945 15th Street Hermosa Beach, CA

Transcription

1 945 15th Street Hermosa Beach, CA Two Unit Townhome Development $3.35 Million Construction Debt PRESENTED EXCLUSIVELY BY:

2 TABLE OF CONTENTS Executive Summary Site and Urban Context Market Overview Conceptual Design Economics Sponsorship Overview BEACH CITY CAPITAL 1240 Rosecrans Ave, Suite 120 Manhattan Beach, CA (424)

3 945 15th Street Hermosa Beach, CA EXECUTIVE SUMMARY

4 EXECUTIVE SUMMARY Beach City Capital (the Sponsor ) is pleased to present an opportunity to place a first lien position construction debt note of approximately $3.35M for the development of two townhomes located at th Street, Hermosa Beach, CA (the "Project"). The land price is approximately $1.8M with hard costs of $1.7M and soft costs of $975K. The Project will have a construction duration of approximately 12 months, with a profit of $562,471. Net sales are expected at a conservative $815 SF for total proceeds of approximately $5.25M. The development will include two 3,200 SF ocean view townhomes, each with two car garages, grand living spaces on the upper levels and a roof top terrace to take advantage of the ocean views. The Project will benefit from Hermosa s accredited high schools, beautiful beaches, affluent demographic, and the new family dynamic in the South Bay. The Sponsor has been in negotiations with the land owner for 6 months and has come to terms for the land owner to seller finance the property. PROPERTY OVERVIEW Property Summary Location Hermosa Beach CA Property Address th Street Land Square Footage 5,655 Proposed Units 2 Net Saleable Product (SF) 6,457 Average Unit Size (SF) 3,229 Sales PSF/Unit $815 psf / $2.6 MM Project Costs Land Costs $1,868,750 Hard Costs $1,700,601 Soft Costs $974,274 Total Cost $4,543,625 DEAL OVERVIEW Capital Structure Senior Debt 75% $3,347,063 Equity 25% $1,210,000 Total Cost 100% $4,557,063 Return Summary Project Level Returns Project IRR 32.3% Class A IRR 23.09% Class B IRR 14.39% Equity Multiple 1.46x ROI (30 Months) 46% Total Profit $562,471 Development Timeline 26 Months

5 EXECUTIVE SUMMARY INVESTMENT HIGHLIGHTS Strong Return Profile The Sponsor s conservative underwriting yields levered returns of 32.3% IRR, an equity multiple of 1.46x, and a profit of $562,471. The total cost of the project is $4,543,625 and the total sales are projected at $5,262,455. Market comparables, within a quarter mile, average $870/SF and new 3,000 SF homes have recently sold for greater than $2.7M. Our financial analysis is assuming a highly conservative $815 psf. This project is currently offering a first lien position construction debt note of approximately $3.35M. Seller Carry The property was acquired off market through a personal relationship with the neighbor of th Street. In doing so, the seller was highly interested to invest in the property with some of the equity received as a result of the sale. As part of this strategy, it was realized the best potential returns would be achieved via a seller carry wherein an Option Agreement is in place until the close of construction loan and start of construction. This significantly decreased risk exposure and eliminated carry costs on the acquisition of the property. For Sale Comparables Hermosa Beach has experienced steady and sustained growth within the past few years as it becomes the most highly sought after destination in the South Bay for single family homes behind Manhattan Bach. Current pending sales have exceeded $1,000/SF and closed sales of have averaged around $738/SF. This averages to approximately $870/SF which is far below the underwriting of $815/SF. To be noted, many of the closed comparable bring down the average as they are not consistent with what new development product and ocean views will receive in the market. Please see the Market Overview section for additional information. Experienced Multifamily / Commercial Development and Investment Sponsor Beach City Capital is a private real estate development firm headquartered in Manhattan Beach, CA. The firm focuses on executing the development and/or repositioning of multi-family, luxury housing, and commercial assets, targeting value-add/opportunistic returns. The owners and key management staff of Beach City Capital have more than 35 combined years of real estate development experience. Beach City Capital is currently managing $110M in active investments across Los Angeles.

6 SITE / URBAN CONTEXT LOCATION MAP

7 SITE / URBAN CONTEXT LOCATION SITE TH Street to Hermosa Pier Killer Shrimp Hennessey s Tavern Fritto Misto Pier Avenue Java Man The Rockefeller Greenbelt Restaurant Waterman s Proximity 1. The Property within walking distance to a new Trader Joe s, Vons Shopping Center, Pier Ave. and Hermosa Pier 2. The City of Hermosa Beach recently welcomed a 12,000 SF Trader Joe's Market, which is located just 0.3 miles (a 5 minute walk) from the Project. Residents will be able to enjoy the sunny skies on a swift walk to the local organic market. The Subject Property lies 0.7 miles (a 15 minute walk) away from the vibrant Hermosa Beach Pier. 3. This neighborhood has a WalkScore of 93% meaning most essential errands can be accompllished on foot. This location is a 10 minute walk to Downtown Hermosa Beach. Nearby parks include South Park, Clark Stadium and Rodaway Park. 4. Fun activities in the neighborhood include the Fiesta Hermosa Art Fair which occurs every Memorial Day and Labor Day weekend in Downtown Hermosa Beach. The music scene always features high caliber, talented musicians. The Strand, beachfront sidewalk linking Hermosa to Manhattan and Redondo Beach, is great for people watching and activities TH STREET 7

8 SITE / URBAN CONTEXT LOCATION Hermosa Pier Pier Ave. The Strand

9 SITE / URBAN CONTEXT SITE AERIAL Hermosa Pier

10 SITE / URBAN CONTEXT PROPERTY PHOTOS Currently Under Construction by Beach City Capital Investment Project

11 SITE / URBAN CONTEXT PROPERTY PHOTOS Current Beach City Capital has acquired a lot with an existing apartment building. The lot is approximately 5,600 SF and situated in a Class-A neighborhood. This lot overlooks the beautiful Pacific Ocean and is surrounded by new homes. Future Vision Demolish the outdated building and develop two elegant and spacious townhomes which blend Contemporary and Plantation design. Each home will cater to the new family dynamic with reverse floorplans, a two car garage, 4 bedrooms and spectacular ocean views from the great room and roof top terrace.

12 SITE / URBAN CONTEXT HERMOSA BEACH AREA OVERVIEW Beach City Community A small, sunny beach city of 1.43 square miles, Hermosa Beach sits at the center of Los Angeles County s South Bay coastline, just 5 miles South of Los Angeles. The town is the very essence of the Southern California lifestyle, with temperatures ranging on average from highs of 78 degrees in the summer to 65 degrees in winter, and nighttime temperatures that rarely fall below 55 degrees. There are architecturally diverse residences on The Strand, bungalows scattered throughout the town and multilevel homes in the hills with ocean views. The City has police and fire departments, a skate park, green belt, community theater and senior center. Culture This lively beach city is also well known for its entertainment offerings, including live music from rock, blues and jazz. Festivals and special events abound on weekends. The three-day weekends of Memorial Day and Labor Day bring thousands of visitors to the Fiesta Hermosa street fair, which has been a tradition for many years, featuring hundreds of crafters, artists and live bands. In addition, Hermosa Beach is well known for its many tasty and diverse restaurants. Hermosa Beach is within a few minutes commute to many of the large, well known names in corporate America in fields such as aerospace, high tech, industrial, service and financial. Project Location - Convenience and Walkability in a Suburban Location Hermosa Beach is a very walkable community, ranking 7 th in state for walkability where most errands can be accomplished by foot. Hermosa Beach has an average walk score of 84/100 with 19,506 residents. The city offers a myriad of regular outdoor activities such as volleyball, surfboarding, skateboarding, and boogie boarding. Other favorite activities include jogging, skating or biking along the Strand, the paved strip paralleling the beach, and connecting Hermosa with the neighboring beach cities. Local Economy As a beach community, Hermosa experiences a high visitor population. During the fiscal year, beach attendance ranged from a low of 77,600 in December 2014 to a high of 1,596,605 in July 2014, according to the Los Angeles County Fire Department, Lifeguard Division. The three highest occupations are management, sales, and administrative support, however residents enjoy access to a much more diverse employment base with the close proximity of all of the other cities in Los Angeles County. The unemployment rate in Hermosa Beach is 3.1%, compared with 7.4% for Los Angeles County, and 6.2% for California as of June Affluent and Educated Population with Great School System Hermosa Valley and Hermosa View School were honored as U.S. Department of Education National Blue Ribbon Schools. Hermosa schools are among the top 10% of schools in the state with students scoring at or above 90%, tested in reading and math. The Hermosa City School District is known to be California s best performing district the local schools in the area include Hermosa View Elementary, Hermosa Valley Elementary and Mira Costa High School. Further, 60% of Hermosa s population hold Bachelor s Degree with 27% of people holding Graduate degrees.

13 th Street Hermosa Beach, CA MARKET OVERVIEW

14 MARKET COMPARABLES SUMMARY RESIDENTIAL SALES COMPS Pending Market Average Sale Closed Market Average Sale Pending/Closed Market Average Sale Tracking 2% CPI for 24 Months th Street Projected Sale PSF Per Unit $1,056 $2,493,250 $738 $2,658,116 $854 $2,598,165 $888 $2,866,887 $815 $2,631,228

15 RESIDENTIAL COMPARABLES A B 4 C

16 RESIDENTIAL COMPARABLES 4 A B C

17 RESIDENTIAL COMPARABLES

18 PENDING RESIDENTIAL COMPARABLES

19 CLOSED RESIDENTIAL COMPARABLES

20 CLOSED RESIDENTIAL COMPARABLES

21 th Street Hermosa Beach, CA CONCEPTUAL DESIGN

22 CONCEPTUAL DESIGN

23 th Street Hermosa Beach, CA ECONOMICS

24 CAPITAL STACK 25% 1,210,000 Class A: Beach City Capital Yields a 15% preferred annual return with a 25% profit split to the JV Equity Partner and a 75% Development Promote 75% 3,347,063 Debt: First Lien Construction Debt Financing with 75% LTC at 7.00%

25 PROJECT OVERVIEW MARKET STATISTICS (2017) Address th Street Submarket Hermosa Beach Hermosa Beach CA Comparables SF $/PSF Sale Price Time on Market Property Type For Sale Townhomes Market Avg 3,159 SF $854 $2,598, days Total Land Area (Acres) 0.12 Market High 3,950 SF $1,115 $2,835, days Total Land Area (SF) 5,655 Market Low 2,250 SF $671 $2,449,000 0 Programming Units Avg SF/Unit Gross SF 2 3,229 6,457 Direct Comps Avg 3,159 SF $854 $2,598, days Pro-Forma Avg 3,229 SF $825 $2,663, days Project Timeline Start End Months Premium / (Discount) 70 SF ($29) $65, days Acquisition Sep-17 Entitlement/Permits Sep-17 Jan Months Construction Jan-19 Apr Months Sale-Off Apr-20 Jul-20 3 Months Total th Street / Hermosa Beach CA Transaction Summary PROJECT AND MARKET OVERVIEW 34 Months SOURCES AND USES SOURCES $/Unit $/SF Total $ USES $/Unit $/SF Total $ Sources Uses Construction Loan $1,653,375 $512 $3,306,751 Land $934,000 $289 $1,868,000 Equity $661,384 $205 $1,322,768 Hard Costs $857,143 $265 $1,714,286 Soft Costs $523,617 $162 $1,047,233 Total Sources $2,314,760 $717 $4,629,520 Total Uses $2,314,759 $717 $4,629,520 DISPOSTION & RETURNS ANALYSIS DISPOSITION $/Unit $/SF Total PROJECT LEVEL RETURNS $/Unit $/SF Total $ Sale Price $2,663,513 $825 $5,327,025 Net Profit $535,731 Cost of Sale ($119,858) ($37) (239,716) Total Equity Investment $1,322,768 Capital Reserves Release $38,971 $12 $77,942 Equity Multiple 1.41x Total Costs ($2,314,760) ($717) ($4,629,520) IRR 15.6% Net Profit 535,731 ROI 40.5% Margin 11.6% EQUITY SUMMARY FINANCING SUMMARY Lender TBD Total Profit IRR ROI Total Loan $3,306,751 Class 1A 800, , % 32.8% LTV 65% Class 1B 522, , % 32.4% Term 18 Equity Partners $1,322,000 $421, % 32.6% Rate 7.00% Developer Promote $115,113 Rate Type Floating Total Profit $536,500 Recourse Recourse

26 945 15th St Hermosa Beach Project Start Date: 9/2/2017 Construction Start Date 1/5/2019 Construction Completion/Final sale 7/5/2020 Pro Forma - Return On Investment Time Frame 34 New Units 2 detached townhomes Months Lot Area 5,655 Building Type: Type V Structures On Grade Investment Period Sources/Uses Project Completion Potential Gross Sells 5,327,025 Commission Costs 3.5% (186,446) Closing Costs 1.0% (53,270) Net Sales Revenue $ 5,087,309 Total Project Costs (4,629,519) Loan Repayment 7.00% 3,306,751 (3,306,751) Release working capital reserve (+) $ 45,468 Un-used Interest Release (+) $ 32,473 Net Cash Flow $ (1,322,768) $ 1,858,500 Project Level Returns Leveraged Internal Rate of Return (IRR) 15.6% Equity Multiple 1.41 X Project ROI - Prior to Profit Split 40.5% Margin 11.6% Equity Used $ (1,322,768) Net Cash Flow $ 1,858,500 Note* Please find attached Equity Waterfall Structure Net Distributable Cash $ 535,732 Master Schedule 9/2/2017 1/5/2019 7/5/2020

27 945 15th St Hermosa Beach Codes Development Costs Saleable (SF) 6, Land Cost 289 $ 1,868,000 Construction Costs (Detailed Schedule Attached) 265 $ 1,714,286 Soft Costs (Detail Schedule Attached) 79 $ 511, Project Contingency 5% 17 $ 111,306 Total Development Costs - Land, Hard and Soft - Before Interest 651 $ 4,205,425 Construction Interest Reserve 35 $ 225,686 TOTAL LAND, CONSTRUCTION, AND SOFT COSTS & INTEREST $ 686 $ 4,431, Closing Costs 10 $ 66, Guarantee Fee 8 $ 49,601 Total Capital Required 704 $ 4,546,847 Less Loan Proceeds 65.0% LTV (3,306,751) Subtotal Equity Required $ 1,240,097 Project Formation 6 $ 37,203 Working Capital 7 $ 45,468 Total Equity Required $ 1,322,768 Equity Contributions JV Equity Partner 60% 800,000 Beach City Capital 40% $ 522,768 Total Project Equity $ 1,322,768 Total Project Costs $ 4,629,519

28 945 15th St Hermosa Beach Equity Return On Investment - Waterfall Structure Partners Contribution Equity JV Equity Partner - Class 1A 60% 800,000 Beach City Capital - Class A2 40% 522,768 Totals 100% $1,322,768 Tier Structure Contribution Pref Distribution Profit Split Distribution Total Profits IRR ROI Cash on Cash (Annual) EM JV Equity Partner - Class 1A 800, ,115 49, , % 32.8% 18.6% 1.33 Time Frame B (17 Months) 400,000 $123,770 $24,667 $ 148, % 37.1% 18.0% 1.37 Time Frame C (12 Months) 400,000 $89,344 $24,667 $ 114, % 28.5% 19.1% 1.29 Beach City Capital - Class 1B 522, , , % 32.4% 15.0% 1.30 Time Frame A (26 Months) 210,000 $89,250 $ 89, % 42.5% 15.0% 1.43 Time Frame C (12 Months) 312,000 $69,689 $ 69, % 22.3% 15.0% 1.22 Developer Promote $115,113 Totals 1,322, ,053 49, ,500 $1,858,500

29 th Street Hermosa Beach, CA SPONSORSHIP OVERVIEW

30 BEACH CITY CAPITAL MANAGEMENT KEY ADVISORS Jason Muller Managing Principal Clinton Abrams Managing Principal Serena Shlomof Development Associate Mark H.Carpenter Jr. Development Associate Greg Cullen Beach City Capital Development Principal Peter Larr Development Associate Lindsey Mills Development Associate Maria Perez Development Coordinator Anna Sporrong Development Intern Matt Stewart HFF Capital Markets Advisor Beach City Capital is a Los Angeles based real estate investment firm focused on the acquisition and development of residential and commercial properties, founded by 3 USC graduates and joined by an incredible team of investors, advisors and Partners. The firm utilizes in-house associates who have a deep background in Acquisition, Finance, Entitlements and Development. Each project is adequately supervised by our staff to mitigate entitlement and development risk. Our company mission is to improve the quality of life and community one project at a time. We plan to help enhance and enrich the urban fabric of the city and in doing so, we design our projects to be affordable, well-integrated, and positively impactful.

31 SPONSORSHIP OVERVIEW BEACH CITY CAPITAL Beach City Capital is a private real estate investment firm headquartered in Manhattan Beach, California. Beach City Capital focuses on executing the development and repositioning of multifamily, luxury housing, and commercial assets, targeting value-add and opportunistic returns. Beach City Capital is a vertically integrated investment company with the ability to source, underwrite, acquire and develop all projects. Our investments capitalize on a broad platform, utilizing in-house real estate professionals whose expertise span all phases of the real estate life cycle. Our staff is made up of experienced professionals in Acquisition, Finance, Entitlement and Development, all seasoned to pursue a consistent investment process that combines local market knowledge and hands-on expertise, creating value for our shareholders. As Beach City Capital reviews deals in coastal locations throughout Southern California, we strive to look for underutilized properties that lack their highest and best use. We focus on assets that are underperforming, mispriced, and mismanaged to add value and improve efficiencies. We use structured finance, an experienced team and government relations to find the true land residual throughout our acquisition. The firm is able to quickly find these opportunities by consistently analyzing key markets and being willing to compete against others using good sportsmanship. While Beach City Capital has extensive experience, what makes us successful is acknowledging that the real estate itself and best in-class service to our investors are the key factors in our Investment Platform s growth. Beach City Capital has a long-standing presence in key markets throughout the United States with a decade of hands-on experience, intimate local market knowledge, and an extensive network of relationships with institutional and local banks, private equity firms, and family offices. This depth of experience and relationships with capital providers gives Beach City Capital a competitive advantage in identifying and closing attractive investments both on and off market. Our reputation has afforded us the opportunity to work with the best leaders in the industry, receiving attractive interest rates and optimal service with certainty. Once acquired and financed, we thoroughly manage the Development Process from Entitlements, Permit Management, Preconstruction and through Construction using a strategic bidding process with the most experienced General Contractors and subcontractors in the industry. We minimize construction risk and manage all jobs to be on time and within budget. We leverage industry knowledge, experience and technology to monitor, report on and manage the delivery of this project from construction to disposition. Our customer service entails monthly reports and thorough communication to our investors. Each project is crafted with pristine excellence and perfection with hopes to create spaces that inspire and modernize everyday life. Our company mission is to improve the quality of life and community one project at a time. We plan to help enhance and enrich the urban fabric of the city and in doing so, we design our projects to be affordable, well-integrated, and positively impactful MITCHELL AVE

32 th Street Hermosa Beach, CA Additional Investment Opportunities: MAR VISTA 37 Condo Unit Development Location: Mitchell Ave, Los Angeles, CA Deal Size: $26.5M Debt: $18.4M Equity: $8M JV Land Equity CATALINA 30 Condo Unit Development Location: Catalina Ave., Redondo Beach, CA Deal Size: $52.8M Debt: $6.6M Equity: $16.2M CONTACT INFORMATION Beach City Capital 1240 Rosecrans Ave, Suite 120 (424)