DISCOVERY PARK CONFIDENTIAL OFFERING MEMORANDUM DENTON, TX | 283 UNITS INVESTOR CONTACT: Catherine Munaco catherine@onestreetcapital.com Denise Piazza denise@onestreetcapital.com
CONFIDENTIALITY AND DISCLAIMER
The following information is an investment summary provided to prospective investors and others. This information is not an offering to sell either 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 document 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 Spark Investment Group and its partners 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 Spark Investment Group and its partners 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 certaininherent 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 maybe 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. Past performance is not indicative of comparable future results. Given the inherent volatility of the securities markets, it should not be assumed that investors will experience returns comparable to those shown here. Market and economic conditions may change in the future producing materially different results than those shown here. All investments have inherent risks
TABLE OF CONTENTS
CORE TEAM
EXECUTIVE SUMMARY
PROPERTY OVERVIEWS
INVESTMENT TERM
FINANCIAL ANALYSIS
CORE TEAM
CORE TEAM
Established in 2007, Post Real Estate Group, Inc. (“Post”) is an opportunistic private investment firm dedicated to responsibly investing in real estate, with an emphasis in the multifamily sector and a specialty in affordable housing. Post has acquired in excess of $3.5 Billion of properties encompassing more than 33,000 units across 15 states and over 50 cities, with a specialty in multifamily sector and affordable housing
DENISE PIAZZA, CPA
MANAGING PARTNER
CATHERINE MUNACO
MANAGING PARTNER
BENJAMINCPAPIAZZA, CFO, ONE STREET CAPITAL
Full Cycle Investments 32 Average ROI to Investors 2.03 x Average Investor IRR 32.99%
OPERATING PARTNER TRACK RECORD
INVESTMENT SUMMARY
Offering Summary Year 1 Cash on Cash Return 6.20% Avg Cash on Cash Return 7.16% IRR 16.73% Equity Multiple / Return of Capital 2..29x Term 6 Years Tax abated cap rate at close 6.14% Non-tax abated cap rate 4.80% Projected Net Investor Returns Purchase Price / Per Door $56,000,000 / $197,880 Total Unit Count 283 units Occupancy 92% Location Dallas-Fort Worth MSA (Denton, TX) Year Built 2020 Investors 506b TOTAL EQUITY REQUIRED $17,983,141
ACQUISITION & RETURN SUMMARY
FINANCIAL RETURNS
Example: $100,000 Investment
• Cash Distributions are paid out Quarterly from the property’s profits
• Upon sale, you receive your original investment AND additional proceeds from sale
Investment Total Return Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Cash Flow - $100,000 $42,950 $6,200 $6,570 $6,700 $7,110 $7,890 $8,480 Return on sale $186,050 $0 $0 $0 $0 $0 $186,050 Total return $229,000 $6,200 $6,570 $6,700 $7,110 $7,890 $194,530
INVESTMENT HIGHLIGHTS
HUD LOAN ASSUMPTION – PREG is assuming a positively leveraged, fixed rate (3.84%), low LTC (57.5%), fully amortizing HUD loan, with 36 years remaining of term, offering attractive, flexible prepay.
CLASS A ASSET – Discovery Park is 2020 vintage with high quality construction. The garden style, mid-rise community has little to no deferred maintenance.
DOWNSIDE PROTECTED – Given the lower leverage, the deal remains cash flow positive, even in extreme downside scenarios.
HIGH GROWTH SUBMARKET IN DFW – Discovery Park is located in Denton, TX – the 4ᵗʰ fastest growing county in the U.S. Population grew a total of 54% over 11 years in the property’s zip code.
100% TAX EXEMPTION – 50% of the units at the asset will be set aside for workforce tenants, generating a 99-year real estate tax exemption at the property.
CONFIDENTIAL OFFERING MEMORANDUM
@onestreetcapital
MARKET HIGHLIGHTS
DENTON, TX (DALLAS, TX MSA)
EDUCATIONAL HUB
University of North Texas
Texas Women’s University
North Central Texas College
UNT is considered the most comprehensive university in DFW – offering 100 Bachelor’s, 83 Master’s, and 37 Doctoral Degree Programs.
Four High Schools
Nine Middle Schools
25 Elementary Schools
STRONG POPULATION GROWTH
Population in the zip code has increased an average of 5.42% - a total of 54% over the last 11 years.
STEADY ABSORPTION TRENDS
Despite new deliveries, the Denton market has never seen an average occupancy below 89%.
Discovery Park offers nearby access to vibrant Downtown Denton with a variety of restaurants, shopping, craft breweries and bars.
CONFIDENTIAL OFFERING MEMORANDUM
@onestreetcapital
DENTON, TX
$100,124
Average Household Income
160,564
Current Population
10.7%
Projected Population Growth (2023-2028)
TOP EMPLOYERS
Denton, TX is located at the apex of what is referred to as the “Golden Triangle of North Texas” – centered between Dallas and Forth Worth. Denton is the 4ᵗʰ
fastest growing county in the United States.
Known for being home to the University of North Texas and Texas Woman’s University, the area also boasts a world-class music and arts scene.
THE “GOLDEN TRIANGLE OF NORTH TEXAS”
CONFIDENTIAL OFFERING MEMORANDUM
@onestreetcapital
DALLAS-FORT WORTH MSA
Discovery Park is conveniently located within the Dallas-Fort Worth (DFW) MSA – the property just 40 miles North of Dallas. DFW is one of the top regions in the nation for business.
Home to 24 Fortune 500 Companies
63K $414 BN
75K $264 BN
160.7K $121 BN
DFW is #1 in the country for 3-year job growth (354K jobs).The metro’s workforce is expected to reach 4.5 Million by the end of 2024 – which would make it the fourth largest employment base in the United States.
CONFIDENTIAL OFFERING MEMORANDUM
4ᵗʰ Largest Metro Area in the U.S.
Firm Employees 2022 Revenue
@onestreetcapital
DFW Largest Public Companies (2023)
PROPERTY SUMMARY
PROPERTY SUMMARY
LOCATION: 3925 North Elm Street, Denton, TX 76207
DESCRIPTION: 283 Unit Garden Style, Mid-Rise Apartments
YEAR BUILT: 2020
CONFIDENTIAL OFFERING MEMORANDUM
NET RENTABLE AREA:
AVG. UNIT SIZE: 859 Square Feet Unit Type Unit Count Projected YR1 Market Rent In-Place Market Rent 1-Bed 173 $1,433 $1,433 2-Bed 110 $1,843 $1,843 TOTAL/AVG. 283 $1,600 $1,600 Unit Type Unit Count Restricted Rent In-Place Rent AFFORDABLE 143 $1,450 $1,575 Sample
1x1 810 SF 2x2 1,043 SF @onestreetcapital
242,958 Square Feet
Floor Plans
CONFIDENTIAL OFFERING MEMORANDUM @onestreetcapital
CONFIDENTIAL OFFERING MEMORANDUM @onestreetcapital
PROPERTY HIGHLIGHTS
UNIT FEATURES
⚬Granite Countertops
⚬Covered Patios & Balconies
⚬ENERGY STAR Appliances
⚬Vinyl Wood-Plank Flooring
⚬Double Vanities
⚬Garden Bathtubs
⚬Full-Size Washer/Dryer in Unit
⚬Lobby-Access Parking Garages
COMMUNITY FEATURES
⚬State Of The Art Fitness Center
⚬Indoor Basketball Court
⚬Resort-Style Swimming Pool
⚬Starbucks Espresso Bar
⚬Cybercafe with Apple Computers
⚬Controlled-Access Gates
⚬Dog Park with Pet Stations
⚬Two-Story Clubhouse with Wi-Fi
CONFIDENTIAL OFFERING MEMORANDUM
@onestreetcapital
CONFIDENTIAL OFFERING MEMORANDUM
PROPERTY UNIT COUNT YEAR BUILT OCC. (%) SF (UNIT) RENT (UNIT) RENT (PSF) The Beverley at Denton 316 2021 91% 831 $1,591 $1.96 The Hightone 378 2023 91% 1028 $1,675 $1.63 32Hundred Windsor 330 2021 94% 999 $1,646 $1.65 Comp Set Average 341 2022 92% 958 $1,640 $1.74 Discovery Park In-Place Rents 283 2020 92% 859 $1,587 $1.85 Discovery Park In-Place Rents Variance to Comp Set 3.29% -6.02% The Hightone The Beverley at Denton
RENT COMPARABLES
Windsor @onestreetcapital
32Hundred
CONFIDENTIAL OFFERING MEMORANDUM
PROPERTY NAME YEAR BUILT UNIT COUNT TOTAL SF AVG SF SALE PRICE PRICE /UNIT PRICE /SF SALE DATE The Beverley at Denton¹⁽⁾ 2022 316 304,624 964 $71,100,000 $225,000 $233.40 2022 Hunters Creek²⁽⁾ 2022 214 207,490 970 $54,570,000 $255,000 $263.00 2023 Preserve At Pecan Creek 2008 192 181,516 928 $46,115,183 $240,183 $254.06 2022 AVERAGE 2018 240 243,096 956 $59,556,364 $237,930 $247.67 2022 Discovery Park 2020 283 242,958 859 $56,000,000 $197,880 $230.49 2024 The Beverley at Denton Hunters Creek Preserve at Pecan Creek 1.Purchased with a Tax Exemption at Close. 2.HUD Assumption Lease Up. @onestreetcapital
SALES COMPARABLES
INVESTMENT TERMS
INVESTMENT METRICS
Total Acquisition Basis $61,152,941 Total Acquisition Basis Per Unit $170,412 Exit Cap Rate ⁽¹⁾ 5.25% Year 6 Est. Sale Price $83,830,488
1.Cap rate is based on year 6 proforma PREFERRED RETURNS Investor Annual Preferred Return 8% 100% to investors Hurdle I: 8-15% 70 / 30 investor / GP Split Hurdle II: 15%+ 60 / 40 investor / GP split
INVESTMENT METRICS
TRANSACTION METRICS
1.Cap rate is based on year 7 proforma.
2.One-time fee.
3.Annual fee paid monthly. Fee equal to 3.50% of Gross Revenue.
5.Annual fee paid monthly, growing at 3% per year.
6.The deal is positively leveraged by 2.30% (based on the 6.14% tax-abated in-place cap rate).
7.Fee is 5% of capital expenditures spend.
8.Compounds Quarterly.
4.The interest rate on the loan is fixed at 3.84% for the entirety of the loan term ; this includes a Mortgage Insurance Premium (MIP) – which are standard for HUD loans – of 0.25%.
CONFIDENTIAL OFFERING MEMORANDUM
Total Acquisition Basis $61,152,941 Exit Cap Rate ¹ ⁽⁾ 5.25% Year 6 Est. Sale Price $83,830,488
ASSUMED DEBT SUMMARY Loan Balance $35,169,800 Lender HUD Loan Term Remaining 36 Years Interest Rate⁽⁴⁾ 3.84% Positive Leverage⁽⁶⁾ 2.30% Interest Only Term 0 First Trust Deed Loan to Cost 57.5% Loan to Purchase Price 62.8% SPONSOR COMPENSATION Acquisition Fee ² ⁽⁾ $650,000 Asset Management Fee ⁽⁵⁾ $100,000 Property Management Fee ³ ⁽⁾ 3.50% of Gross Rev. Construction Management Fee ⁽⁷⁾ $77,825 Cash Flow: Sponsor Splits 8% Annual Return: 70% Members/30% Manager ⁽⁸⁾ Capital Event: Sponsor Splits 8% Annual Return: 70% Members/30% Manager ⁽⁸⁾ 15% Annual Return:60% Members/40% Manager ⁽⁸⁾ @onestreetcapital
CAPITAL STACK
As part of this acquisition, POST will assume an enviable HUD loan at a sub-4% interest rate. This low rate in today's environment provides for significant positive leverage as compared to our entry abated cap rate of 6.14%. The HUD loan has no prepay penalty after November 2029, providing for additional flexibility.
POST will be bringing in a small preferred equity piece to this investment. Factoring in the preferred equity, the combined LTC of 70% is still considerably below typically maximum-leveraged transactions.
Cumulative Debt Analysis
(1) Positive leverage equates to the delta between the abated walk-in cap rate and the blended interest rate
CONFIDENTIAL OFFERING MEMORANDUM
HUD Loan – Senior Debt $35,169,800 Interest Rate 3.84% Term 36 Years Type Fixed Rate Amortization Fully Amortizing LTC/LTV 57.5%/62.8% Preferred Equity $8,000,000 Rate Paid Current 7.00% Total Rate 12.00% Investor Equity $17,983,019 Cash Flow 8% Hurdle, 70/30 Split Above 8% Capital Event 8% Hurdle, 70/30 Split Above 8% 15% Hurdle, 60/40 Split Above 15%
Blended LTV 77.09% Blended LTC 70.59% Blended Rate Paid Current 4.43% Total Blended Rate 5.35% Positive Leverage on Current ¹ ⁽⁾ 1.71%
@onestreetcapital
SOURCES AND USES
SOURCES OF FUNDS
$61,152,941
USES OF FUNDS
3.Includes Construction Management Fee of $77,825. $61,152,941
1.Estimated closing costs presented above are subject to change.
2.Years one and two PILOT payment.
CONFIDENTIAL OFFERING MEMORANDUM
Equity $17,983,141 Debt $43,169,800 TOTAL SOURCES $61,152,941 Purchase Price $56,000,000 Acquisition Fee $650,000 Preferred Equity Reserves $283,889 Cap Expenditures & Operational Contingency ³ ⁽⁾ $2,050,575 Admin Fee $100,000 Housing Authority Fee $400,000 3ʳᵈ Party Legal ¹ ⁽⁾ $250,000 HA PILOT Payment ² ⁽⁾ $304,500 Construction/PM Due Diligence $44,190 Title and Escrow ¹ ⁽⁾ $50,000 Lender Third Party Costs ¹ ⁽⁾ $25,000 Property Survey ¹ ⁽⁾ $15,000 HA Consultant Cost $162,500 Misc. Closing Costs ¹ ⁽⁾ $29,000 Financing Fee $538,287 HA Legal & Financial Advisory Costs $250,000 TOTAL USES $61,152,941 Closing Costs as % of Purchase 5.54% @onestreetcapital
FINANCIAL PROJECTIONS
FINANCIAL PROJECTIONS
PROPERTY CASH FLOW
(1) January 2024 historical financials include trailing 12-month expenses and revenue.
CONFIDENTIAL OFFERING MEMORANDUM
Income Historical – Jan-24 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Market Rent 5,573,735 5,304,590 5,463,728 5,627,640 5,796,469 5,970,363 6,149,474 Loss to Lease (181,558) 39,508 (72,938) (75,126) (77,380) (79,701) (82,092) GPR $5,392,177 5,344,098 5,390,790 5,552,514 5,719,089 5,890,662 6,067,382 Physical Vacancy (443,081) (400,664) (341,461) (328,264) (313,968) (298,518) (307,474) Bad Debt (9,775) (26,523) (27,319) (28,138) (28,982) (29,852) (30,747) Concessions (55,180) (132,573) (91,033) (23,441) 0 0 0 Gross Rental Revenue $4,884,141 4,784,338 4,930,976 5,172,670 5,376,139 5,562,292 5,729,160 Other Property Income 634,819 668,786 688,850 709,515 730,801 752,725 775,307 Net Revenue 5,518,960 5,453,125 5,619,826 5,882,186 6,106,940 6,315,017 6,504,467 Expenses R&M 114,251 (56,600) (58,298) (60,047) (61,848) (63,704) (65,615) Turnover 0 (56,600) (58,298) (60,047) (61,848) (63,704) (65,615) Payroll 491,082 (468,948) (483,017) (497,507) (512,432) (527,805) (543,639) Marketing 130,581 (93,390) (96,192) (99,077) (102,050) (105,111) (108,265) Administrative 69,840 (84,900) (87,447) (90,070) (92,773) (95,556) (98,422) Contracts 392,106 (384,423) (395,955) (407,834) (420,069) (432,671) (445,651) Utilities 191,745 (197,497) (203,422) (209,525) (215,811) (222,285) (228,954) Management Fee 221,549 (190,859) (196,694) (205,876) (213,743) (221,026) (227,656) Property Taxes 1,059,520 0 0 0 0 0 0 Franchise Taxes 16,800 (18,050) (18,602) (19,470) (20,214) (20,903) (21,530) Insurance 268,551 (201,021) (207,052) (213,264) (219,661) (226,251) (233,039) Total Expenses 2,956,025 (1,752,289) (1,804,976) (1,862,718) (1,920,449) (1,979,015) (2,038,386) NET OPERATING INCOME 2,562,025 3,700,836 3,814,850 4,019,468 4,186,491 4,336,001 4,466,081 Capital Expenses & Reserves Total Upfront Capital Expenses & Reserves (1,070,843) (442,835) (442,835) (47,031) (47,031) 0 Capital Reserve Draw 1,070,843 442,835 442,835 47,031 47,031 0 Replacement Reserves Recurring (87,730) (56,600) (56,600) (99,050) (99,050) (102,022) Non-Recurring 0 (56,600) (56,600) (99,050) (99,050) (102,022) Entity Expenses Payment in Lieu of Taxes 0 0 (159,135) (163,909) (168,826) (173,891) Asset Management Fee (Fixed) (100,000) (103,000) (106,090) (109,273) (112,551) (115,927) Corporate Loss (40,000) (41,200) (42,436) (43,709) (45,020) (46,371) Total Non-Operating Expenses (227,730) (257,400) (420,861) (514,991) (524,498) (540,232) Interest on Reserves 38,205 19,103 Residual Preferred Equity Reserve Release 283,889 Net Sales Proceeds 0 0 0 0 0 82,153,878 Debt Paydown 0 0 0 0 0 (31,966,412) Mezz Paydown 0 0 0 0 0 (8,000,000) Escrow Releases 0 0 0 0 0 233,039 Financing Expense Debt Service- Interest (1,254,631) (1,236,849) (1,218,418) (1,199,315) (1,179,514) (1,158,990) Debt Service- Principal (487,220) (505,002) (523,433) (542,536) (562,337) (582,860) MIP Payment (87,370) (86,132) (84,848) (83,518) (82,139) (80,710) Mezzanine- Interest (567,778) (567,778) (567,778) (567,778) (567,778) (567,778) Mezzanine Clawback 0 0 0 0 0 (2,837,014) NET CASH FLOW 1,114,313 1,180,792 1,204,130 1,278,353 1,419,736 41,402,890 @onestreetcapital
May 3rd May 8th May 15th April 26th PPMs Read y PPMs signe d All Fund s Wired Closin g
INVESTMENT TIMELINE
www.onestreetcapital.com Schedule with Denise +1 (215) 479 0142 Denise@OneStreetCapital.co m +1 (248) 345 0594 Catherine@OneStreetCapital.com Schedule with Catherine NEXT STEPS & GETTING STARTED Interested Investors can fill out a soft commit form contact form and can set up a one-on-one consultation to discuss any questions CLICK HERE SOFT COMMIT FORM
