Torbert Real Estate Group is offering $1,350,000 in shares to investors for the redevelopment of Palm Square, a 12-tenant commercial property located in North Miami. The property will be purchased for $3.5 million with financing from a senior loan and construction loan. Extensive renovations are planned to attract new tenants and increase rental income over four years, at which point the property will be sold. Investors are projected to receive a 10.39% annualized return upon sale of the property in year four. The memorandum describes the offering, property details, financial projections, and risks of the investment.
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Accounting Class Project - Creating a Private Placement Memorandum
1. p a l m s q u a r e
torbert
real
estate
group
303 north east 167th street miami
private
place
ment
me
morandu
m
2. 3 0 3 n o r t h e a s t 1 6 7 t h s t r e e t m
in which m in
executive summary 4
photographs 5
description of offering 6
sources and uses of cash 7
risks 8
capital structure 9
ratios and returns 10
two
3. 3 0 3 n o r t h e a s t 1 6 7 t h s t r e e t m
in which m in
appendix a: cost and value add 11
appendix b: financial statements 12
appendix c: journal entries 15
appendix d: final sale 22
appendix e: balanced worksheet 23
three
4. 3 0 3 n o r t h e a s t 1 6 7 t h s t r e e t m
in which m in
nestled between the I-95 and the high traffic count of biscayne
boulevard, palm square offers the perfect shopping selection for
value shoppers. this 12-tenant, 16,200 square foot space offers a
significant re-positioning opportunity occupying just over 1 acre.
the exterior will receive new paint and a new roof to invite a
modern look. the property was constructed in 1992 and many of the
interior spaces are outdated. the original electrical, plumbing, and
drywall will be replaced to invite a new selection of tenants. the
current anchor tenant is golden one oriental spa occupying 2400
square feet. other tenants include live house clothing, north dade
auto tag agency, ferrera embroidery and printing, and the island
grocer.
the renovations will be marketed to attract top-tier “mom and
pops” who will replace current occupants. the property is about 15.4
miles north of the glitz and glamour of south beach, so this
property appeals to the family-conscious consumer who enjoys
supporting small businesses in their Miami neighborhood.
torbert real estate group is a real estate development firm founded
in 2010 with offices in miami and los angeles. the company focuses
on commercial redevelopment in metro areas of the united states.
this project is offering $1,350,000 in shares to
investors who should expect annualized
yields of 10.39%.
four
executive
summary
5. 3 0 3 n o r t h e a s t 1 6 7 t h s t r e e t m
in which m in
6. d e s c r i p t i o n o f o f f e r i n g
palm square will be bought for $3.5 million of which $2,450,000 will be
financed from a Wells Fargo Senior Loan at 6%. The remaining amount of
$1,500,000 will be garnered from investors. torbert real estate group will
sponsor $150,000 in equity while offering $1,350,000 in preferred equity
shares. shares will be sold at $25,000 with a minimum investment of
$25,000. 30 investors are being targeted. Assuming the project sells on
the first day of the fourth year, investors should expect an annualized
return of 10.39%.
torbert real estate group will perform extensive value add options
totaling $571,600. The entire cost of value add construction will be
financed from a preferred construction loan from chase bank at 7%
interest.
six
7. s o u r c e s a n d u s e s
o f c a s h
s o u r c e s o f c a s h i n y e a r o n e w i l l c o m e f r o m a
$ 2 , 4 5 0 , 0 0 0 w e l l s f a r g o l o a n a n d a $ 5 7 1 , 6 0 0
c o n s t r u c t i o n l o a n f r o m c h a s e b a n k . t h e i n v e s t m e n t
i s e x p e c t e d t o b e s o l d i n y e a r f o u r f o r $ 4 , 9 5 0 , 0 0 0 .
s o u r c e s o f c a s h w i l l a l s o b e g e n e r a t e d f r o m
i n c r e a s i n g r e n t a l i n c o m e f o r f o u r y e a r s .
u s e s o f c a s h f o r y e a r s o n e t h r o u g h f o u r i n c l u d e
o p e r a t i n g e x p e n s e s .
seven
8. r i s k s
i n v e s t i n g i n a n y p r o j e c t c a r r i e s r i s k . p o t e n t i a l
i n v e s t o r s s h o u l d i n v e s t c a r e f u l l y b y s e e k i n g s o u n d
a d v i c e f r o m a f i n a n c i a l , r e a l e s t a t e , a n d / o r l e g a l
p r o f e s s i o n a l .
p a l m s q u a r e i s l o c a t e d i n a t r a n s i t i o n i n g
n e i g h b o r h o o d o f n o r t h m i a m i t h a t h a s h a d a s l i g h t
i n c r e a s e i n c r i m e p e r t h e n o r t h m i a m i p o l i c e
d e p a r t m e n t . a n i n c r e a s e i n c r i m e m a y s c a r e a w a y
s o m e c u s t o m e r s .
t h e a r e a a r o u n d p a l m s q u a r e i s s u r r o u n d e d b y
s i m i l a r 1 0 - 2 0 u n i t c o m m e r c i a l s p a c e s t h a t w e r e
b u i l t i n t h e 1 9 8 0 s a n d 1 9 9 0 s . t o r b e r t r e a l e s t a t e
g r o u p a s s u m e s p r o p e r t y v a l u e s a n d r e n t s s h o u l d
c o n t i n u e t o c l i m b o v e r t i m e . i n v e s t o r s s h o u l d t a k e
n o t e t h a t a l o s s o f c a p i t a l c o u l d h a p p e n i f
p r o p e r t y v a l u e s d o n o t i n c r e a s e o r i f r e n t a l
i n c r e a s e s d o n ' t o c c u r r e g u l a r l y .
a n o t h e r r i s k i s t h e s u r r o u n d i n g a r e a i s c r o w d e d
w i t h m a n y r e t a i l o p t i o n s t h a t p a l m s q u a r e m a y
h a v e d i f f i c u l t y c o m p e t i n g a g a i n s t . t h e f u t u r e
c o u l d s e e c o n s u m e r s p r e f e r r i n g n e w c o n s t r u c t i o n
r e t a i l p r o j e c t s t h a t a r e n e a r b y . t e n a n t s c o u l d a l s o
a b a n d o n r e d e v e l o p m e n t s p a c e s , s u c h a s p a l m
s q u a r e , i n s e a r c h f o r n e w e r b u i l d s .
eight
9. c a p i t a l s t r u c t u r e
i n y e a r s 1 - 3 , t h e i n v e s t m e n t t a k e s o n a
c o n s i d e r a b l e a m o u n t o f d e b t . t h e d e b t t o e q u i t y
r a t i o d e c r e a s e s i n t h e f o u r t h y e a r .
d e b t t o e q u i t y m o d e l
nine
10. r a t i o s & r e t u r n s
debt accounts for 64.5%
of financing needs.
equity accounts for 35.5 %.
ten
11. a p p e n d i x a :
c o s t a n d
v a l u e a d d
$3,500,000 sale price
$2,450,000 wells fargo mortgage loan at 6%
$1,500,000 from investors
$571,600 value add cost
chase bank loan at 7%
eleven
12. a p p e n d i x b :
b a l a n c e s h e e t
twelve
13. a p p e n d i x b :
i n c o m e
s t a t e m e n t
thirteen
