Houston TX Multifamily Preferred Equity

Min. Invest
$75,000
Target Hold
6 mo
Annualized Returns
24.00%
Progress - 85% Pledged
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Why Invest?

  • ECONOMICS
    • Investors receive 24% annualized return
    • Six month term, may extend for two (6) month extensions for increased fee - yield. 
    • $75,000 per unit - $9,000 profit per unit at end of six (6) months
    • $84,000 Payback amount in 6 months.
  •  CLASSIC VALUE ADD UNDERVALUED MULTIFAMILY PLAY 
    • Rents are 25% below market
    • Captive tenants
    • New renovations will increase rent roll and bottom line within six (6) months to either refinance or replace our Preferred Equity with new common equity.
  • DEMOGRAPHICS
    • Working class Hispanic neighborhood
    • Desired requirements for upcoming/better housing in a gentrifying location
    • Overall Houston market demand for rental housing continues to grow
    • Houston supply is still limited for affordable market housing

Investment Type Preferred Equity
Term 6 Months
Raise Amount $750,000

Executive Summary

Overview. Four Arrow Funding, Inc. (the “Issuer”) is making a $875,000 preferred equity investment (“PE”) to a newly formed limited liability LLC (the “Borrower”) formed by Vinod Kulhari, Erin Hudson, and Cynthia Manno (the “Guarantor(s)”). The PE is secured by 300 Victoria Drive and 4635 Werner Street, Houston, TX (the “Properties”). The Properties are comprised of two (2) multifamily projects containing a total of 104 units that are substantially occupied. The Properties are “C” Class properties in a B- market. The Borrower intends to upgrade to a solid “B” rating to increase rents and NOI substantially to a $750,000 annual NOI upon stabilization. The approximate cost (the “Cost”) of the Properties is $6.5 million. Upon stabilization, the $6.5 million Cost will convert to a $8.2 million valuation (the “Value”). See the next page for details. The location is the northwest corridor. The Issuer is an affiliate of Chesterfield Faring Ltd (“CFL”).

Capital Structure. The Properties will be secured by first mortgage loans (the “Loan(s)”) of $4.7 million. The purchase price is $5.2 million. With approximately $1.0 million for value add improvements plus $300,000 in closing costs, the total acquisition cost is $6.5 million. The Borrower will have $1.0 million of common equity (“CE”) invested in the Properties. The PE has $1.0 million of CE subordinated to the PE. The Loan is 71.48% Loan to Cost. The PE including the Loan is a 84.79% Loan/PE to Cost and 67.99% Loan to Value upon stabilization. The Value of the Properties must decrease by over 32.01% before you as investors (the “Investors”) would have any risk of principal loss.

PE Participations. The Issuer provides PE loan participations to its Investors. The Issuer is offering ten (10) units (the “Units”) at $75,000 each totaling $750,000. The repayment will be $84,000 per Unit or a gross of $840,000 at the end of the six (6) month term (the “Term”) for a profit of $9,000 per Unit. Predicated on the Term, the annualized return is 24.0%. CFL is purchasing a $35,000 unit totaling $875,000 for the gross PE issuance. The Borrower may extend through two (2) six (6) month extensions for $25,000 in cash each plus adding $75,000 for each extesnion to the face amount of the PE. The Investors will receive Units from the Issuer secured by the PE that the Issuer makes to the Borrower. See the PE Loan Participation agreement for more details and risk factors.

Collateral Held. The Collateral includes a secondary assignment of the LLC membership interests. If and upon a Maturity Date default, if any, FAF has right to sweep net cash flow to repay full balance until paid in full. The Guarantor will: i) guarantee the Loan, & ii) pledge assignments of the interests in the Properties.

The Properties. 300 Victoria Drive. This Property is a 68-unit, 85% occupied "C" class apartment community. 4635 Werner Street. This Property is a 36-unit, 89% occupied “C” class apartment community located close to 300 Victoria Drive. Both Properties are located in Independence Heights area of near Northwest Houston. It is located approximately 1.5 miles outside Loop 610 and sits just over a mile west of the Houston MetroRail (Red Line). While the draw is the affordability of the housing, residents are equally excited about the new choice in public transportation. Both Properties are close in proximity to be easily managed together.

Contact Information

Kirk Lewin
Director of Investor Relations
Chesterfield Faring Ltd
355 Lexington Avenue, New York, NY 10017
Office: 212-405-2469
 

24% Annualized Return

Ten (10) $75,000 units totaling $750,000.

Pays $9,000 profit (interest) on $75,000 returmning $84,000 in six (6) months.

Two (2) six (6) month extensions, each paying another $10,000 maintaining over a 24% annualized return until final maturity. 

Financial Sources

First Mortgage Debt $4,700,000
Preferred Equity $750,000
Common Equity $1,000,000

Financial Uses

Aquisition $6,575,000

Houston Texas

Houston Multifamily Market. The energy sector recovery has fueled job growth in Houston. This in turn has driven demand for housing.

Houston is expected to lead the nation in job creation for a second consecutive year in 2019 as the economy bounces back from a slowdown in the oil and gas industry. Strengthening employment growth will invigorate housing demand with residents facing limited housing options.

The apartment construction pipeline thinned significantly during the energy industry downturn, and this year’s completions fall to one-third of last year’s total. Demand will outweigh completions, resulting in declining vacancy for only the second time in a five-year span. The brightening economic outlook spurred rising multifamily permit issuance last year, and an expanding planning pipeline suggests higher deliveries could be anticipated after 2019 to meet the rising housing needs. (Source: Marcus & Millichap).

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Investor Tutorial

CERTAIN INFORMATION REGARDING THIS OFFERING

THESE UNITS ARE BEING OFFERED WITHOUT REGISTRATION UNDER ANY FEDERAL OR STATE SECURITIES LAWS, BUT ARE BEING OFFERED UNDER AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND UNDER COMPARABLE EXEMPTIONS UNDER VARIOUS STATE SECURITIES LAWS. HOWEVER, THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”) HAS NOT DETERMINED THAT THESE UNITS ARE EXEMPT FROM REGISTRATION. THESE UNITS HAVE NOT BEEN REVIEWED, APPROVED OR DISAPPROVED BY THE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY, ADEQUACY, COMPLETENESS OR MERITS OF THIS MEMORANDUM, AND ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THIS MEMORANDUM DOES NOT CONSTITUTE AN OFFER TO SELL TO, OR A SOLICITATION OF AN OFFER TO BUY FROM, NOR SHALL ANY OF THE UNITS BE OFFERED OR SOLD TO, ANY PERSON IN ANY JURISDICTION IN WHICH SUCH AN OFFER, SOLICITATION, PURCHASE, OR SALE IS UNLAWFUL OR UNAUTHORIZED UNDER THE SECURITIES LAWS OF SUCH JURISDICTION.

THE STATEMENTS MADE HEREIN ARE MADE AS OF THE DATE ON THE COVER OF THIS OFFERING MEMORANDUM. THIS OFFERING MEMORANDUM CONSTITUTES AN INVITATION TO THE PROSPECTIVE INVESTOR TO SUBMIT AN OFFER TO SUBSCRIBE. NO PERSON MAY PURCHASE THE UNITS OFFERED HEREBY EXCEPT PURSUANT TO AN EXECUTED SUBSCRIPTION AGREEMENT IN THE FORM PRESCRIBED BY THE FUND, AND THEN ONLY FROM A PERSON TO WHOM THE FUND OR ITS DESIGNATED AGENT HAS DELIVERED A COPY OF THIS OFFERING MEMORANDUM.

THESE UNITS ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED BY THE FUND. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THERE IS CURRENTLY NO PUBLIC MARKET FOR THESE UNITS.

IN MAKING A DECISION TO PURCHASE UNITS HEREUNDER, PROSPECTIVE INVESTORS MUST CONDUCT THEIR OWN INDEPENDENT INVESTIGATION OF THE FUND AND THE TERMS OF THIS OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED, AND ARE ENCOURAGED TO CONSULT WITH THEIR ADVISORS AS THEY WILL BE REQUIRED TO REPRESENT THAT THEY ARE ABLE TO BEAR THE ECONOMIC RISK OF THEIR INVESTMENT AND THAT THEY ARE FAMILLIAR WITH AND UNDERSTAND THE FUNDAMENTAL RISKS AND TERMS OF THIS OFFERING.

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION WITH RESPECT TO THE OFFERING OF THE UNITS WHICH IS NOT CONTAINED OR REFERENCED HEREIN, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. POTENTIAL INVESTORS MAY, IF THEY SO DESIRE, MAKE INQUIRIES OF THE FUND WITH RESPECT TO THE FUND’S BUSINESS OR ANY OTHER MATTERS SET FORTH HEREIN, AND MAY OBTAIN ANY ADDITIONAL INFORMATION WHICH SUCH PERSON DEEMS TO BE NECESSARY IN ORDER TO VERIFY THE ACCURACY OF THE INFORMATION CONTAINED IN THIS MEMORANDUM (TO THE EXTENT THAT THE FUND POSSESSES SUCH INFORMATION OR CAN ACQUIRE IT WITHOUT UNREASONABLE EFFORT OR EXPENSE).

August 12 2020

Confidential Offering Memorandum: Four Arrow Funding, Inc

PROSPECTIVE INVESTORS ARE CAUTIONED NOT TO CONSTRUE ANY CONTENTS OF THIS OFFERING MEMORANDUM OR ANY PRIOR OR SUBSEQUENT COMMUNICATIONS, AS CONSTITUTING INVESTMENT, LEGAL OR TAX ADVICE; RATHER THEY SHOULD CONSULT THEIR OWN ADVISORS OR COUNSEL WITH THE CAPACITY TO ADVISE AND PROTECT THEIR INTEREST IN CONNECTION WITH ALL MATTERS CONCERNING THIS OFFERING MEMORANDUM.

THIS OFFERING MEMORANDUM DOES NOT KNOWINGLY CONTAIN ANY UNTRUE STATEMENT OF A MATERIAL FACT OR OMIT A MATERIAL FACT, AND ANY SUCH MISSTATEMENT OR OMISSION IS DONE WITHOUT THE KNOWLEDGE OF THE PREPARERS OF THIS DOCUMENT OR THE FUND. AS SUCH THE FUND BELIEVES THAT THIS OFFERING MEMORANDUM CONTAINS A FAIR SUMMARY OF THE MATERIAL TERMS OF ALL MATTERS, DOCUMENTS AND CIRCUMSTANCES MATERIAL TO THIS OFFERING. WHILE THE DATA AND STATEMENTS CONTAINED HEREIN ARE BASED UPON INFORMATION BELIEVED TO BE RELIABLE, NO WARRANTY CAN BE MADE AS TO THE ACCURACY OF SUCH INFORMATION OR THAT CIRCUMSTANCES HAVE NOT CHANGED SINCE THE DATE SUCH INFORMATION WAS SUPPLIED. THIS MEMORANDUM CONTAINS SUMMARIES OF CERTAIN PROVISIONS OF DOCUMENTS RELATING TO THE BUSINESS OF THE FUND AND THE UNITS OFFERED HEREBY, AS WELL AS SUMMARIES OF VARIOUS PROVISIONS OF RELEVANT STATUTES AND REGULATIONS. SUCH SUMMARIES DO NOT PURPORT TO BE COMPLETE AND ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO THE TEXTS OF THE ORIGINAL DOCUMENTS, STATUTES AND REGULATIONS.