A MULTIFAMILY INVESTMENT OPPORTUNITY
● Frederick, MD ●
DISCLOSURE
The following information is an investment summary provided to prospective investors and others. This information is not an offering to sell a security or a solicitation to sell a security. At the request of a recipient, the Company will provide a private placement memorandum, subscription agreement and the Limited Liability Company Operating Agreement. The Managing Member in no way guarantees the projections contained herein. Real estate values, income, expenses and development costs are all affected by a multitude of forces outside the Managing Member’s control. This investment is illiquid and only those persons that are able and willing to risk their entire investment should participate. Please consult your attorney, CPA and/or professional financial advisor regarding the suitability of an investment by you.
This information is confidential and may not be reproduced or redistributed. The information presented herein has been prepared for informational purposes only and is not an offer to buy or sell, or a solicitation of an offer to buy or sell any security or fund interest or any financial instrument and is not to be considered investment advice. This presentation is for institutional use only and is not to be distributed to any party other than its intended recipient.
The following materials present information regarding a proposed creation of a special purpose vehicle (the "Issuer") which would offer securities (the “Securities”) to finance its acquisition of a portfolio of financial assets to be selected and managed by the portfolio manager referred to herein (the "Manager"). These materials have been prepared to provide preliminary information about the Issuer and the transactions described herein to a limited number of potential underwriters of the Securities for the sole purpose of assisting them to determine whether they have an interest in underwriting the Securities.
The views and opinions expressed in this presentation are those of Honey Pot Investments, LLC and are subject to change based on market and other conditions. Although the information presented herein has been obtained from and is based upon sources Honey Pot Investments believe to be reliable, no representation or warranty, expressed or implied, is made as to the accuracy or completeness of that information. No assurance can be given that the investment objectives described herein will be achieved. Reliance upon information in this material is at the sole discretion of the reader.
This data is for illustrative purposes only. Past performance of indices of asset classes does not represent actual returns or volatility of actual accounts or investment managers and should not be viewed as indicative of future results. The investments discussed may fluctuate in price or value. Investors may get back less than they invested.
Forward-looking information contained in these materials is subject to certain inherent limitations. Such information is information that is not purely historical in nature and may include, among other things, expected structural features, anticipated ratings, proposed or target portfolio composition, proposed diversification or sector investment, specific investment strategies and forecasts of future market or economic conditions. The forward-looking information contained herein is based upon certain assumptions, which are unlikely to be consistent with, and may differ materially from, actual events and conditions. In addition, not all relevant events or conditions may have been considered in developing such assumptions. Accordingly, actual results will vary, and the variations may be material. Prospective investors should understand such assumptions and evaluate whether they are appropriate for their purposes. These materials may also contain historical market data; however, historical market trends are not reliable indicators of future market behavior.
Information in these materials about the Manager, its affiliates and their personnel and affiliates and the historical performance of portfolios it has managed has been supplied by the Manager to provide prospective investors with information as to its general portfolio management experience and may not be viewed as a promise or indicator of the Issuer's future results. Such information and its limitations are discussed further in the sections of these materials in which such information is presented.
Past performance of indices or asset classes does not represent actual returns or volatility of actual accounts or investment managers and should not be viewed as indicative of future results. The comparisons herein of the performances of the market indicators, benchmarks or indices may not be meaningful since the constitution and risks associated with each market indicator, benchmark, or index may be significantly different. Accordingly, no representation or warranty is made to the sufficiency, relevance, important, appropriateness, completeness, or comprehensiveness of the market data, information, or summaries contained herein for any specific purpose.
TABLE OF CONTENTS
(click on the section name below to jump directly to that section)
THE TEAM
PARTNERS
EXECUTIVE SUMMARY
We have identified The Parkview Apartments for acquisition.
We are offering an opportunity to partner with us on a 53-unit, Class B, garden-style apartment building community. Built in 1950 on 5.72 acres of land, the complex consists of 10 buildings with 36 two bed, one bath units and 17 one bed, one bath units.
The property is situated in the heart of historic downtown Frederick adjacent to Baker Park, Across the street from 58-acre park with beautiful Culler Lake, bike/walk paths, tennis courts, public swimming pools, and numerous playgrounds for children. The park also features concerts and children’s theater and variety of outdoor events during warmer months. Also within walking distance to the charming historical downtown area with major retails, restaurants, and the beautiful riverwalk.
The Parkview Apartments represents an outstanding opportunity to invest in a proven value-add story with significant upside.
This is a 506(b) offering, available to accredited investors AND 35 sophisticated (approved non-accredited) investors.
KEY INVESTMENT DETAILS
6%
preferred return starting in 13th month of ownership
26.79%
average annual return (including profits at sale at year 10)
2.50%
avg annual cash-on-cash return (not including profits at sale)
3.68x
equity multiple in a 10-Year hold period (see sensitivity analysis)
This is a 506(b) offering. We are accepting investments from accredited investors and 35 non-accredited but sophisticated investors. You need to have a relationship with someone on the sponsorship team in order to have the opportunity to invest.
PROPERTY STATISTICS
53
Units
$1,440
Avg 1-br rent in 2miles
$925
Avg 1-br rent at Parkview Apts
40,037 / 5.72
Total rentable SF / acres
$1,668
Avg 2-br rent in 2miles
$975
Avg 2-br rent at Parkview Apts
$2.2MM
CapEx Budget
97%
Occupancy
$122K ($85K*)
Purchase price per door
* after sale of land lots
PROPERTY PROFILE
RENTAL COMPS
We are $400-$700/month below avg market rent for one-bedroom and two-bedroom options. Although, these are not the true comparables since some of the examples are Class-A apartments; however, this still illustrates how Parkview Apartments’ has an amazing location with incredibly low rent.
Our 3-year avg rent target post-renovation is $1466 with $1570 avg target rent in the 4th year, which is still quite conservative even when compared to the current market. These projections will give us a much needed buffer zone just in the case of any unforeseen circumstances, while giving us a healthy margin to outperform our projected numbers should the market normalize.
* low income/subsidized housing
* low income/subsidized housing
BUSINESS PLAN
Immediately upon taking ownership, we will begin moving away from heavily relying on the current boiler system by upgrading the HVAC from ground up through increasing power supply from Frederick County, upgrading electrical wiring systems throughout the buildings, and installing a mini-split system in each unit so all units are separately metered.
In conjunction with the electrical upgrade, we will increase rents by $250-$300/unit immediately and systematically create more vacant units to allow us to carry out a full renovation in an efficient manner. We will target renting units at $1400-$1500 post-renovation, which will still place us well below the market rent in 3-4 year time. This price point will make us a very attractive option for all renters in any given market.
We will continue the current subdivision process which has been started by the current owners. We project the subdivision process will be finalized in 18-24 months into our ownership, and then we will wait for the best time to sell the lots to local developers. We believe our target sale price of these lots is very conservative considering they are the last empty lots adjacent to Baker Park.
Our plan is to return all investor capitals plus profit within first 36-48 months of ownership through refinancing for a long-term hold. We will continue to receive passive income quarterly as we continue to own this property indefinitely… until potential buyers offer us a purchase price that we can’t refuse.
10-11 Lots for Single Family Home Development
FINANCIAL ANALYSIS
MARKET REVIEW
FREQUENTLY ASKED QUESTIONS
How and when will distributions be made?
We will pay distributions quarterly, in 13th month following the closing. Payments will only be made via ACH direct deposit to the bank account that you provide to us upon committing your investment.
When is the first distribution?
The 6% preferred return distribution will not start until 13th month of ownership, paid at the 1st quarter of the 2nd year. This gives management an opportunity to settle in, assess the operations, ensure the property is cash flowing, and pay investors with the operating cash flow.
Is the General Partnership team investing any of their own money?
Yes. The GP team is investing close to $1,000,000 of their own funds into this deal.
Will you be doing a cost segregation study that includes bonus depreciation?
Yes, we will be hiring Engineered Tax Services to perform a cost segregation study to maximize the depreciation and bonus depreciation (assuming current tax laws remain in place) for the 2023/2024 tax year AFTER the majority of exterior and interior renovation has been completed. Consult your CPA on how this could affect your taxes.
Why is there a range given on the total projected returns?
We estimate the profits at sale based on a prediction of the market cap rate at that time of refinancing, in this case, 36-48 months from now. Rather than guess with a single number, we like to show a wider range of possible cap rates, above and below the current, to capture what we believe to be a more accurate display of the possible returns. Think of it as a best-case and worst-case scenario, although returns could still fall outside of these predictions.
Can I invest less than $50,000?
At this point in time, we are NOT accepting investment amounts less than $50,000.
What is the most amount of money I can invest in this deal?
The maximum investment amount for this deal is $500,000.
IMPORTANT DATES
REAL ESTATE TERMS AND DEFINITIONS
Capitalization Rate (Cap Rate): A rate of return on a real estate investment property based on the expected income that the property will generate. Capitalization rate is used to estimate the investor's potential return on his or her investment. This is done by dividing the income the property will generate (after fixed costs and variable costs) by the total value of the property.
When acquiring income property, the higher the capitalization rate (“Cap Rate”), the better. When selling income property, the lower the Cap Rate the better.
A higher cap rate implies a lower price, a lower cap rate implies a higher price.
Cash Flow: Cash generated from the operations of a company, generally defined as revenues less all operating expenses.
Cash-on-Cash (COC): A rate of return often used in real estate transactions. The calculation determines the cash income on the cash invested.
Calculation: Annual Dollar Income Return / Total Equity Invested = Cash-on-Cash.
Debt Service Coverage Ratio (DSCR): It is the multiples of cash flow available to meet annual interest and principal payments on debt. This ratio should ideally be over 1.
Return on Equity (ROE): The amount of net income returned as a percentage of shareholders equity.
Average Annual Return (AAR) excluding disposition: The average return per year during the investment hold.
Investor Average Annual Return, including disposition: The average return per year including profits from disposition. This calculation does not include the return of invested capital.
Internal Rate of Return (IRR): The rate of return that would make the present value of future cash flows plus the final market value of an investment opportunity equal the current market price of the investment or opportunity. The higher a project's internal rate of return, the more desirable it is to undertake the project.
Yes, I would like to make a soft commitment to this investment opportunity!
Note: A soft commitment notifies us of your interest but does not guarantee your spot in the deal. Your spot is only guaranteed once your legal documents are signed and your funds have been wired.