SERIES NOTE LISTING Cash Flowing 3- Asset Northern NJ Office Portfolio

Transcription

1 Information Regarding the Project Payment Dependent Note 1. Note Series Number Total Amount Offered $6,000, Minimum Investment Amount 4. Interest Rate $5, % per annum, cumulative, non- compounding, of which 8.0% will be paid current in accordance with the payment schedule and 8.0% will accrue to the Initial Maturity Date Interest Advances (if any) Additional Interest Rate (if any) 7. Servicing Fee 0.3% 8. Other Fees 9. Prepayment Charge None 10. Initial Maturity Date 3.0 years from the date of closing of the Corresponding Project Investment. Unless extended to Final Maturity Date, final payment of the Note to occur within twenty (20) business days of the Initial Maturity Date. 11. Final Maturity Date The date when all payments from the corresponding project investment are received from the real estate company or the corresponding project investment is no longer outstanding. Final payment to occur within twenty (20) business days of the Final Maturity Date. 12. Payment Schedule Quarterly on March 30, June 30, September 30, and December 30, in arrears, with the first payment being due on June 30, Contingent Payments No payments of principal and interest on this Note shall be payable unless the Company has received payments under the corresponding project investment, and then only to the extent of the amount of such payments received by the Company. [Information Regarding the Corresponding Project Investment Appears on the Following Page]

2 Information Regarding the Corresponding Project Investment 1. Identity of Real Estate Company Lincoln Morristown GP LLC 2. Corresponding project investment $6,000, Aggregate amount of corresponding project investment 4. Corresponding Project Investment ID Number $84,797, Preferred Return 16.0% 6. Projected Redemption Date 36 Months 7. Date of Closing May 4, Prepayment Charge None 9. Origination Fee 1.5% 10. Due Diligence Fee $5, Type of Real Estate Project Office 12. Phase of Real Estate Project Value- Add 13. Location of Real Estate Project 100 Southgate Pkwy., Morristown, NJ 1200 Mt. Kemble Ave., Morristown, NJ 60 Columbia Rd., Morristown, NJ 14. Loan- to- Cost Ratio 86.6% 15. Property Location Morristown, NJ 16. Tenancy 91.8% 17. Development Phase Value- Add 18. Sponsor Track Record Greater than $250M 19. Investment Summary This is an opportunity to invest in the acquisition and repositioning of a 3- property office portfolio located 30 miles outside of New York City in the Morristown, New Jersey sub- market. All the properties are currently cash flowing with a blended occupancy rate of 91.8%. The sponsor, Lincoln Equities Group ( LEG ), has owned and managed more than 5 million square feet of Class A commercial office space in the New Jersey market during its 30 year history. LEG closed on the acquisition with Fundrise in May of 2015 at a purchase price of $80,000,000 ($194/SF), which represents a blended cap rate of 9.27% based on the 2014 NOI of $7,416,439. LEG purchased the portfolio at a discounted bulk price due

3 to upcoming lease roll- over and terminations, and plans to reposition several of the properties over in the next three years. Once they have completed leasing and brought all the buildings to stabilized occupancy, they plan on selling the properties individually (high- bidders in the market pay 7-8% cap rates) yielding a much greater overall price for the portfolio. LEG projects a total project cost to complete the repositions of $84,797,900. At closing, LEG along with it s partners invested more than $11,400,000 junior to the Fundrise position, yielding an approximate LTC on the Fundrise investment of 86.6%. In other words, LEG would have to lose $11,400,000 of value from the asset before the Fundrise position was put at risk. Portfolio Breakdown Southgate - PP: $36,178,344 - Occ: 99.2% - Cap: 7.23% - SV: $34,500,000 Kemble - PP: $19,872,611 - Occ: 86.1% - Cap: 9.99% - SV: $26,400,000 Columbia - PP: $23,949,045 - Occ: 88.5% - Cap: 11.76% - SV: $30,000,000 PP = purchase price Occ = occupancy Cap = cap rate at purchase SV = stabilized value Notes: The largest tenant in the Columbia property Smith s Detection has given notice of its intent to terminate its lease in May 2016 and has already vacated the property, although they continue to pay their full rent. As part of it s termination option, Smith s will pay an early termination fee of $1,862,000. This fee will be used in addition to the existing equity investment to pay for tenant improvement allowances as part of the releasing process. LEG has already been in negotiations with several tenants with an interest in filling the space. 20. Financial Overview at Stabilization LEG projects to increase NOI to $7,725,000 and achieve a lower blended cap rate of 8.50% at planned sale of the assets, yielding an exit valuation in excess of $90,000,000. Loan Information LEG closed on the property with a $67,390, year floating- rate CMBS loan with a floor of 4.75%. Projected Return Fundrise investors are projected to earn a gross annual return of 16% paid (8% Current / 8% Accrued) over the 36- month term. 21. Capital Structure Equity $11,407,900 Preferred Equity $6,000,000 Senior Debt - $84,797, Project Summary The Morristown Portfolio consists of three office buildings in Morristown, NJ: 100 Southgate Parkway, Morristown, NJ ( Southgate ), 1200 Mt. Kemble Avenue, Morristown, NJ ( Kemble ), and 60 Columbia Road, Morristown, NJ ( Columbia ). Southgate contains a single, three- story, commercial office building improved with elevators, a full- service cafeteria, an

4 atrium, two outdoor water fountains and outdoor seating. In addition to the current structure, the property is improved with landscaping, concrete sidewalks, and asphalt- paved parking lots. Vehicular access to the subject property is provided from a paved driveway from Southgate Parkway along the western property boundary. Kemble contains a single, three- story, commercial office building improved with one diesel emergency generator, two hydraulic passenger elevators, a full- service cafeteria, atrium lobby, and outdoor patios. In addition to the current structure, the property is improved with landscaping, concrete sidewalks, and asphalt- paved parking lots. Vehicular access to the subject property is provided from a paved driveway from Mt. Kemble Avenue along the northwestern property boundary. Columbia contains two three- story, commercial office buildings identified as Building A and Building B improved with four hydraulic passenger elevators, an outdoor water fountain, and outdoor seating. The buildings are virtually identical; however, Building B is equipped with a café and fitness center on the ground floor. Building A has reportedly been vacant for approximately one year. In addition to the current structures, the subject property is improved with landscaping, concrete sidewalks, and asphalt- paved parking lots. Vehicular access to the subject property is provided from a paved driveway along the north from Whippany Road and along the south side from Columbia Road. 23. Market Summary Morris County is situated in the northeastern section of New Jersey and consists of 40 municipalities including Chester, Florham Park, Hanover Township, Madison, Mendham, Morristown (the County seat), and Parsippany. The County is known for its high quality of life, well- educated work force, and its large concentrations of major corporate headquarters. These corporations are able to draw employees from a great distance due to the region s highway infrastructure and Morris County s central location. Morris County is one of the wealthiest in the counties in the country, boasting an average household income of $132,622, 37% higher than the New Jersey average of $97, % of the County s population is employed in white color professions including financial services, pharmaceuticals, telecommunications, and high technology. Three of the portfolio tenants are wealth management firms Morgan Stanley, Regent Atlantic Capital, and Glenmede benefiting from the affluent local community. 100 Southgate Parkway, 1200 Mt. Kemble Avenue, and 60 Columbia Road are located in or adjacent to Harding Township. While Morris County is consistently one of the top 10 wealthiest counties in the Country, Harding Township is wealthier still (average household income of $202,858). In taking advantage of this, three of the portfolio tenants are wealth management firms, Morgan Stanley, Regent Atlantic Capital, and Glenmede. It is the location of 1200 Mt. Kemble & 100 Southgate, situated between Harding Township and Morristown that has allowed these buildings to outperform the submarket in terms of both

5 occupancy and rental rates and has insulated the assets against the recent market downturn. The three properties are located less than 8 miles from each other, off of Interstate 287. The location offers convenient access to I- 287, I- 78, I- 80, I- 280, Rt- 46, Rt- 10, and Rt- 24 which allow travelers to reach New York City in 45 minutes, Newark Liberty International Airport in 25 minutes and Philadelphia in 90 minutes. Just 5 miles from Downtown Morristown, the portfolio offers excellent proximity to restaurants, shopping malls, hotels, parks, and daycare centers. In 2013, Morris County boasted a AAA Bond rating for the 39th consecutive year from both Moody s and Standard & Poor s. Moody s cited the AAA rating as reflecting the Country s strong and diverse tax base, well- managed financial operations, which have historically supported healthy reserve levels, and a modest debt burden. With over 30.1 million SF of inventory, Morris County has the largest office inventory in the state, 55% of which is considered Class A product, giving Morris County a larger class A than many cities including Orlando, Milwaukee, Memphis, San Antonio, and Columbus. Morris County represents New Jersey s largest concentration of Fortune 500 companies with over 40 companies either headquartered or having a major facility in the county. Average asking rents are $27.51/SF, and Class A average asking rent is $30.45/SF, a 4% increase since last year. The office market sees very high velocities, with over 3.5 million SF of leasing activity of over the past 2.5 years, the highest of any county in NJ.