PRESENTS AN INVESTMENT OVERVIEW FOR THE LAKE ELSINORE VALUE-ADD PORTFOLIO DON OLIPHANT DWO ENTERPRISES DIRECT: (858) 756-5565 OLIPHANT@DWOENT.COM FOR MORE INFORMATION PLEASE CONTACT: TIM WILLIAMS DWO ENTERPRISES DIRECT: (858) 756-5754 WILLIAMS@DWOENT.COM MATT CAMPBELL LUMINOUS VENTURES DIRECT: (858) 779-1875 MCAMPBELL@LUMVEN.COM MARK KNEPPER LUMINOUS VENTURES DIRECT: (858) 779-1874 mknepper@lumven.com
DWOLV is pleased to present The Lake Elsinore Value-Add Portfolio, a 320 unit two property multi-family portfolio comprised of Harbor Grand Apartments and North Lake Apartments. The properties are located at 15120 Grand Avenue and 15195 Lincoln Street, Lake Elsinore, California. Harbor Grand was built in 1986 and is considered a B class asset in a B location that is currently 97% occupied. North Lake was built in 1987 and is considered a B- class asset in a B location that is currently 97% occupied. DWOLV is seeking equity partners to capitalize its business plan to acquire the properties and bring them up to market rent through a renovation of the interior and exteriors of the properties. The business plan involves capitalizing the cost of the acquisition and the renovation. The exterior renovation plan will include; a new paint scheme, signage package and landscaping. The interior improvements include; new paint, flooring, black appliances, counter tops, cabinet faces, lighting, tub and tile surrounds, fixtures and the addition of washer and dryers in select units. The amenities will all be updated and modernized including the following; pool upgrades with new pool furniture, dog parks, and a new fitness gym at each property. The investment strategy for The Lake Elsinore Portfolio will be as follows: Hire a new professional property management team Immediately implement a new marketing strategy consistent with this quality of asset Rebrand property with new name and modern logo Start all exterior improvements Start renovation of interiors as they become available Push for the highest market rent achievable Lease-up and stabilize the property Refi with long-term fixed rate debt or sell The acquisition of The Lake Elsinore Portfolio will be made with a loan from a bridge lender to be determined. We estimate the project will be stabilized with new rents in the 28 th month of the proforma. After stabilization and seasoning of the new rents, we plan on refinancing or selling in month 32 of the proforma. The total equity requirement for The Lake Elsinore Portfolio is $11,305,913. DWOLV will be one of the major equity investors with the percentage to be determined. The proforma below shows a short-term sale at the 32 nd month resulting in an overall project levered IRR of 22.57%, an investor IRR of 18.42% and investors profit multiple of 1.59x. The proforma also shows a 10-year hold post refi with an overall project levered IRR of 17.26%, an investor IRR of 15.61% and investor profit multiple of 4.68x.
THE MARKET The Inland Empire is a region of Southern California used to describe the cities of western Riverside County and Southwestern San Bernadino County. The population of the Inland Empire is approximately 4 million and is one of the most dynamic areas in the entire country for development, due to its availability of land in Southern California and lower cost of living. The Inland Empire Apartment Market is thriving due to continued job growth and demand for more affordable housing. This has pushed vacancy to a 15 year low near 3%. Rents have posted an 8.5% increase over the last year according to Marcus and Millichap s market report. With job growth expected to continue and outpace other areas of the country, the rent growth is expected to continue at a rapid pace. Lake Elsinore is a city within the Inland Empire with a population of over 60,000 and is considered one of the fastest growing cities in California. Lake Elsinore gets its namesake from a 3,000-acre freshwater lake in the center of the city. The city has grown from a resort town into more of a commuter and bed room community where the locals have great regional access via the 15 freeway north and south and the 74 freeway East and West. A large number of residents enjoy the low cost of living in Lake Elsinore while commuting to Orange County and other close by cities for higher paying jobs. The Lake Elsinore apartment market is a highly-occupied market today with no new units currently under construction. The Lake Elsinore market has seen continued upward pressure on rents as occupancies are consistently reaching 100% at some properties. In a recent study by Cushman & Wakefield the rents in Lake Elsinore were determined to be the second lowest in the Inland Empire second only to the Perris area. Currently Lake Elsinore rents average $1,278 per unit. As city s north, east, south and west of Lake Elsinore continue to build new class A properties with significantly higher asking rents Lake Elsinore should continue to see high occupancy and sustained rent growth.
RENT OVERVIEW The current asking rent at the properties is an 18.3% increase or $178 per unit over the average in-place rents today. Post renovation rents are projected to be $355 higher or a 36% increase over the average in-place rents today. Of the total increase in rents projected 50.2% is already being achieved with the remaining 49.8% projected through the renovation. There is currently a waiting list of potential tenants at each property. PORTFOLIO TOTALS Initial Initial Initial Post In-Place Rental ReHab Rents Increase Rents Overall Average 320 853 Monthly Rent $976 $355 $1,331 psf $1.143 $0.416 $1.559 % Change 36.4% Loss to Lease Portion of Increase, Currently asking Rents Monthly Rent $976 $178 $1,154 psf $1.143 $0.209 $1.352 % Change 18.3% % Change of Total Increase 50.2% Renovation Portion of Increase Monthly Rent $1,154 $177 $1,331 psf $1.352 $0.207 $1.559 % Change 15.3% % Change of Total Increase 49.8%
CASH FLOW - SNAPSHOT SNAPSHOT OF THE EQUITY INVESTMENT Total Required Equity $10,175,321 Isolated Equity Investment for this Example $1,000,000 9.83% of Total SHORT TERM SALE Toal Project Term is 32 Months Average Distribution Summary Cash Equity Cash Cash-on-Cash Months Balance Flow Return Cash Flow 1-12 = 12 Mos $1,000,000 $0 0.0% Cash Flow 13-24 = 12 Mos 968,128 51,654 5.3% Cash Flow 24-31 = 7 Mos 918,348 56,143 6.1% Partial Year Sale Proceeds 32 = 1 Mo 1,479,667 N/A Total Distributed Dollars to Investor $1,587,464 0.00 ck Profit $587,464 0.00 ck Equity's IRR 18.42% Equity's Profit Multiplier 1.59 x LONG TERM SALE Toal Project Term is 148 Months Average Distribution Summary Cash Equity Cash Cash-on-Cash Months Balance Flow Return Cash Flow 1-12 = 12 Mos 1,000,000 0 0.0% Cash Flow 13-24 = 12 Mos 968,128 51,654 5.3% Cash Flow 25-36 = 12 Mos 869,272 159,387 18.3% Refinance at Month 32 Cash Flow 37-48 = 12 Mos 748,151 77,066 10.3% Cash Flow 49-60 = 12 Mos 664,303 89,805 13.5% Cash Flow 61-72 = 12 Mos 567,551 102,547 18.1% Cash Flow 73-84 = 12 Mos 458,015 115,519 25.2% Cash Flow 85-96 = 12 Mos 335,255 128,957 38.5% Cash Flow 97-108 = 12 Mos 198,799 142,876 71.9% Cash Flow 109-120 = 12 Mos 48,154 157,293 326.6% Cash Flow 121-132 = 12 Mos (117,184) 172,225 Infinite Cash Flow 133-144 = 12 Mos (297,741) 187,689 Infinite Cash Flow 145-147 = 3 Mos (208,971) 49,508 Infinite Parital Year Sale Proceeds 148 = 1 Mo 3,245,088 N/A Total Distributed Dollars to Investor $4,679,618 0.00 ck Profit $3,679,618 0.00 ck Equity's IRR 15.61% Equity's Profit Multiplier 4.68 x
DEAL STRUCTURE DEAL DESCRIPTION Proforma analyzes the acquisition of an existing Two Project Apartment Portfolio located in Lake Elsinore, California Number of Units 320 Square Footage 273,040 Average Unit Size 853 Current Occupancy 96.6% Number of Buildings 28 Plus a Two Leasing Offices Total Project Capitalization Equity Mezz Debt at Purchase $48,805,913 20.8% $10,175,321 0.0% $0 Loan Terms Silver Peak Quote 79.8% TLC 1 pt in 1 pt Out L+475 = 5.55% I/O Full Term 3 Year Term + 1 + 1 Pt Out waived if Refinanced w/ their CMBS Deal Loan 76.8% $37,500,000 Mezz Loan Terms Combined into First DEAL STRUCTURE Waterfall Equity Structure 90/10 Positive Cash Flow during Initial Term Refinance 1. Preferred Return 8.0% Agency Exit 2. Return of Equity 75% LTV 3. 80/20 to a 12% IRR 1.25x 4. 70/30 to a 15% IRR 4.65% 5. 60/40 to a 18% IRR 2 Years I/O 6. 50/50 thereafter Positive Cash Flow after Initial Term 1. Preferred Return 8.0% 2. Return of Equity Promote Fees 3. 80/20 to a 12% IRR 1. Acquisition Fee of 1.25% of Total Project Capitalization 4. 70/30 to a 15% IRR 2. Asset Management Fee of $12,000 per Month for 31 Months 5. 60/40 to a 18% IRR 3. Asset Management Fee of 1.25% of Gross Receipts 6. 50/50 thereafter after 30 Months Sale and Refinance Proceeds are Distributable as follows: 1. Preferred Return 8.0% 2. Return of Equity 3. 80/20 to a 12% IRR 4. 70/30 to a 15% IRR 5. 60/40 to a 18% IRR 6. 50/50 thereafter
PROFORMA INVESTMENT OVERVIEW Number of Units 320 Square Footage 273,040 Average Unit Size 853 Current Occupancy 96.6% Analysis Holding Periods 32 Months & 148 Months Net Operating Incomes & Cap Rates Seller's Seller's NOI Seller's Initial NOI Initial NOI Owner's NOI Buyer's NOI Owner's NOI Buyer's NOI w/o Reserves w/ Reserves w/o Reserves w/ Reserves Stabilized at Sale at Sale at Sale at Sale & Turn Cost & Turn Cost & Turn Cost & Turn Cost Mo 27 Mo 32 Mo 32 Mo 148 Mo 148 $2,207,996 $2,140,534 $1,954,214 $1,794,214 $3,218,332 $3,293,643 $4,823,125 $3,147,355 $4,488,615 = Adjusted for Buyer's Taxes Seller's Cap Rate 5.412% Seller's Cap Rate 5.246% Buyer's Cap Rate 4.790% Buyer's Cap Rate 4.398% Return on Cost 6.59% Terminal Cap Rate 5.50% 5.50% Spread 109 109 = Basis Points NET SALE PROCEEDS $56,745,122 $80,956,085 COST SUMMARY Purchase Price $40,800,000 $40,800,000 Improvement Cost 5,586,000 5,586,000 Soft Costs 1,381,192 1,381,192 Financing 1,038,721 1,038,721 TOTAL PROJECT COST $48,805,913 $48,805,913 Existing Lender's Exit Fee 375,000 375,000 Last Month of Debt Service 173,438 173,438 Last Month of Debt Service 0 0 Last Month of Debt Service 201,754 Cash Flow during Initial Term (1,218,746) (1,218,746) Cash Flow during Holding Period (15,651,481) Additional Cost paid from Cash Flow during Holding Period 1,294,246 Refinance Costs 435,944 Principal Adjustment 0 0 Principal Adjustment (7,325,278) PROFIT $8,609,518 $53,865,296 Project's Leveraged IRR 22.57% 17.26% Project's Profit Multiplier 1.76 x 5.76 x Equity Investor's IRR 18.42% 15.61% Equity Investor's Profit Multiplier 1.59 x 4.68 x Project's UnLeveraged IRR 11.80% 10.04% Project's UnLeveraged Profit Multiplier 1.31 x 2.57 x
PROPERTY STATISTICS Price: $39,000,000 Price per Unit: $121,875 Price per Square Foot: $142.84 Number of Units: 320 Rentable Square Feet: 273,040 Number of Buildings: 28 Number of Stories: 2 Year Built: 1986 & 87 Lot Size: 14.6 Acres (combined) AERIAL HARBOR GRAND
AERIAL NORTH LAKE
Harbor Grand PROPERTY PHOTOS North Lake
Harbor Grand North Lake
TEAM OVERVIEW DWO Enterprises and Luminous Ventures have joined forces to create a strategic blend of talent and expertise across the full spectrum of real estate development. The team has the capability to handle any size and scope of commercial acquisition and development. DWO Enterprises is a real estate development and investment company located in Rancho Santa Fe, California that has a 30 year track record and a diverse project background. Luminous Ventures is an opportunistic real estate firm with a skill set based in brokerage, marketing, and sophisticated institutional underwriting that has been successful in identifying profitable opportunities during the current real estate cycle. HIGHLIGHTS and ACCOMPLISHMENTS Involved in the acquisition, development and brokerage of nearly $2.5 billion in real estate transactions Combined 90+ years of real estate experience Significant experience in the repositioning of assets and ground-up development in all aspects of commercial real estate Developed over 2 million square feet of commercial and industrial space Currently 2,600 multi-family units under management across the western US PARTIAL LIST OF CURRENT MULTI-FAMILY PROJECTS: The Timbers, Dallas, Texas 260 units valued at $28,000,000 (post renovation) The Pearl, Dallas, Texas 213 units valued at $16,000,000 (post renovation) The Grand Apartment Homes, San Antonio, Texas 136 units valued at $13,000,000 (post renovation) The Parker Apartments, San Antonio, Texas 202 units valued at $7,615,000 (post renovation) The Sterling, Corpus Christi, Texas 180 units valued at $12,900,000 (post renovation) Eagle s Landing, Beeville, Texas 156 units valued at $7,800,000 Country Villa Apartments, Castroville, Texas 128 units valued at $9,545,000 (post renovation) Corpus 295, Corpus Christi, Texas 295 units valued at $18,430,000 (post renovation) Brooks Village Apartments, San Antonio, Texas 135 units valued at $7,728,000 (post renovation) The Gardens, Midland, Texas 102 units valued at $11,328,000 (post renovation)
SPECIFIC MULTI-FAMILY EXPERIENCE INCLUDES: The Gardens: purchased property and are currently under major renovation. 102 units in Midland, TX. Brooks Village: purchased property and are currently under renovation. 135 units in San Antonio, TX. Ocean Drive Estates: purchased property and completed a major renovation, and recapitalization now holding for cash-flow. 99 units in Corpus Christi, TX. The Grand Apartment Homes: purchased the note and completed a deed in lieu; currently in the stabilization process. 136 units in San Antonio, TX. The Parker Apartments: purchased property and completed a major renovation now in the stabilization process. 202 units in San Antonio, TX. The Sterling Apartment Homes: purchased the property and completed a major renovation now in the stabilization process. 180 units in Corpus Christi, TX. Corpus 295: purchased a 3 property portfolio and are currently under major renovation. 295 units in Corpus Christi, TX. Country Villa Apartments: purchased the property and are currently under renovation. 128 units in Castroville, TX. Hedgemoor Square Apartments: purchased the note foreclosed and immediately sold the property; 64 units in Memphis, TN (Sold) Desert Rose Apartment complex: purchased the note and completed a short sale; 237 units in Las Vegas, NV. (Sold) The Place at Commerce Apartments: purchased the note and foreclosed; currently holding on the market for sale. 184 units in San Antonio, TX. Sunset Point Apartments: purchased a note and foreclosed; sold project in 112 days from acquisition of the loan on 73 units located in Crystal City, Missouri. (Sold)
PRINCIPAL MR. DON W OLIPHANT President, DWO Enterprises Mr. Oliphant is responsible for the vision, values, and overall strategy of DWOLV Group. DWOLV Group has earned a very favorable reputation for their development and renovation of multi-family projects across the western US including receiving property of the year honors for a recent development. Mr. Oliphant founded DWO in 1980 for the sole purpose of developing quality commercial, multi-family, and industrial projects in the Western United States. DWO Enterprises has a comprehensive approach to the development business not often found in the industry. Working realistically within the prevailing governmental attitudes and economic conditions, the company has developed or entitled real estate valued at over $900 million. Emphasis continues to be on excellence, durability, and creating value in the marketplace. Mr. Oliphant is a former General Partner of Knott's Berry Farm, one of the largest amusement parks in the United States consisting of 150 acres located in the heart of Orange County, California. As partner, one of the responsibilities and accomplishments was to broaden the scope of the company and create opportunities for diversification. Mr. Oliphant was also the Chairman of Knott's Berry Farm Foods, Inc., a food production and distribution company making preserves, jellies, fruit syrups and salad dressings. Mr. Oliphant earned his bachelor s degree in Business Finance from the University of Southern California and served his country as a Captain in the United States Marine Corps. PRINCIPAL MR. TIM WILLIAMS Vice President, DWO Enterprises As project Manager, Mr. Williams is responsible for the analysis, due diligence, financing, entitlement, and construction management of DWOLV s real estate development projects. He has proved that he has the creative ability and talent to handle sophisticated real estate transactions. Over the last several years of the real estate downturn Mr. Williams built a very successful business buying and selling foreclosed homes, this provided Tim an excellent venue to learn first-hand the foreclosure laws and to perfect strategies for maximizing investor returns. Mr. Williams previously served as an airline pilot for American Eagle Airlines, based in Puerto Rico and Dallas, TX. He prides himself with a strong work ethic, uncompromising integrity, and an enthusiastic attitude. Mr. Williams graduated from Southern Illinois University with a B.S. in Aviation Management.
PRINCIPAL MR. MATT CAMPBELL Luminous Ventures Mr. Campbell s responsibilities at Luminous involve the overall strategy and direction of the company along with serving as the head of acquisitions. Over the first 15 years of his commercial real estate career he worked in investment sales, leasing and market research. During the first 10 years of his career he established an extremely successful brokerage practice that included negotiating lease and sale transactions in excess of over 4 million square feet and half a billion dollars in value. Over the last several years Mr. Campbell focused in the distressed sector of the commercial market becoming an expert in accessing information for distressed opportunities through loan sale advisory firms, commercial real estate firms, banks and private seller s. Most recently Mr. Campbell has been working to acquire a portfolio of multi-family projects on a national basis through the DWOLV Group. Mr. Campbell was previously a principal and top producing broker at Cassidy Turley San Diego. He also worked as an associate broker at Lee & Associates Commercial Real Estate and worked in the marketing department at one of the largest commercial real estate firms in the country, Colliers International. Mr. Campbell graduated from the University of San Diego with a degree in Business Administration with an emphasis on finance and marketing. PRINCIPAL MR. MARK KNEPPER Luminous Ventures Mr. Knepper serves as the CFO and CIO for Luminous he is a financial expert in the field of commercial real estate. Mr. Knepper has learned and perfected his skills over the last 26 years in the development sector working on large scale ground up developments all over Southern California, ranging from Class A office to large retail power centers and industrial parks. During the course of his career, he has completed over of $875 million of volume in over 115 commercial transactions, ranging from construction projects to debt & equity to office sales in Southern California spanning the full spectrum of commercial real estate. Most recently Mr. Knepper has been working to acquire a portfolio of multi-family project throughout the U.S. with the DWOLV Group. Mark was most recently the Director in the Capital Markets Group of Cassidy Turley San Diego prior to serving in his current role at Luminous Ventures. Mark also worked as a Senior Analyst and Associate Director with Holliday Fenoglio Fowler, L.P. as well as the Vice President of Finance with Newport National Corporation; a San Diego-based development firm.