Deep Deuce

Oklahoma City, OK

Date Acquired: April 14, 2004
Purchase Price: $22,200,000
Date Sold: July 31, 2007
Sales Price: $26,900,000
Location: Oklahoma City, OK
Leveraged IRR: 27.95%

Somerset Partners (“SP”) purchased this 294 unit Class A property located in Oklahoma City in an off-market transaction. In this direct purchase, Somerset was able to achieve an above market yield due to the property’s unique position in its market. Deep Deuce was the first and only urban in-fill project in Oklahoma City and as such there were no comparative properties (“comps”) with which to measure it. Although Somerset paid a then record price of $75,000 per unit, the purchase was at an 8% “cap” rate on in-place NOI. At a time when Class A properties were trading at 6% “cap” rates in larger markets and interest rates were at record lows, Somerset saw this investment as a classic arbitrage opportunity. The purchase was financed with a 4.75% loan and Deep Deuce yielded substantial Cash-on-Cash returns during Somerset’s ownership. Somerset was able to further improve operations through capital improvements/upgrades and proactive asset management during its 3+ years of ownership.