renaissance project

Renaissance Carson21800 S. Avalon Blvd, Carson CA 90745

Renaissance Carson

Renaissance Carson Chris Chen, Matt Decoteau, Bob Seeds,

Mandeep Singh, Mitch Surowitz, Daniel Yang


Renaissance Carson

OBJECTIVE: Secure Financing for Renaissance City Center

• Class A, Mixed-Use Apartment & Retail Property in Carson, CA (Greater Los Angeles Area Suburban)

• Developed by Thomas Saffran & Associates• Construction complete in 2 months.• Stabilization: 6 to 12 Months• 150 Residential Units & 14,000 SF Retail

FINANCING

• Permanent Loan• 10 Year Term

The Deal


Renaissance CarsonCompany Overview Developer – Thomas Safran & Associates Specializes in aesthetically pleasing mixed-use, multi-family and

senior housing projects Developed numerous properties in the greater LA area including

Orange County, Riverside and Catalina Island. Won multiple developer awards


Renaissance CarsonBorrower Credit & Financials

• Borrower has net worth of $24.3M

• $6.8M in Carried Interest Earnings (GP)

• $12.3M of Equity in Real Estate Holdings


Renaissance Carson

Current Outlook• Greater LA area is attractive for investors

Low cap rates for Class A stabilized, suburban assets – 4.0% to 4.5%

• Majority of new construction in 25% of Area DTLA, MDR/Venice, Wilshire/Westlake, & LAX/Westchester Limited new construction in Carson new build command higher

rate.

Economic Drivers

• Improvements in Employment (BP, Lakeshore Learning Materials)

• Adjoining submarkets: Torrance, Redondo Beach, Hermosa (Toyota, Honda, Torrance Memorial Medical Center, Providence Life)

Market Overview


Renaissance Carson

Comparables• Geographical Proximity, Amenity Package, Interior

Furnishings, and Square Footage• “Large Box” Properties, Sublease Condos, Single-Family

Homes, and Townhouses• Monthly Rent per SF: $1.21 to $3.25.

Property Name Address Distance (miles) Bed/Bath Rental SF Lease Term (Months) Monthly Rent Monthly Rent per SFCarson, CA Singly Family Home E 224th St 0.8 6 bd/2 bth 2149 12 $3,000.00 $1.40 Townhouse Unit 49 21901 Moneta Ave 1.2 3 bd/ 2 bth 1482 12 $2,500.00 $1.69 Apartment Unit # 36D 20526 Leapwood Ave 1.4 2 bd/ 1 bth 1150 12 $1,715.00 $1.49 Apartment Unit # 36C 20527 Leapwood Ave 1.4 2 bd/ 1 bth 1150 12 $1,815.00 $1.58 El Cordova 950 E. Del Amo 1.7 1 bd/ 1 bth 850 12 $1365 to $2760 $1.60 to $3.25 El Cordova 950 E. Del Amo 1.7 2bd / 1 bth 1100 12 $1625 to $2885 $1.48 to $2.62 Townhouse Unit 49 21901 Moneta Ave 1.2 3 bd/ 2 bth 1482 12 $2,500.00 $1.69 Dominguez Hills Village 17822 Woodbine Ct 3.3 3 bd/2.5 bth 1656 12 $2,600.00 $1.57 Dominguez Hills Village 17528 Nutwood Dr 3.3 3 bd/ 3bth + Loft 2436 12 $2,950.00 $1.21 Singly Family Home 17859 Alderwood Ct 3.4 3 bd/ 3 bth 1656 12 $2,650.00 $1.60 Townhouse 1262 Date Palm Dr 3.6 4 bd/ 3bth 1815 12 $2,800.00 $1.54 Torrance, CA Emerald Victoria 3553 Emerald St. 5.6 1bd / 1bth 720 12 $1,475.00 $2.05(Class A) Emerald Victoria 3553 Emerald St. 5.6 2bd / 2bth 1115 12 $1,850.00 $1.66 Emerald Victoria 3553 Emerald St. 5.6 3bd/ 3bth 1325 12 $2,395.00 $1.81

Market Rental Rates


Renaissance CarsonIndustry Analysis -Residential (Carson)• Carson has a relatively low vacancy rate – 2.7%• Effective average rent is $1,106 per month with a year-

on-year change of 2.6%• Lower-midrange rental market

Only 24.3% of housing units are renter-occupiedMedian household income is $71,653 (compared with

$61,400 statewide)35.8% of housing units were built from 1960-1969

• LocationAdjacent to a strip mall with newly renovated Ralphs

• Retirement community13.8% are 65 and older, compared to 11.4% statewide


Renaissance CarsonIndustry Analysis – Retail Landscape• Neighbors

Carson Town Square

• South Bay Pavilion Mall (1 mi away) Target Sears JcPenney IKEA 24 Hour Fitness


Renaissance CarsonReal Estate Overview• Mixed use facility located in Carson, CA

• Phase 1 – 86-unit senior affordable housing community

• Phase 2 – 150-unit market rate residential apartments, 14,000 sq. ft. commercial retail space


Renaissance CarsonReal EstateNeighborhood/Location• Over 44 nearby

entertainment and service centers

• Good freeway and public transit access


Renaissance CarsonReal EstateAmenities• Apartment Units:

Gourmet Kitchens Granite Countertops European-style Cabinetry Stainless Steel Appliances In-home Washer/Dryer Private Patios/Balconies

• Community: Resort-style Pool/Spa Outdoor Fireside Lounge Fitness Studio with Instructor-

led Classes Billiards Lounge Game Room Business Center


Renaissance CarsonCommunity Amenities


Renaissance CarsonBusiness Plan – Phase 1• Completed April 2011

• Construction & leasing of 86 senior affordable housing units

• 14,000 square feet of commercial space

• Completed, stabilized, and operating

• Not part of the collateral for this loan


Renaissance CarsonBusiness Plan– Phase 2• Expected completion July 2014

• Expected to take 6-12 additional months to lease up

• 150 market rate residential apartment units

• Additional 14,000 square feet of commercial space

• Two-level parking structure with 462 spaces


Renaissance CarsonBusiness Plan – Phase 2 Apartments• Modern, luxury apartments

• Average rent expected to be $2.00 per sq ft

• Targeted to middle class professionals and families

• Marketed as the “Official Residence of the LA Galaxy”


Renaissance CarsonApartments


Renaissance CarsonBusiness Plan – Phase 2 Commercial• “The Shops at the City

Center”

• 5 retail stores

• Two floor plan options

• Targeted toward similar clientele as the apartment tenants


Renaissance CarsonCommercial Space – Option 1


Renaissance CarsonCommercial Space – Option 2


Renaissance CarsonPro-forma Analysis

Residential Apartment• 150 units on three levels, NNN lease

Retail Space• 14,000 square feet on the ground floor


Renaissance Carson

• Task description• Task description• Task description

• Task description• Task description• Task description

Step 3Title

Cash flow analysis

• Determine the free cash flow of both residential apartments and retail space

Valuation Process• Calculate the value of the whole

mixed-use project based on proper methodology

Loan Structure• Determine the appropriate loan

structure based off the valuation and the net worth of the borrower


Renaissance CarsonKey AssumptionsVacancy

• For the first year, vacancy rate of the residential apartment and retail space is 50% and 25%, respectively

• In the following years, vacancy rate of residential apartment and retail space is 5%

Expense• All operating expenses are based on regional averages on comparable

buildings as a percentage of Gross Potential Rent


Renaissance CarsonKey Assumptions(Cont’d)Economic Factors

• Rental Growth rate is 2% based on REIS research

TI/LC Plans• No TI/LC plans since it’s a brand-new building• However, paint and carpets need to be refreshed when the tenant rolls

out

Disposal Plans• For calculation purpose, we assume the building will be sold at Year

10, and the valuation would be based on NOI of that year


Renaissance CarsonKey Numbers

Levered

IRR 9.91%

NPV $1,714,105

Average cash on cash 25.5%


Renaissance CarsonValuation Process• We use the formula: Value=NOI/Cap Rate to determine the

value of the property

• We use the second-year NOI as our basis since first-year NOI doesn’t reach stability

• Based on CBRE research, the cap rate for residential apartment in LA is 5% in average, and for retail is 6.5% in average; Mixed cap rate for this property is 5.4%

• We determine the total value of this property is $36,434,430


Renaissance CarsonSponsor ExperienceGeographic

• 26% of sponsor's properties in LA area (% of total assets)

Property Type• Almost all of sponsor's holdings are multi-family

Property Size• Renaissance is 4x larger (in units) than next largest property owned

Business Plan• Renaissance is first ground-up construction for sponsor


Renaissance CarsonSponsor Financial Capacity$24M Net Worth

Leverage (Assets/Equity) of 2.0x

Have Equity in ALL Properties (Value > Debt)

$12.3M equity in RE - $6.8M in RE carry interest

+

Illiquid: Almost all assets are RE

Renaissance is largest investment in fund's history

Risky raw land investments on sponsor's books

Co-owners in 20 of 21 props- Limited Flexibility

(-)


Renaissance CarsonLoan StructureSelection of Loan Structure

• Based on the past experiences and net worth of the borrow• We decide to use LTV ratio as a constraint to loan amount

Loan Terms

• 75% LTV ratio, 1.25 DSCR ratio• 4% interest rate• 30 yrs amortization


Renaissance CarsonConclusion• Opportunity to finance a multifamily development

in an attractive market in LA

• Experienced Los Angeles based operator

• Net worth and liquidity justifies loan value


Renaissance CarsonAppendixGrowth Rate 　　　　 2% 2% 2% 2% 2% 2% 2% 2% 2%Apartment Vacancy 　　　 50% 5% 5% 5% 5% 5% 5% 5% 5% 5%Retail Vacancy 　　　 25% 5% 5% 5% 5% 5% 5% 5% 5% 5%

Year 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022Income 　　 0 1 2 3 4 5 6 7 8 9 10

Multifamily

Gross Potential Rent 3,506,388 3,576,516 3,648,046 3,721,007 3,795,427 3,871,336 3,948,762 4,027,738 4,108,292 4,190,458Rent Revenue Collected 3,436,260 3,504,985 3,575,085 3,646,587 3,719,519 3,793,909 3,869,787 3,947,183 4,026,127 4,106,649

Losses to Vacancy -1,753,194 -178,826 -182,402 -186,050 -189,771 -193,567 -197,438 -201,387 -205,415 -209,523Losses to Concessions -$27,934.00 -$27,934.00 -$27,934.00

Other Revenue 37,925 37,925 37,925 37,925 37,925 37,925 37,925 37,925 37,925 37,925

Effective Gross Rental Income 1,693,057 3,336,151 3,402,674 3,498,462 3,567,672 3,638,267 3,710,274 3,783,721 3,858,637 3,935,051

Retail

Gross Potential Leases 967,046 986,387 1,006,115 1,026,237 1,046,762 1,067,697 1,089,051 1,110,832 1,133,049 1,155,710Lease Revenue Collected 947,705 966,660 985,993 1,005,713 1,025,827 1,046,343 1,067,270 1,088,616 1,110,388 1,132,596

Losses to Vacancy -241,762 -49,319 -50,306 -51,312 -52,338 -53,385 -54,453 -55,542 -56,652 -57,785Losses to Concessions

Other Revenue

Effective Gross Lease Income 705,944 917,340 935,687 954,401 973,489 992,959 1,012,818 1,033,074 1,053,736 1,074,810

Gross Potential Income (Multi+Retail) 4,473,434 4,562,903 4,654,161 4,747,244 4,842,189 4,939,033 5,037,814 5,138,570 5,241,341 5,346,168

Effective Gross Income (Multi+Retail) 2,399,001 4,253,491 4,338,361 4,452,862 4,541,161 4,631,226 4,723,092 4,816,795 4,912,372 5,009,861

Expenses $/SF % of GPR 　　　　　　　　　　　Salaries and Personel 1.42 12.90% 577,073 588,614 600,387 612,395 624,642 637,135 649,878 662,876 676,133 689,656Insurance 0.29 3.00% 134,203 136,887 139,625 142,417 145,266 148,171 151,134 154,157 157,240 160,385Taxes 0.71 6.50% 290,773 296,589 302,520 308,571 314,742 321,037 327,458 334,007 340,687 347,501Utilities 0.7 6.40% 286,300 292,026 297,866 303,824 309,900 316,098 322,420 328,868 335,446 342,155Management Fees 0.51 5.00% 223,672 228,145 232,708 237,362 242,109 246,952 251,891 256,928 262,067 267,308Administrative 0.4 4.00% 178,937 182,516 186,166 189,890 193,688 197,561 201,513 205,543 209,654 213,847Marketing 0.08 4.00% 178,937 182,516 186,166 189,890 193,688 197,561 201,513 205,543 209,654 213,847Contract Services 0.45 4.10% 183,411 187,079 190,821 194,637 198,530 202,500 206,550 210,681 214,895 219,193Repair and Maintenance 0.48 4.40%　 196,831 200,768 204,783 208,879 213,056 217,317 221,664 226,097 230,619 235,231Total Expenses 5.04 50.30% 2,250,138 2,295,140 2,341,043 2,387,864 2,435,621 2,484,334 2,534,020 2,584,701 2,636,395 2,689,123

Net Operating Income 　　　 148,864 1,958,351 1,997,318 2,064,998 2,105,540 2,146,892 2,189,071 2,232,094 2,275,978 2,320,739

Senior Loan Analysis 　　　　　　　　　　　　　Interest Expense 1,085,359 1,064,835 1,043,489 1,021,290 998,203 974,193 949,222 923,252 896,244 868,155Principal Payments 　　　 513,106 533,630 554,976 577,175 600,262 624,272 649,243 675,213 702,221 730,310Total Debt Service 1,598,465 1,598,465 1,598,465 1,598,465 1,598,465 1,598,465 1,598,465 1,598,465 1,598,465 1,598,465

CFADSTI / LC Expenditures 　　　 0 14,400 14,400 14,400 14,400 14,400 14,400 14,400 14,400 14,400Net Cash Flow -1,449,601 345,486 384,453 452,133 492,675 534,027 576,206 619,229 663,113 707,874

Acquisition / Disposition AnalysisAcquisition Equity Funding 　　 -9,300,457　　　　　　　　　　Closing Costs -364,344Disposition Profit 　　　　　　　　　　　　 21,221,685

Total Cash Flow 　　 -9,664,802 -1,349,601 345,486 384,453 452,133 492,675 534,027 576,206 619,229 663,113 21,929,559Cash on Cash Return -13.96% 3.57% 3.98% 4.68% 5.10% 5.53% 5.96% 6.41% 6.86% 226.90%

Discount R 8.0%Levered Unlevered

IRR 9.91% 5.9%

NPV $1,714,105 $ -5,123,317.03 Average Cash on Cash 25.50% 16.4%

Unlevered Cash Flow Analysis

Acquisition 　　 $ -37,201,829.11 　　　　　　　　　　NOI $ 148,863.61 $ 1,943,950.62 $ 1,982,917.81 $ 2,050,598.35 $ 2,091,139.81 $ 2,132,492.11 $ 2,174,671.45 $ 2,217,694.38 $ 2,261,577.77 $ 2,306,338.82

Disposition 　　　　　　　　　　　　 $ 41,773,298.84

Unlevered Cash Flow $ -37,201,829.11 $ 148,863.61 $ 1,943,950.62 $ 1,982,917.81 $ 2,050,598.35 $ 2,091,139.81 $ 2,132,492.11 $ 2,174,671.45 $ 2,217,694.38 $ 2,261,577.77 $ 44,079,637.67 Cash on Cash Return 0.40% 5.23% 5.33% 5.51% 5.62% 5.73% 5.85% 5.96% 6.08% 118.49%


Renaissance Carson

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