Houston TX Multifamily Preferred Equity
- 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.
- 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|
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.
Four Arrow Funding
Sponsor Profile - Four Arrow Funding.
Four Arrow Funding is an alternative investment platform that focuses on funding and servicing private commercial real estate loans. Our strategy is to originate, hold and service all our loans. Our discretionary platform and nimble structure delivers unparalleled certainty of execution. We emphasize direct origination of our loans, which allows our management team a greater degree of control over due diligence, underwriting, and custom-tailored credit enhancements.
- Lawrence J. Selevan will be the Executive Chairman of the Company. He is the Chairman and CEO of Chesterfield Faring Ltd, and is responsible for the overall direction of the Firm. Mr. Selevan has more than 40 years of experience in real estate investment banking, investment management, principal ownership, and capital markets activities. During his career, Mr. Selevan has executed over $15.0 billion (plus) in transactions for both US domestic and offshore institutional and private clients, including US REITs, pension fund, fund managers, global investment banks, private family home offices, and Sovereign Wealth Funds. Previously, Mr.Selevan was the CEO of Garrick Aug, Director of Fund Management for Sumitomo Real Estate, Managing Director at Fieldstone, Inc. and the merchant banker for a private family office. He has worked on projects throughout the world including the US & the Americas, EMEA (Europe, Middle East, Africa), plus Asia.
- Jordan Shrier. serves as President a co-founder of Four Arrow Funding Inc. He originates and underwrites transactions for the firm and acts in an advisory role and direct lender having helped his clients raise over $800 million in capital markets transactions. Mr. Shrier is active with the Commercial Real Estate Finance Council (CREFC), Mortgage Bankers Association (MBA) and International Council of Shopping Centers (ICSC). Mr. Shrier has twelve years of experience in commercial real estate and corporate finance. He has held positions at Investment Banks C.E. Unterberg Towbin and Bear Stearns & Co. When Jordan isn’t working he’s spending time with his wife and three children
Operator Profile - The Hudson Team
The Hudson Team. Andrew has been in the mortgage industry for over 10 years. Andrew and Erin created a turnkey company for Investors to acquire investment properties in Ohio, Indiana and Missouri. They have successfully done over 220 buy and sell transactions primarily in single-family rehab projects over the last five years. Their experience is a natural transition to the multi-unit/commercial arena.
Cindy Manno. Cindy is the owner and co-founder of the first virtual r eal estate brokerage in the country. The brokerage has over 20 years of residential & commercial real estate experience and currently holds Licenses in California, Colorado, Texas and Washington. Cindy is also a registered dietitian with over 25 year experience in hospital management.
Jacob Mojarro. Jacob is a successful real estate attorney as well as a licensed broker in California for over ten years. He specializes in real estate law, mergers and acquisitions for business including SEC platforms, and is especially strong with contracts, trusts and employment/labor issues, Also worked with the California Department of Real Estate to help oversee policies, and was awarded for 10 Best Real Estate Law Attorney 2018-2019 by the American Institute of Legal Counsel.
Kenny Gardner. Kenny brings over thirty years of residential and commercial, and multi-family construction experience in California, Florida, Oklahoma, North and South Carolina, and Tennessee. He has also completed post-disaster re-builds working with Insurance and FEMA. He has also created and operated property management companies with successful reduction in maintenance expenses.
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.
|First Mortgage Debt||$4,700,000|
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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