appraised value of $18–$20 million just two years ago.

Market Overview: Interest Rate Pressures on Multifamily Assets

Before the Federal Reserve began its series of interest rate hikes, many apartment owners leveraged floating-rate loans to acquire properties, often with aggressive loan-to-value ratios. Today, rising interest rates and escalating costs of interest rate caps have created a challenging environment, significantly increasing debt service expenses.

The impact is profound: over $2.2 trillion in debt is set to mature before 2028, much of which will need to be refinanced at higher rates (Wall Street Journal). As a result, many apartment owners are selling properties at steep discounts—often 20–30% below previous market valuations—to meet financial obligations.

Market Indicators: Positive Trends in Multifamily Housing

1. Vacancy Rates Declining: Recent data from Apartments.com reveals that national vacancy rates have declined for the first time in three years. In Phoenix, the average vacancy rate currently stands at 10.9%, but our Arizona properties have experienced notable increases in occupancy rates over the past several quarters, signaling localized strength in tenant demand.
2. Supply Constraints on the Horizon:
   • Tapering New Construction: Apartments.com projects that new multifamily deliveries will decline by 50% in 2025, dropping to 334,000 units.
   • Completed Units Outpacing Starts: According to the U.S. Census Bureau, 193,900 more multifamily units were completed than started in 2024, marking a significant shift.

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This trend suggests that as completed units continue to exceed new starts, supply will tighten beginning in 2025 and likely extend in subsequent years.

Market Outlook: Favorable Conditions for Multifamily Investment

The combination of declining vacancy rates, strong tenant demand, and tapering supply points to a favorable environment for the recapture of intrinsic value.

Investing at this discount creates the potential for a substantial upside as market conditions stabilize and improve.

HSK LLC presents a unique investment opportunity, capitalizing on a distressed asset available at a significant discount while positioning itself in a market with positive indicators for long-term growth and stability, making it an ideal choice for investors looking to maximize returns.

Project acquisition costs are expected to total approximately $13,600,000. The Operator expects to finance the project through a bank loan of 55% - 65% of the Project cost with the remainder being financed through either of the two scenarios described below.

Two scenarios for anticipated sources and uses for the Project are outlined in the table below, although more are possible.

Studio and 1 Bed/1 Bath Units