Property Package

 

 

 

 

 


Prepared By:

    

QUESTIONS SHOULD BE DIRECTED TO:

Seneca Commercial Property, LLC

Justin Wickens, Investor Relations Manager

W-214.295.4864

1.800.660.0821

Email:  justin@senecacommercial.com, fax 703-942-0295

 

www.senecacommercial.com

1.800.660.0821

 

Text Box: Common Area Amenities 2 Sparkling Swimming Pools 2 On-site Laundry Facilities On-site Management Outdoor Grilling Areas Well Maintained Grounds Apartment Unit Amenities Town Home Units Private Patios/Balconies Updated Appliances Frost Free Refrigerators Dishwasher/Disposal Mini Blinds Wall-to-Wall carpet Ceiling Fans Washer/Dryer Connections

 

This information is authorized for use only by a limited number of existing Seneca Commercial Property clients who have been qualified and accepted as accredited investors by the Seneca Commercial Property, LLC by furnishing proof of substantial income ($200,000/yr or $300,000/yr if married) over the last two years, or a net worth of $1,000,000 and extensive investment experience.  Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the real estate interests in this property package, or passed upon the adequacy or accuracy of this document.  Any representation to the contrary is a criminal offense.

 

This material does not constitute an offer or a solicitation to purchase securities.  An offer can only be made by the private placement memorandum.  This document is an informational summary and is authorized for use only by accredited investors who are existing Seneca Commercial Property clients and have been accepted as qualified and accredited investors by Seneca Commercial Property by virtue of their experience and financial circumstance.

 

Seneca Commercial Property, LLC is a Texas based Limited Liability Company with corporate offices at 300 N. Coit Rd, Richardson, TX.  We are a fully integrated real estate operating company engaged in the acquisition, ownership, management, and re-positioning of multifamily apartment communities.

 

Our mission is threefold:

*      To reward our investors and lending partners while working to improve communities

*      To create a quality living environment for our tenants

*      To provide our employees with optimal working conditions and growth opportunities

 

Seneca Commercial Property, LLC is arranging for the acquisition of undivided real estate interests in the above property by a limited number of accredited and qualified Seneca Commercial Property clients. 

 

This Package contains currently available information received from the current owner relating to the property location, description, broker’s information sheet, rent rolls, budget, projected returns and investment strategies and risk factors (final inspection reports to be sent to all qualified investors).  Although this package contains the initial information received, an independent appraisal is pending.  Though information has been secured from sources that appear to be reliable, no representation by Seneca Commercial Property, either expressed or implied, is made as to the accuracy of any information on this property.  All information contained herein is further subject to correction, modification or withdrawal without further notice.

 

Funds received as investment in the deal will be applied and used solely for the acquisition of this property, corresponding expenses and acquisition costs and property improvements, if any, as shown on the pro-forma acquisition expenses table in this package.

 

This information is confidential in nature and should not be reproduced in whole or in part without the express written permission of Seneca Commercial Property, LLC.  Returns are subject to change due to loan terms, new discovery, occupancy, additional capital investment, owner decisions and various factors involved in property management, therefore, Seneca Commercial Property, LLC and its affiliates do not guarantee these returns, and further do not guarantee that the property will close nor the specific date it will close.  Income distributions are made as approved by the owners on a quarterly basis.

 

OVERVIEW... 2

CONTENTS. 3

Property Description.. 4

Market Overview... 5

STRATEGY.. 5

DEAL ASSUMPTIONS. 6

2008 – 2009 Dallas/Ft Worth Market Insights. 9

ECONOMIC PROFILE. 10

RISKS. 11

COMMITMENT INSTRUCTIONS. 14

WIRE INSTRUCTIONS. 15

 

** IMPORTANT **

Please respect the residents and on-site staff of this property. Understand that neither the tenants nor the on-site staff has any knowledge of this transaction. If you desire to visit the property (other than just driving by), please coordinate with your Seneca Commercial Property representative.

 

 

 

 

 

 

North Story Apartments is a well maintained 60-unit garden apartment community situated on 3.04 acres of land with approximately 400 feet of frontage on North Story Rd. The property consists of 50,680SF of improvements and was originally constructed in 1968 of brick veneer on Pier & Beam foundations. The electricity is individually metered with individual HVAC units. The property is master metered for gas with a new boiler replaced in June of 2007. The property has a favorable unit mix with 40% of the units being 1bedroom/1bath unit types, 40% 2bedroom /2bath and 20% 3bedroom/2bath (3bedroom units have washer/dryer connections). Units range from 676/SF to 1,196/SF with an interior amenity package that includes: ceiling fans, dishwashers, disposals, walk-in closets, frost free refrigerators and/or large patios and balconies. The property boasts beautiful, well maintained, mature landscaping as well as an excellent exterior amenity package that includes: a sparkling pool (new in 2002), picnic area with built-in BBQ's, laundry facility as well as a DART bus stop immediately in front of the property. Rents appear to be slightly below the market average when compared to similar properties within a 1.5 mile radius. 

 

North Story Apartments are well located near the corner of North Story Rd. and West Northgate Dr. (the border road separating Irving and Los Colinas). West Airport Freeway (183) and North Belt Line are both approximately 1-mile from the subject property providing quick access to employment and the numerous retail centers on North Belt Line and throughout the Metroplex. The property is approximately 2-miles from DFW International Airport as well as just minutes from The Irving Mall, Texas Stadium (current home of the Dallas Cowboys), Four Seasons Resort (home of the Byron Nelson Golf Classic) and the University of Dallas.

 

 

The Dallas/Fort Worth Metroplex has had tremendous population growth during the past decade, adding 1.1 million new residents to become the fourth largest metro area in the nation and in the top 10 for several consecutive years with the nations highest population increase. It is expected to be among the nation’s leaders of overall population and job growth this year, further driving the demand for apartment units. Annual effective rents are expected to increase 3.1% and owners in the area who were slow to react to the improving occupancy are expected to raise rents faster than the metro average this year. Investor interest in the Metroplex is forecast to heighten this year, with a renewed focus on property operations as opposed to more speculative and conversion-related transactions. The metro area remains well positioned for investors seeking properties at lower per-unit prices and above average cap rates.

 

 

 

 

Over the past 3 years the current owner has been in the process of rehabilitating the interior and exterior resulting in prior low occupancy levels and negative cash flows. Current rents have not been increased in 2 years while operations have been grossly over managed. With the property improvements completed and the occupancy level over 94%, our strategy is to take this already stabilized asset, increase cash flow by implementing a RUBS utility bill-back system while efficiently reducing operation costs to result in a high performing asset.

 

Our intent is to simply purchase and hold this asset for 3 years while generating strong monthly cash flows of over $5,000 per month from day 1.  With efficient management and an effective bill-back system, we will be able to increase monthly profits and resell the property after the third year with a conservative sales price of $$2,870,729 at a 7.5% Cap Rate.

 

The acquisition timing of this asset in this Metro area will also allow us to get into a market that has enjoyed a stable and consistent population increase over the past decade.  A combination of good market fundamentals, as well as good management will create additional equity in the property over the next 3 years and spin off generous cash return to the investors.

 

Text Box: FINANCIAL ASSUMPTIONS Estimated Years to Hold 3 Offsite Management Fees 5.5% Cap Rate at Resale 7.5% Projected Rent Increase (yr 3) 0% Projected Expense Decrease 10% Year 1 Projected Annual Occupancy 95% Reserves per unit $250 per unit MORTGAGE DATA First Lender Rate 6.29% Interest Only No Payments per year 12 Loan Amount $1,648,000 Total LTV 75% Total Loan Amount $1,545,000 Total Loan Payment Annually $114,672.96          Text Box: ACQUISITION EXPENSES Purchase Price $2,101,200 Less Loan Amount $1,545,000 Down Payment Equity $556,200 Closing Costs $93,800 Legal $2,500 Lender fees $15,450 Title policy $1,500 Survey $0 Recording/Transfer Taxes $1,500 3rd Party Reports $2,000 Processing fee $3,400 Other $5,000 Required Maintenance Reserves $40,000 Expense Reimbursement $62,450 Exterior Upgrades ($40,000) Cash Requirements at Closing $650,000 PROPERTY DETAILS Purchase Price $2,101,200 Number of Buildings 5 Number of Units 60 Square Footage 50,680 Cost per Unit $35,020

 

 

 

 

 

Best Places in America to Live - Dallas/Fort Worth Up 4 Places 2007 Rank: 27 from 2006 Rank: 31

 

 

Multifamily Market Lifecycle

 

 

 

 

 

 

 

 

The Dallas/Fort Worth (DFW) Metro Area, located in North Central Texas, encompasses a 9,100-square-mile region known as the Metroplex. The Metroplex consists of 12 counties and 136 incorporated municipalities. While it covers just 3.5% of the state’s land area, the Metroplex accounts for approximately 26% of the state’s population and 27% of its employment.

 

Downtown Dallas (or Central Business District) is the general term given to the geographic area within the central freeway loop in Dallas. The downtown area has recently taken off with dozens of residential conversions and some new residential towers, as well as its redeveloped Main Street, which has become a hotspot for local residents and visitors after a slew of retail shops, hotels, and restaurants opened their doors along the strip. According to Dallas’ Downtown Main Street District Retail Initiative, an estimated 300,000 square feet of retail and restaurant space will exist in the Main Street District by the end of 2007. Recent openings of Main Street Contemporary Gallery, Jos. A. Banks, Petrus Lounge, and Luqa will be joined by other openings in 2008, including a new restaurant from celebrity chef Charlie Palmer (at the Hotel 1530 Main Street). Several downtown residential projects will open in 2008, as well, including Mosaic (440 units), Third Rail Lofts (165 units), Metropolitan (273 units), and Republic Tower (227 units).

 

Downtown’s growth can partially be attributed to DART’s two (soon to be four) light-rail transit lines and the one commuter line that run through downtown, as well as an aggressive stance taken by local officials to drive development at all costs.

The city has spent $160 million of public funds in downtown Dallas for residential development that attracted $650 million of private investment. An example is the recently completed One Arts Plaza, a 10-acre, mixed-use office, retail, and luxury-apartment development, located at the eastern edge of the Dallas Arts District, that serves as the new headquarters for 7-Eleven Inc.

 

The city, along with several non-profit organizations, has recently pushed for the development of the deck park over the Woodall Rodgers Freeway to create a seamless uptown/downtown district, hoping the booming uptown real estate market would help further redevelop downtown.

 

POPULATION

The DFW Metropolitan Area is the largest metro area in Texas and the fourth largest in the United States. In addition to accounting for nearly one-quarter of the state’s population, the Metroplex accounts for 28% of its annual population growth.

 

From 1990 to 2000, the population of the DFW Metropolitan Area grew 29.4%, rising from 3,989,294 to 5,161,544, more than twice the national growth rate of 13.2% during this period.

 

As of 2006, the population was estimated at 5,950,033 and is projected to reach 6,578,374 by 2011, equating to a 2.1% annual increase over the next five years. By 2030, the metro area is expected to add nearly 4 million new residents. The median age for the region is 33.3 years.

 

In terms of population, the 10 largest cities in the Metroplex are Dallas, Fort Worth, Arlington, Plano, Garland, Irving, Grand Prairie, [City], Carrollton, and Richardson.

 

The Dallas-Fort Worth apartment market is a leader in terms of absorption, with approximately 18,400 units absorbed in 2005 and nearly 15,000 in 2006. These figures surpassed annual totals from 2001 to 2004. During the first six months of 2007, the market recorded absorption of 810 units.

 

While absorption has been vigorous, new apartment construction has slowed. After averaging over 10,200 units annually from 2001 to 2003, new deliveries declined to just over 9,200 units in 2004, then to about 6,500 units in 2005.

 

In 2006, a slight up tick was recorded, with nearly 8,100 units completed. Fewer than 3,200 units were completed in the first half of 2007.

 

Including both condominiums and apartments, multifamily permits for the Dallas-Fort Worth Metro Area averaged about 11,400 units annually from 2001 to 2003. In 2004, permits dropped to about 7,800 units before rising to over 10,100 units in 2005 and to 11,850 units in 2006.  During the first

two quarters of 2007, permits were issued for nearly 6,600 multifamily units.

 

As a result of improved demand (brought about by the area’s strengthening economy) and flat new construction, vacancy rates have steadily improved over the past several years. In the second quarter of 2007, the average vacancy rate was 7.1%, down slightly from 7.3% a year earlier.

 

With vacancy rates declining, rents have trended up. The average market rent for the area was $715 in June of 2007, up 2.2% from a year prior. This rate of growth was nearly four times the year-prior gain of 0.6%, signaling the market’s recovery.

 

 

The value of this property and the corresponding equity of the tenants-in-common owners (hereinafter “Owners”) of this property will fluctuate based on the value of the property and the income the property generates.  Though the potential risk of investing in multi-family housing is moderate, Owners can lose some or all of their investment by investing in this property.  The property’s value and rental income can be affected by many factors, and you should consider the specific risks presented below before investing in this property.

 

General Risks Prior to Closing on Real Property:

These may include:

            Returns are subject to change due to new discovery changes in loan terms, occupancy, additional capital investment, owner decisions, and various factors involved in property management, and therefore Seneca Commercial Property, LLC and its’ affiliates do not guarantee these returns.  These potential changes may also affect the feasibility of acquiring this property.

 

            Prior to acquisitions, several costs are incurred to pay for due diligence on real property.  The prospective Owners agree to utilize their deposits to pay for these costs, though there is no guarantee from Seneca Commercial Property, LLC and its’ affiliates that the property may close, or the date it will close.  Potential Owners with 1031 exchanges should take appropriate precautions with their Exchange Accommodator to have appropriate backup alternatives.

 

General Risks of Owning Real Property:

All Owners will be subject to the risks inherent in owning real property including:

            Income distributions are made as approved by the owners, not by Seneca Commercial Property, and may not occur for a few months after closing to allow the property’s cash flow to be verified and stabilized.  As with any investment, distributions are not guaranteed.

 

Each Owners’ property values or rental and occupancy rates could go down due to general economic conditions, a weak market for real estate generally, changing supply and demand for certain types of properties, and natural disasters or man-made events.

 

A property may be unable to attract and retain tenants, which means that rental income would decline.

 

Each Owner could lose revenue if tenants don’t pay rent, or if the Owners are forced to terminate a lease for nonpayment.  Any disputes with tenants could also involve costly litigation.

 

A property’s profitability could go down if operating costs, such as property taxes, utilities, maintenance and insurance costs go up in relation to gross rental income, or the property needs unanticipated repairs and renovations.  A negative cash flow may require additional investment from the owners should there be insufficient reserves.

 

General Risks of Property Management:

            While Seneca Commercial Property does not manage the property, it does consult the owners on property management activities and performance.  Each Owners’ property values, rental income, and operating expenses could vary up or down depending on the performance and diligence of both on-site and off-site management of the property manager and the accuracy of their financial accounting.

 

General Risks of