Mesa, Arizona- Multifamily - Preferred Equity

Min. Invest $50,000
Target Hold 12 mo
Annualized Returns 17%
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Project Summary

  • $800,000 Preferred Equity investment paying 17% annualized subordinated to a $6.945 million first mortgage and superior to $1.4 million of common equity.
  • Yield paid 1% upfront fee, 8% annual paid currently per month plus 8% per annum accrues and paid in one year.
  • 84 unit multifamily existing rental property with great bones and value add potential located near Phoenix Arizona.
  • Phonenix is a great rental makrket currently.
  • Property being bought per unit at a 25% discount to current comparable salses of residential units.

Investment Type: Term: Raise Amount: Targeted ROI:
Preferred Equity
12 Months $800,000 0%

Executive Summary

Overview. Chesterfield Faring, Ltd. (“CFL”) with you as investors are amking the $800,000 preferred equity for a repeat customer of CFL to acuire an 84-unit, multifamily complex known as Hidden Village Apartments located in Mesa, AZ (Phoenix MSA). The PE is supported by a favorable acquisition basis (25% below market) and the opportunity to increase cash flows via a value add renovation plan.

The Offering. The PE is offered in individual units of $100,000 each, totaling $800,000 or half units of $50,000. The PE matures at the 12-month anniversary of the Closing  subject to four six (6) month extensions.  Each Unit receives  sixteen percent (16.0%) annual return, paid: i) eight percent (8.0%) current amnnual yield  paid monthly plus ii) eight percent (8.0%) accrued yield  paid at the end of one year.  The investors also receive a one percent (1.0%) origination fee.

Sponsorship. CFL has previously invested in four (4) separate transactions with Mission Bay Investments. To date, with its investors, CFL has invested $2.45 million of PE investments  with Mission Bay Investments properties since January 2018. The first transaction was repaid in full prior to the maturity date. The remaining transactions are in good standing and are paying as agreed. 

Sources & Uses of Funds. The projected total acquisition cost of $9,095,763 includes estimates for renovation budget, closing costs, transaction costs, financing costs, and operating reserves. The purchase price is $7,400,000 or $88,095 per unit. The PE represents 85% (combined with the Loan) of the capital stack, or $92,203 per unit. This compares favorably to prevailing market values of $105,000 to $120,000 per unit for comparably aged Class B/C properties in the Phoenix market. The Sponsor and its investors are investing $1.46 million common equity which is subordinated to the PE in any disposition or refinancing scenario of the Property. 

First Mortgage Loan. CFL has secured a $6,945,000 floating rate bridge loan from Ready Capital Corp. The Loan is comprised of a $5,920,000 initial funding and a future funding commitment of $1,025,000. 

 

Contact Information

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

17% Annualized Return

  • Eight (8) $100,000 Units - totaling $800,000
  • Pays a 17% annualized retun
    • 8% current yield
    • 8% accrued yield
    • 1% origination fee
  • 12 Month term
    • four optional 6 Month Extensions 

Financial Sources

1st Mortgage Bridge Debt $6,945,000
Preferred Equity $800,000
Sponsor and Common Equity $1,419,263

Financial Uses

Purchase Price $7,400,000
Capital Expenditures $982,000
Transaction Costs $460,000
Lender Reserves - Ex Capex $50,000
Financing Costs $272,263

Market Overview

Phoenix Remains a Top Market for Job Growth - Phoenix was the top performing employment market in the western U.S. in 2018, adding nearly 65,000 jobs year-over-year through December 2018. For 2017 and 2018, the Phoenix MSA added ±133,000 jobs, which ranked #3 among all U.S. cities.

Diversified Economy and Employment Base – Phoenix’s economy has changed from one that was highly dependent upon the single family home construction market to one that is diversified and less volatile. Employment growth in Phoenix is being driven by a more diverse composition of industries today, predominantly healthcare, financial services, technology, and professional and business services firms. years. Companies across industries are choosing Phoenix for expansion and relocation opportunities because of the area’s large and growing talent base, which allows for scalable expansion, cost advantages, and an overall high quality of life that the area affords its residents.

High Tech - Intel, Infosys, and Willis Towers Watson are among the technology companies with large expansions underway in the Phoenix MSA. Phoenix remains an ideal market for Silicon Valley-based companies that need to scale their operations. Phoenix provides these companies optimal scalability because of its large and growing talent pool graduating from Arizona State University (Ranked #1 for Innovation by U.S. News & World Report for the third consecutive year), new infrastructure, cost advantages, lifestyle appeal and proximity to Silicon Valley.

Financial Services - Phoenix is the second largest market in the U.S. for advanced business services jobs (±174,000 employees) in the financial services sector. Major financial services firms expanding in Phoenix include JPMorgan Chase, Wells Fargo, Quicken Loans, Freedom Financial, Nationwide, and Voya Financial.

Healthcare - Banner Health, Arizona’s largest employer, continues to expand its Banner University Medical Center campus in Central Phoenix and Banner MD Anderson Cancer Center in Gilbert. Continued development of the Phoenix Biomedical Campus in Downtown Phoenix has transformed the city core into a hub for major medical research and specialized treatment. Recent projects completed at the Phoenix Biomedical Corridor include the ±250,000 SF University of Arizona Cancer Center (2015) and the ±245,000 SF Biosciences Partnership Building (2017). Currently, the campus comprises more than 1M SF of biomedical and research facilities in Downtown with an adjacent seven acres north of the existing campus scheduled for build-out by 2025, which will add ±500,000 SF of biomedical space to the campus. In North Phoenix, Mayo Clinic is nearly doubling its campus by adding ±1.4M SF of hospital and biomedical research space. This expansion will result in 2,000 new jobs.

Source: CBRE

Proximity to Jobs - A significant amount of employment growth in greater Phoenix is concentrated along the Loop 101 and Loop 202 corridors in Phoenix’s East Valley. Hidden Village is within two miles of Loop 101 and within five miles of Loop 202. Downtown Tempe is Phoenix’s top employment growth market and one of the most dynamic employment markets in the U.S. A total of ±50,000 jobs have been created in Tempe this cycle and the submarket is the target destination for technology and financial services companies expanding in Phoenix. ASU’s continued growth and ongoing corporate expansions in Tempe support strong long-term demand for multifamily housing in the area. The Property is also located approximately one mile west of Downtown Mesa. Major industries of employment located Downtown include government, education, advanced business services and retail. More than 16,000 employees commute Downtown during the work week.

Population Growth Trends – Resurgent population growth in Metro Phoenix is being driven by an expanding job market and relative affordability compared to alternative western markets. In 2017, Metro Phoenix’s population grew by ±99,000 new residents, surpassing the 25-year annual average (±82,000) for the first time since 2007. The Phoenix MSA is projected to add 118,000 new residents annually from 2016-2026, which produces 47,000 new households per year. The City of Mesa has an estimated population of approximately 485,000 residents, making it the largest suburban city by population in the United States, the third-largest city in Arizona after Phoenix and Tucson, and the 36th-largest city in the US. Not only is Mesa considered a fast growing city within the U.S., it is also attracting more residents who choose to rent versus buy. The median age for the city is 35.7 years, and the median household income is $52,393, both of which are indicative of demand for multi-family. The influx of more affluent young residents, attracted to Mesa’s proximity to employment, is creating additional demand for higher quality multi-family properties. This is exemplified by the most recent year over year growth rate in median household income of 6.5%.