SMARTCAP Opportunity Zone Fund 3, LLC


SMARTCAP Opportunity Zone Fund 3, LLC

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    Property Type: Distribution Warehouse
    Total Equity Raise: $9,550,000
    10-Yr Targeted IRR: 14%-16%
    10-Yr Targeted Equity Multiple: 2.40x - 2.60x
    10-Yr Targeted Average Cash Yield: 8% - 9% once stabilized
    Minimum Investment: $25,000
    Investment Profile: Development
    Targeted Distribution Commencement: Following Stabilization (expected in year 3)
    Distribution Period: Quarterly




    Offering Summary


    SMARTCAP Opportunity Zone Fund 3, LLC will be the developer and owner of 308,000 SF of Class A distribution warehouse in the North Seattle Opportunity Zone located in Marysville, WA. The investment will be the fourth development, and SMARTCAP’s third designated Opportunity Zone investment, in the emerging Cascade Industrial Center of North Seattle.

    This is an Opportunity Zone investment and only qualified capital gains can be invested to receive the additional tax advantages associated with the 2018 Opportunity Zone Tax Incentive. Projected returns are before additional tax advantages.

    SMARTCAP, Inc is acquiring two neighboring sites totaling 23.09-acres in Marysville, WA, the Pacific Northwest’s Premier Industrial Market. SMARTCAP has entered a Joint Venture Agreement with a local high net-worth Family Trust, which is contributing $10mm of the estimated $19,550,000 total equity for the development. The remainder will come from SMARTCAP Opportunity Zone Fund 3, LLC.

    • The total all-in development and leasing costs are projected to be $128 per SF including land equating to a build to CAP of nearly 7%. The stabilized value of the building in today's market would fetch a 5% CAP rate and sell for a projected $192/SF, representing instant equity at stabilization of nearly $19,000,000.
    • Upon stabilization, the project will be refinanced utilizing SMARTCAP's preferred lending relationships, allowing for all refinance proceeds to be distributed back to investors. This allows for a return of a significant portion of investors' equity, all while ensuring the entire original investment maintains qualified Opportunity Zone status.
    • The ongoing Cash on Cash Return after refinance will target over 8% annually on the remaining portion of investors' capital.

    Investment Overview


    Investment Highlights


    • The newly constructed buildings will be the first completed distribution development in Marysville for tenants wanting to add warehouse and logistics capabilities servicing the fast growing Snohomish County. This provides a significant 'First to Market' advantage for leasing.
    • The Cascade Industrial Center has seen 5.85% average yearly rent growth and is experiencing a 3 year average vacancy rate of 3.8%. This high demand market is expecting 679,000 SF of new development to deliver in the next 24 months, with 65% of that space pre-leased and several known 100,000 SF tenant requirements currently circling in the market.
    • SMARTCAP is utilizing conservative projections in their underwriting. SMARTCAP is assuming starting rental rates of $.75 + NNN in the completed buildings, while the average market rates today are $.79 + NNN. The last lease signed by SMARTCAP in the market was $.85 + NNN. In addition, SMARTCAP is modeling a sale value per SF of $230 in 10 years, which equates to a 2% annual growth building value!
    • This strategic location services North King County, including North Seattle and Bothell, as well as Snohomish County, where the population is expected to grow by nearly 17% in the next decade.
    • The building site is less than five minutes from the newly planned I5 interchange, making it highly desirable for distribution. Neighbors include UPS, which is under construction on their regional distribution warehouse.
    • This is SMARTCAP's third Opportunity Zone fund, and fourth industrial development in the same area with completed, and in progress, industrial development of over 640,000 SF.

    Business Plan


    • SMARTCAP is master planning the two neighboring sites to accommodate up to 236k SF Logistics Center and a smaller 72k SF light distribution building.
    • The two buildings will help offset each other’s risk as they will target different tenant requirements due to their overall size and ability to break down into smaller tenant suites as needed.
    • A speculative development for the entire project is the desired course of action. The development site is one of the best located sites in Marysville’s “path of progress”, supported by direct access to the future On / Off ramp to Interstate 5.
    • Marysville is development-friendly and encouraging development along 152nd St corridor. The off-ramp will help accommodate the increased flow in truck traffic and provide better access for future tenants. UPS is currently under construction on their new 100K SF facility just north of 152nd St., set to be delivered in the next 12 months. The City of Marysville improving site access with a new freeway ramp & UPS already developing along the 152nd St. corridor are evidence of this being an up and coming industrial area and support the investment.
    • Once both properties are completed & stabilized, SMARTCAP will look to refinance the assets up to an estimated 60%-65% Loan to Value, returning proceeds pro-rata back to investors. The project will then be held for the remainder of the investment period (est. 10 years) as a stabilized cash-flowing investment.

    The Property


    Financial Summary


    • Table shows a projected return based on SMARTCAP’s assumptions demonstrating a $100,000 investment.
    • Refinance is assumed to happen in year 3, when the buildings are stabilized. Subject to change based on market conditions.
    • Cashflow percentage is based on original $100,000 investment. Other cash flow projection in this investment package are calculated on un-returned capital.

    NOTE REGARDING PROJECTED FINANCIAL INFORMATION: THE FINANCIAL INFORMATION SET FORTH IN THIS DOCUMENT INCLUDES UNVERIFIED THIRD PARTY VALUATIONS AND FORWARD LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE PROJECTIONS OF EXPECTED VALUE AT DISPOSITION IN THE CASE OF PROPERTIES THAT HAVE NOT YET SOLD, TOTAL RETURN IF SOLD TODAY, AND SIMILAR PROJECTIONS INCLUDED IN THE PROJECTED FINANCIAL INFORMATION ABOVE AND BELOW IS BASED UPON ESTIMATES MADE BY SMARTCAP. SMARTCAP HAS COMPILED AND PROVIDED THE PROJECTED FINANCIAL INFORMATION BASED ON A METHODOLOGY OF ITS CHOOSING, WHICH IS NEITHER AUDITED NOR REVIEWED BY AN INDEPENDENT ACCOUNTING FIRM. THERE MAY BE OTHER VALUATION METHODOLOGIES THAT WOULD PRODUCE DIFFERENT RESULTS. THE PROJECTIONS OF VALUE, RETURN AND SIMILAR PROJECTIONS INCLUDED IN THE PROJECTED FINANCIAL INFORMATION HEREIN ARE BASED UPON ESTIMATES MADE BY SMARTCAP AND NOT UPON ANY ACTUAL OPERATING RESULTS OF SMARTCAP OR THE PROPERTIES. THERE IS NO ASSURANCE OR GUARANTEE THAT THE ACTUAL OPERATIONS OF SMARTCAP OR THE VALUATION OF THE PROPERTIES WILL EQUAL ANY OF THE PROJECTIONS. YOU SHOULD NOT RELY ON THE PROJECTED FINANCIAL INFORMATION CONTAINED IN THIS SUMMARY IN EVALUATING SMARTCAP’S FINANCIAL CONDITION AND PERFORMANCE.

    3% of Construction Cost Development Fee

    1.5% annual asset management fee charged on equity raised

    The above fee table is a summary, and there may be additional fees associated with this offering. Please refer to the Company’s Operating Agreement and Private Placement Memorandum for further details.

    8% IRR paid to investor.

    70%/30% split thereafter with no upside CAP for investors.

    Comparables


    Lease Comparable Map

    Lease Comparable

    Sale Comparable Map

    Sale Comparable

    SMARTCAP Management Team and Vision