Apr 7, 2015 11:10 EST

Windmill Investments, LLC – Timber Oaks Apartments: 180 Unit Class A multifamily investment opportunity in the rapidly growing Dallas Metro area

iCrowdNewswire - Apr 7, 2015

Timber Oaks Apartments

180 Unit Class A multifamily investment opportunity in the rapidly growing Dallas Metro area.

  • 22.7% Targeted AVG Annualized Return
  • 17.8% targeted IRR
  • 7.1% targeted avg. annual cash on cash returns
  • $18.4 million purchase price ($102K/unit)
  • 98% occupied with stable performance history
  • 7.3% cap rate on trailing income
  • 2010 construction: newest property in the submarket
  • Attractive mix of 1, 2 and 3 bedroom units
SPONSOR

Windmill Investments, LLC

Windmill Investments, LLC is a private real estate investment firm. With over 100 years of collective experience, Windmill seeks out high cash flow multifamily apartments located in growth regions of the U.S. and applies operational expertise to consistently deliver double-digit returns. Over the past three decades, Windmill’s executive team has invested in over $100M of assets in 10 diverse U.S. markets.

The current market imbalance caused by the deleveraging of financial markets offers an once-in-a-lifetime opportunity to buy real estate at extremely low prices. The combination of low interest rates, decreasing home ownership, increased demand for rental apartments and the lack of new apartments built since 2008 provides significant rewards for savvy real estate investors.

Using proprietary market analysis, we identify high-growth regions and then invest considerable time and energy in the region to seek out undervalued or underperforming assets with strong upside earning potential. Although we believe all of our investments have significant appreciation potential, the basis of our investment philosophy is that the fundamental value of any property comes from operational cash flow.

Windmill’s objective is to incur minimal costs to commit capital to opportunities that provide stable returns. We place a premium on protecting and preserving our investors’ capital. We stand behind our commitment to investors by having a fee structure based primarily on performance.

SUMMARY

Sponsor: Windmill Investments, LLC
Targeted Annualized Return: 22.7% AVG
Targeted Hold Period: Five Years
Investment Type: Equity
Property Type: Class A Multifamily
Location: Dallas Metro
Min Investment: $35,000
Rentable Sq Ft: 173,920
Lot Size: 9.3 acres
Seller: Midlothian Timber Oaks, LP (Original Developer)
Purchase Price: $18,400,000
Price per Unit: $102,222
Price per Sq Ft: $106
Sponsor Co-Investment: $300,000
FNMA First Lien Assumption: $12,600,000
Private Equity: $4,000,000
Common Equity: $3,000,000
Crowdstreet Goal: $2,700,000
Law Firm: Trowbridge Taylor Sidoti LLP
Escrow: Stewart Title

Investment Overview

Transaction Summary

Purchase Price $18,400,000
Acquisition/Closing Costs $468,000
Loan Closing Costs $206,000
Acquisition Fee $184,000
Legal Expense $50,000
Working Capital $42,000
Capital Expenditure Reserve $250,000
Total Closing Costs $19,600,000
Private Preferred Equity $4,000,000
Sponsor Equity $300,000
CrowdStreet Equity $2,700,000
Fannie Mae Loan Assumption $12,600,000
Total Sources at Closing $19,600,000
Fannie Mae Loan Amount $12,600,000
Interest Rate (fixed) 3.89%
Maturity Date 2022
Loan to Cost 64.3%

Summary of Terms

Equity Investment Amount $3,000,000
EQUITY CONTRIBUTION
CrowdStreet Investors 90%
Windmill 10%
PREFERRED RETURN
CrowdStreet / Windmill 8%
SPLIT AFTER PREFERRED RETURN TO A 17% IRR
CrowdStreet Investors 75%
Windmill 25%
SPLIT AFTER A 17% IRR
CrowdStreet Investors 50%
Windmill 50%
CrowdStreet Investor Targeted IRR 17.8%
CrowdStreet Investor Targeted Equity Multiple 2.14x

Investor Cash Flow Summary

Acquisition Year 1 Year 2 Year 3 Year 4 Year 5
JV Equity ($3,000,000)
Cash on Cash Return $161,090 $167,797 $238,819 $240,000 $259,337
Return of Capital $3,000,000
Targeted Profits at Sale $2,324,314
Total Investor Cash Flow ($3,000,000) $161,090 $167,797 $238,819 $240,000 $5,595,880
Investor IRR: 17.8%

Hypothetical $50,000 Investment

Acquisition Year 1 Year 2 Year 3 Year 4 Year 5
JV Equity ($50,000)
Cash on Cash Return $2,685 $2,797 $3,980 $4,000 $4,322
Annual Investor
Cash on Cash Return (7.1% avg.)*
5.4% 5.6% 7.9% 8.0% 8.6%
Return of Capital $50,000
Targeted Profits at Sale $38,942
Total Investor Cash Flow ($50,000) $2,685 $2,797 $3,980 $4,000 $93,265
Investor IRR: 17.8%

* Distributions to be issued quarterly subject to available distributable cash flow

As an Investor Member in Timber Oaks Partners, LLC you will own a percentage interest in the equity of Timber Oaks Apartments and team up with an experienced multifamily acquirer and operator. Windmill Investments, LLC (“Windmill”) has a strong track record of successfully delivering investor returns on multifamily properties located in Oregon, Texas and South Carolina. Windmill currently has over 1,300 units under management in its portfolio and will crest 1,500 units with the acquisition of Timber Oaks. Windmill recently disposed of two assets and delivered returns that vastly exceeded expectations.

Windmill is offering for the first time via the web, the ability for accredited investors to co-invest in Timber Oaks. Your funds will be invested alongside Windmill’s own cash investment of $300,000 and its existing network of accredited investors and its institutional capital partner.

Windmill is offering to CrowdStreet investor members an 8% cumulative internal rate of return (“IRR”) preferred return. Once 100% of CrowdStreet investor member capital is returned and the preferred return is paid, Windmill will share in excess profits up to a 17% cumulative IRR. Above a 17% IRR, Windmill will share in 50% of excess profits. If the investment performs as contemplated in the pro forma, CrowdStreet investors are targeted to receive annual cash on cash returns of 7.1% (which begins at 5.4% in year 1 and grows each year) and a cumulative IRR of 17.8%.

Beginning approximately 100 days after your investment is finalized, Windmill will commence a quarterly distribution, the amount of which will depend upon available distributable cash flow. The pro forma contemplates distributable cash flow beginning at a 5% yield in Year 1 of the holding period and growing to 8.6% by Year 5. Your investment capital, along with Windmill’s capital and that of its co-investors and a private equity partner, plus the assumption of a first mortgage, will be used to fund the acquisition of the property.

As part of the acquisition, Windmill is assuming a Fannie Mae first mortgage that matures in 2022. The estimated outstanding balance at the time of acquisition is approximately $12,600,000. The interest rate is fixed at 3.89% on a 30-year amortization schedule.

Windmill is acquiring Timber Oaks at 7.3% capitalization rate on trailing income (defined as the property’s net operating income for the previous 12 months divided by purchase price), which compares very favorably to current cap rates of 6.0% – 6.25% for similar assets in the submarket. Windmill believes this discrepancy is largely attributable to an inefficient marketing process. Windmill was approached by a direct relationship in an off-market format to acquire Timber Oaks after a previous potential buyer failed to perform. While the acquisition price remained fixed at $18,400,000, monthly operations continue to improve throughout the period the property was held off the market (e.g. the property has experienced over $10,000 of increased monthly income over the past 12 months). This off-market process suggests that Windmill may be acquiring the asset for $1,200,000 to $2,000,000 below its current full market value.

The targeted investment holding period is five years at which time Windmill Investments expects to sell the property. The exit strategy for Timber Oaks includes selling Timber Oaks as a stand-alone asset or possibly bundling it with other Windmill assets and selling it as part of a portfolio to a large institution. A portfolio sale will only be contemplated if it is deemed accretive to the business plan.

Property Description

Address 721 Eastridge Drive, Midlothian TX 76065
Units 180
Number of Buildings 11 total; ten apartment buildings and one leasing office / community building
Floors Three (apartment buildings) One (leasing building)
Gross Building Area (SF) 190,920
Net Rentable (SF) 173,290
Construction vintage 2010
Parking Stall Count /
Ratio (per unit)
300 / 1.67
Heating System Forced air electric fan coil system
Cooling System Split system electric condensers at grade
Water Heating Individual electric units
Roof System Pitched roofs with asphalt composition shingles
Elevators None
Fire Suppression Wet-pipe sprinkler system, 100% coverage

Unit Mix

Type Qty Area* (SF) Market Rent Rent per sq ft. Monthly Income
1 Bed / 1 Bath 20 740 $959 $1.30 $19,180
1 Bed / 1 Bath 40 745 $785 $1.05 $31,400
2 Bed / 1 Bath 10 1009 $970 $0.96 $9,700
2 Bed / 2 Bath 40 995 $950 $0.95 $38,000
2 Bed / 2 Bath 10 1009 $980 $0.97 $9,800
2 Bed / 2 Bath 20 1122 $1,060 $0.94 $21,200
2 Bed / 2 Bath 10 1122 $1,249 $1.11 $12,490
2 Bed / 2 Bath 20 1130 $1,065 $0.94 $21,300
3 Bed / 2 Bath 10 1245 $1,445 $1.16 $14,450
Total 180 173,290 $986 $1.02 $177,520

The Sponsor – Leadership Team

Daniel Carter, Founder and CEO

Daniel has been a Real Estate Investor and an entrepreneur since 1983. He owns and manages nearly 2000 rental units, including residential and commercial properties. Daniel graduated from Oregon State University in 1983 with a degree in Computer Science. From 1983 to 1988, he worked for Microsoft at its headquarters in Redmond, WA in various engineering and management roles. While at Microsoft he helped establish and support Microsoft’s offices in the UK, Benelux and Scandinavia.

In 1989 Daniel co-founded International Software Products (iSP), a software translation and localization company and was CEO from 1989 to 2001. In 2004, he oversaw the acquisition of iSP by Transperfect, one of the leading worldwide translation companies. Today he focuses exclusively on real estate investments. Daniel has published numerous articles and has been a regular speaker at industry conferences and events.

Peter Collins

Peter received his bachelor’s degree in economics from Pitzer College in 1980 and graduated with an MBA in Finance from the University of Washington in 1985. He has held executive roles involving finance and control, including Financial Director of KLM Helicopters, Flight Operations and Ground Services. After KLM, he worked in a number of executive functions, which involved M&A funding. Simultaneously, Peter has also been a real estate investor since 1983, overseeing family assets in British Columbia.

In 1993 Peter took on a totally new challenge as Financial Director of KLM Helicopters and later became Financial Director of the KLM Flight Operations and Ground Services Divisions. In 2000, to prepare the company for acquisition, Peter became CFO of Cistron Telecom, the first ADSL provider in The Netherlands. The company was sold to KPN in 2001. In 2002 Peter became CFO of Thomas Regout, a specialized steel fabrication company and one of the oldest companies in The Netherlands. In 2006 Peter acquired a company specializing in gift items and sold it in 2010. Peter’s contribution to Windmill Investments is his experience in funding, reporting and governance.

Jasmyne Zebdeh, Asset Manager

Jasmyne has over 14 years of property management experience in both residential income and commercial real estate. Her areas of expertise include portfolio/asset management, financial management and budgeting, property renovations and repositioning, supervision of both non and unionized staff, and administration and compliance of Tax Credit, HUD and RD programs. She has mainly focused on distressed properties by bringing them out of debt and towards profitability. Jasmyne studied Business Administration at the Jordan University and taught Business Administration and English at the Jordanian Canadian College.

Rob Cook, Financial Manager

Rob is a graduate of the University of California, Santa Barbara and received an MBA in Finance from Santa Clara University. He spent 10 years managing HUD, tax credit and commercially financed properties, and has included tasks such as hands-on maintenance, supervision of property management staff, asset management and acquisition of financing. He has experience working for companies with revenues ranging from $40M – $100M. Rob is a CPA and has spearheaded several successful corporate and divisional turn-around efforts by identifying, measuring and continuously refining critical success factors and operational performance metrics, as well as streamlining processes and procedures.

Shan Khan, Investment Manager

Shah graduated cum laude in Business Administration and Statistics from the University of Missouri-Columbia in 2007, and earned a master’s degree in Corporate Finance at the Vrije Universiteit in Amsterdam. During his master’s study he specialized in Alternative Investments and completed an internship in alternative-asset funds, including real estate at APG Asset Management, the third largest pension fund in the world.

Testimonials

I’ve had the pleasure of working with Dan Carter several times over the past few years. He has a great reputation in the investment community and always keeps to his word. While we have never closed a deal together, we have pursued several over the years and I’d welcome the opportunity to work with him again in the future.

The Midlothian market has seen tremendous growth over the last decade. Since 2000, the population has increased by 141% and total households have increased 130%. During this rapid growth period, a lack of new construction has allowed landlords to steadily increase rents year over year, while maintaining a submarket average occupancy in the 95% range. Median household income is comparable to the rest of the D/FW metroplex. Limited new supply will allow newer construction complexes like Timber Oaks to continue to raise rents and maintain strong occupancy for the foreseeable future.

-Mason Green, Senior Associate, Marcus & Millichap, Fort Worth, TX

 

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