THE FLATS AT TERRAMAR

The property has operated as a Studio 6 hotel since 2002 and is now winding down operations. The borrower sourced this distressed, off-market opportunity through local relationships that sought ADS for its development expertise. The $18.2MM purchase price includes $12.5MM ($127K/unit) for the operator’s leasehold interest, which will be collapsed, and $5.7MM ($58K/unit) representing the landowner’s contribution to the venture. Closing, targeted for December 2025, is expected after full entitlement approval and delivery of the property vacant with the hotel flag and FF&E removed.

The current owner is underwater on lease and loan payments with only four years left. This acquisition resolves the issue by collapsing the lease, giving the borrower both the land and hotel interest.

The three-story building includes 74 studios and 24 one-bedroom units, with 15 reserved for tenants earning 50%, 80%, and 120% of AMI. Each unit has a parking space, plus 25 additional spaces for rent. Amenities include a pool, spa, patio, lawn, and ~16,000 SF of interior common space with a gym, breakfast bar, meeting room, and lobby. A pickleball court will also be added, making it one of the most amenitized coastal rental communities in North County near the beach.

The property will undergo a full cosmetic renovation with updated finishes to create a vibrant, beach-inspired living environment. The borrower will invest $7.6MM ($77K/unit) in hard costs over a 12-month renovation period, including:

• Unit Interiors: New LVP flooring and fresh paint throughout, new cabinets, countertops, and plumbing fixtures in kitchens and bathrooms, new kitchen appliances (microwave, fridge, induction cooktop) and W/D in most units.
• Common Area: Planned upgrades include refreshing the lobby, breakfast bar, clubroom, and game room; adding meeting and co-working spaces; creating bike and surfboard storage; converting the laundry area into a lively, social laundromat; and installing a pickleball court.
• Exterior Improvements: Replaster the pool and spa, new pool equipment, rebuild the trellis, install outdoor showers, redesign and expand landscaping to incorporate the large grass area on the west side into the common area, repave and restripe the parking lot, and install new lighting.