Mesa, Arizona- Multifamily - Preferred Equity
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- $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||Preferred Equity|
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.
Chesterfield Faring Ltd
Chesterfield Faring Ltd.
Chesterfield Faring, Ltd ("CFL") invests in direct real estate assets, real estate portfolios, distressed debt, high yield private preferred equity, real estate companies both publicly traded and privately held, and incubates new smart talent both in the firm and in its invested companies.
CFL takes first mover advantage in targeted markets overlooked by other merchant banks. For example, CFL created a CRE debt restructuring platform in March 2007, a full year ahead of the capital markets collapse. CFL was a first mover that led to over $7 billion in CRE debt restructuring assignments for CRE borrowers. That experience allows CFL to see the borrowers vantage point as it acquires larger and larger "leftover" pools of CRE loans being liquidated by major funds and banks currently.
Often, past opportunities create new opportunities. Thinking like a principal and investing its own capital side by side with its clients, provides us an unique alignment to vet the best deals and at the best pricing.
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.
Mission Bay Investments (“MBI”) is a boutique real estate investment firm that was founded to acquire and manage value-added real estate investments on behalf of its principals and investor partners. Mission Bay invests in properties that are well-located with sound physical and economic fundamentals, properties that have the ability to generate attractive levels of distributable cash, and where Mission Bay can add value by executing recapitalization or repositioning strategies. The founding partners of MBI are Daniel Woodford and Charles Triska.
Originally the firm focused its investment activities in the Mid-Atlantic and Southeast regions, however it has begun to identify opportunities in multiple emerging markets across the nation. MBI’s success is due to their ability to identify profitable transactions, and their organizational skills and ability to lead a strong team of contractors, attorneys, real estate agents, property managers, and private sector funding sources that enable profitable rental strategies.
CFL has secured debt and equity on six (6) transactions with Mission Bay Investments. A summary of its transaction history is provided below:
- Blue Sky Apartments, a 49-unit multi-family value-add property acquired for $1.75M in January 2019. (CFL invested $250,000 in PE)
- Coronado Hills Apartments, a 68-unit stabilized multi-family property acquired for $3.6M in November 2018 (CFL invested $750,000 in PE)
- Towne Oaks Town Homes, Tyler TX: 90-unit value-add multi-family property acquired for $6M in July 2018. (CFL sourced senior debt and invested $750,000 in PE)
- Towne Oaks East, Tyler, TX: 104-unit value-add multi-family property acquired for $4.5M in February 2018. (CFL sourced senior debt and invested $700,000 in PE)
- Villages at Wake Forest, Winston Salem, NC: 251-bed purpose-built student housing property serving Wake Forest University. Acquired for $20.9M in February 2018. MBI will implement a value-add strategy through unit upgrades, implementing more efficient management practices and developing up to 100 beds on 6 adjoining acres. (CFL sourced senior bridge debt, co-sponsor equity, and PE)
- Castaways Apartments, Warner Robins, GA: 211-unit value-add opportunity. Acquired for $10.6M in June 2017. MBI will accomplish their value-add strategy through unit upgrades, implementing more efficient management practices and upgrading exterior and amenity spaces. (CFL sourced co-sponsor and JV equity)
- Hampstead Apartments, Richmond VA: 98-unit value-add apartment property acquired in March 2016 for $5.8M
- South Line at Perry Place, Richmond VA: Historic Tax Credit renovation of the last half of the former Brown and Williamson Tobacco Plant. Acquired in January 2014 to reposition into 176 Class-A Loft-Style apartments and 60,000 Sq. Ft. of Commercial space. ($40M Acquisition)
- Chamberlain Ave Apartments, Richmond VA): MBI acquired a 40-unit value add, affordable apartment building. The Property was acquired in Jan 2014 for $1.1M and sold in January 2016 for $1.44M. During ownership, MBI successfully increased rents by approximately 10% and implemented more efficient management practices.
AZ Wealth Builders, LLC is an Arizona limited liability company (the Company), with offices at 14747 N Northsight Blvd Ste 111-472, Scottsdale, AZ. AZ Wealth Builders is primarily responsible for identifying opportunities and asset management. The key principals are MarJeanne Fields, Rebecca Stuelpnagel, and Bryan Ayres.
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
|1st Mortgage Bridge Debt||$6,945,000|
|Sponsor and Common Equity||$1,419,263|
|Lender Reserves - Ex Capex||$50,000|
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.
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%.
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