PROJECT PROPOSAL Wyndham Hill Townhomes Frederick, Colorado. Project Overview. Market Conditions and Comparable Projects. Sales and Marketing

Transcription

1 PROJECT PROPOSAL Wyndham Hill Townhomes Frederick, Colorado This project proposal is for the land development and construction of 63 Townhomes within the Wyndham Hill Master Planned Community located in Frederick, Colorado. The content of this proposal is broken into Four main sections; they are: Project Overview Market Conditions and Comparable Projects Sales and Marketing Project Financials and Investment Overview

2 Project Overview The proposed Townhomes will be within the Wyndham Hill Community in Frederick, Colorado which is a Master Planned Community with an eventual build out of 400 single family homes, 63 Townhomes, 128 Apartment units, a Medical Campus, Mixed Commercial and Retail, Community Parks, Walking Trails, and other common area improvements. The Community is ½ mile west of I25, North of Highway 52 with its main access point at County Road 7. To date there are over 200 single fami1y homes on the site that have been completed and sold by Richmond American Homes and Lennar Homes. Lennar has completed its portion of the development and Richmond has begun development of its next 80 lots. There are six floor plans available that range in size from 1,900 square feet to about 4,000 square feet with base prices from $328,950 to $398,950. In addition to the base price, there are lot premiums that range upwards of $20,000 and numerous upgrades and options that are available to the home buyers. The average sales price of the new homes with lot premiums, upgrades and options is in excess of $400,000. The Townhome site is located at the Northwest corner of County Road 7 and Billings Avenue. The site is approximately 6.1 Acres is size and the topography is relatively flat. It is bordered on the North, South, and West with single family homes and the East by County Road 7. All infrastructure and utilities to the site are complete including roads, water, sewer, gas, electric and cable. The site is currently on the market for $535,000 but preliminary negotiations reflect a future purchase price of $425,000. Closing will occur within 5 days of the equity capital being raised. The Civil Engineering and Landscape Architecture is complete and is ready for City submittal and approval. The Architectural designs and Structural engineering is in progress and will be completed within 30 to 45 days. Based on these conditions the site development can begin within 30 to 40 days of closing with the construction of Townhomes starting approximately 30 days after the site development begins. The Site lends itself well to a phased construction approach, which is exceptionally rare with multi-family projects. The development plan is to start horizontal (site) development on the East side of the project and complete infrastructure development Westerly to the West side of Travertine Court. This will provide 22 finished Townhome lots. The development of the balance of the site will be conditioned by the sale of product within the first and subsequent phases. The first phase of Townhome product will be the seven homes within blocks 20 and 21. Future construction phasing will also be sales driven. The cash flow analysis within the Project Financials and Investment Overview section of this analysis reflects three phases of site development (horizontal) and six phases of home construction (vertical). The first phase of home construction is seven homes with the remaining phases averaging just over eleven homes each. The Townhomes will be configured within duplex and triplex buildings, the homes will be two or three bedrooms with two full baths and a powder room on the main floor. Homes will range from 1,500 to 1,800 square feet with projected base pricing from $285,000 to $315,000. There will be a set selection of standard features and the ability to purchase an upgrade package that if selected add approximately $12,000 to the base price of the home. The exterior elevations of the Townhomes will be a blend of Craftsman and Prairie style with primarily 9 foot ceilings and vaulted areas as design permits.

3 Market Conditions & Comparable Projects. Market Conditions The metro housing market has been on a steady trajectory upward since January Beginning in 2012, there suddenly became strong signs that the housing market had recovered with the beginning of multiple offers on homes. Several factors have contributed to the increase in housing demand. The mortgage rates have been at historically low levels which allow far more people to qualify to purchase a home. In addition the low rates have facilitated a move up opportunity for young families. Presently rates on a 30 year fixed are under 4%. The population and employment statistics indicate strong growth for the area and an influx of new residents. In 2015, the net immigration to the state was over 100,000 new residents. At 3.2 percent, Colorado offers one of the lowest unemployment rates in the country right now and a variety of new companies are locating their offices in the metro area. The new companies offer well paying jobs fueling a 1.1 percent income growth rate. Demographic trends that impact the housing market include the delaying of marriage, the extended life expectancy and the millennial generation beginning to enter the home buying market. All three of these variables will necessitate the need for additional housing units. With the downturn of the housing market in 2008, builders quit building and many even went bankrupt. Building permits dropped significantly. For several years, foreclosures and short sales dominated the housing market. When the housing market turned around in early 2012, builders were far behind the demand for houses. Many builders have spent the last 3 years purchasing developable land and moving forward with the building permit process. Even with that activity the demand for new homes still exceeds the finished lot inventory by 30%. As prices appreciated inventory of homes for sale declined. In 2015 the Denver metro areas homes sales were 25% above their 25-year average while inventory for sale was down 66%. In a normal market with a 5-6 month supply of homes there would be 14,000 to 15,000 homes on the market. At the end of December 2015 there were less than 5000 homes available for sale. Although this project is actually located in Weld County, because it is on the west side of I-25 and so close to the county line, the Boulder County market will have a significant impact. Just as prices and lack of inventory in Boulder County drove people to Frederick and Firestone in the early 2000 s, that same thing will occur with this project. There simply is no inventory at this price point closer to the heart of Boulder County. In addition, it is extremely rare to find new attached dwelling units available. This project has the unique feature of having the infrastructure in place. Actual construction could begin within a few months of the closing on the property. Completed sales could start occurring by late 2016 or early This timeframe will allow the project to take advantage of current market conditions.

4 Comparable Projects. The table below outlines eight Townhome/Condo projects within 7 miles of the Wyndham Hill Townhome project. The combined data from those projects reflects average square footage of 1,598 per unit, 1.25 car garages, average price of $406,078, and a price per foot of $ It s notable and very favorable to the Wyndham Townhome project that while the average square footage per unit is almost exactly the same (within 2 square feet), the garages are a full two car garage and more importantly the average price and price per foot are substantially lower. Those factors will positively influence the sales absorption rate and allow for price increases thru the term of the project. The average sales per month of the listed projects is 3.5 units. Applying that rate to the Wyndham Townhomes reflects a sales period of 18 months. WYNDHAM HILL TOWNHOMES Market Comparable Analysis Project Name Location Avg. Sq. Footage Garage Avg. Price Price Per Foot Tramonto Longmont 1,615 2 Car $515,000 $ Prospect Longmont 2,228 2 Car $640,000 $ Erie Commons Erie 1,320 2 Car $450,000 $ Silver Meadows Longmont 1,773 2 Car $389,500 $ Sundance Town Homes Dacono 1,625 1 Car $300,625 $ Quail Ridge Longmont 1,285 1 Car $312,500 $ Fairview Longmont 1,196 None $248,000 $ Brownstones Longmont 1,746 None $393,000 $ Market Averages 1, $406,078 $ Wyndham Hill Frederick 1,600 2 Car $300,000 $ Variance to Market $106,078 -$66.54

5 Sales and Marketing The sales and marketing of the Townhomes will be coordinated by the Colorado Premier Group and Coldwell Banker Residential Brokerage. Guardian Title will handle the title work and closings. Cornerstone Home Mortgage will be the preferred lender of the project. The homes will be listed in both ReColorado which services the Denver Metro area and IRES which is the MLS of Northern Colorado. Prior to completion of the homes there will be renderings and floor plans used in the MLS to start marketing the homes. During the initial phase of construction, the sale staff will have an onsite sales office that is operated out of the construction trailer. The hours and days of operation to be determined once the project has been started and initial sales have begun. The office will be staffed by licensed real estate brokers. No formal models are planned as the current market conditions and comparable project operations don t warrant them. Additional marketing tasks that may be utilized include but are not limited the following: Branded virtual tour of the homes and the development Professionally produced 40 second spot on Coldwell Banker TV show Professionally produced 40 second posted on YouTube Channel Property brochures Posted to company and individual websites and social media outlets Mobile Brochures to provide instant access to information via a smart phone Site Specific website Signage on Highway 52 directing buyers to the location Cross marketing with the existing homebuilders at Wyndham Hill flyers sent to metro Denver and Northern Colorado real estate professionals Home staging (If model is required)

6 Project Financials and Investment Overview Proforma Expenses: Land Acquisition $ 425,000 Closing Costs 3,500 Civil, Structural & Architectural 45,000 Bonds 10,000 Raw Water Contribution and Taps 1,713,000 Building Permits 1,008,000 Site Development 1,116,000 Project Management 350,000 Insurance 100,000 Construction Costs 8,316,000 Total Expense $13,086,500 Revenue: Home Sales $18,900,000 Sales and Marketing 6% 1,134,000 Total Revenue $17,766,000 Projected Profit $4679,500 * * Revenue doesn t include anticipated lot premiums or design upgrades which are estimated at $6,000 per unit totaling $378,000. Construction Financing There are a number of available Lenders willing to do both the Horizontal and Vertical (site & product) lending for this project, if the buyer/builder owns the land without encumbrance. Given the aforementioned development approach the equity and loan conditions for the first construction phase will be: 1. Equity: Land acquisition & engineering $500, Horizontal Loan: Phase one of 22 lots $396, Vertical Loan: Phase one 7 townhomes $1,433,831 The lender will condition the Horizontal loan so that upon funding of the vertical loan the horizontal loan will be paid down for each unit started. Usually this equates to 125% of cost, which in this scenario would be $22, 500 per lot. That amount is reflected within the Vertical loan, so the maximum amount extended on phase one loans will not exceed $1,672,331. For overall development purposes we will obtain lending commitments in the amounts of $486,000 for the horizontal loan and $2,457,000 for the vertical loan, these amounts will never be reached as the horizontal loan reduction thru the vertical loan will always take place prior to its loan amount maximum ever being reached.

7 The vertical loan will be conditioned such that the maximum loan amount that will ever be extended on unsold homes is $1,433,831 which is equal to seven homes. The purpose of this type of rolling commitment is to allow the immediate construction of sold homes while still maintaining unsold inventory under construction for quick occupancy. It also eliminates the need to obtain additional loans to keep pace with sales, saving both time and additional loan and interest costs. Investment Opportunity The total equity required for this project is $500,000. These funds will be used per the source and use of funds chart below this section. The project equity position from the investment of those funds is 50%. As an example based on the above Proforma an equity investment of $100,000 would return the original investment of $100,000 plus $467,950 in projected profit. The structure of the investment/operational group will be in the form of a Colorado State registered LLC, the members will be the investor(s) and Megary Group LLC. The new LLC will retain the services of Megary Group Construction to provide oversight and management for the development and construction of the project. The fees paid to Megary Group Construction are reflected within the Proforma. Investor members of the LLC can be either individuals or any other entity that is allowed under Colorado statute. Megary Group LLC retains the right to provide equity funds to this project and to increase its equity percentage of the LLC in an amount equivalent to the funds it contributes. Disbursement of revenues will be made on a quarterly basis beginning at the end of the first quarter where revenue occurs. Disbursements will first be made to the equity investor(s) equal to the pro rata share of the investors original equity investment per Townhome closed, then disbursed to all members in line with their individual percentage of ownership. The overall timeline for this investment is projected to be approximately 24 months. Source & Use of Funds Source: Amount: Description: Amount: Equity Investment $500,000 Land Acquisition $425,000 Closing Costs $3,500 Civil, Structural & Architectural $45,000 Bonds $10,000 Total $483,500 Reserves $16,500 Horizontal Loan $1,116,000 Site Development $1,116,000 Vertical Loan $11,487,000 Raw Water Contribution $1,713,000 Building Permits $1,008,000 Construction Costs $8,316,000 Insurance $100,000 Project Management $350,000 Total $11,487,000 Source Total $13,103,000 Cost Total $13,086,500 Reserve $16,500 Total $13,103,000

8 Cash Flow Analysis WYNDHAM HILL TOWNHOMES Phase One Twenty Two Lots - Blocks 20 & 21-7 Homes Adjustment Balance Equity $500,000 $55,552 $444,448 Loans: Horizontal Loan $396,000 $157,500 $238,500 Vertical Loan $1,433,831 $1,433,831 Asset: Homes $2,100,000 Finished Lots $270,000 Equity Balance $444,448 Asset Total $2,814,448 Sales: Revenue $2,100,000 Sales Cost $126,000 Gross Revenue $1,974,000 Total Loans $1,672,331 Net Asset $1,142,117 Vertical Loan Payoff $1,433,831 Operating Capital $540,169 Equity Balance $444,448 Finished Lot Value $270,000 Asset Value $1,254,617 Horizontal Loan $238,600 Net Asset Value $1,016,017

9 WYNDHAM HILL TOWNHOMES Phase Two Blocks 16, 18,19-11 Homes Adjustment Balance Equity $444,448 $87,296 $357,152 Loans: Horizontal Loan $238,500 $238,500 $- Vertical Loan $2,244,163 $2,244,163 Asset: Homes $3,300,000 Finished Lots $72,000 Equity Balance $357,152 Operating Capital $540,169 Asset Total $4,269,321 Total Loans $2,244,163 Sales: Revenue $3,300,000 Sales Cost $198,000 Gross Revenue $3,102,000 Net Asset $2,025,158 Vertical Loan Payoff $2,244,163 Net Revenue $857,837 Equity Balance $357,152 Finished Lot Value $72,000 Operating Capital $540,169 Net Asset Value $1,827,158

10 WYNDHAM HILL TOWNHOMES Phase Three Twenty Seven Lots - Blocks 14,15,17-11 Homes Adjustment Balance Equity $357,152 $87,296 $269,856 Loans: Horizontal Loan $486,000 $157,500 $328,500 Vertical Loan $2,163,163 $2,163,163 Asset: Homes $3,300,000 Finished Lots $360,000 Equity Balance $269,856 Operating Capital $1,398,006 Asset Total $5,327,862 Total Loans $2,491,663 Sales: Revenue $3,300,000 Sales Cost $198,000 Gross Revenue $3,102,000 Net Asset $2,836,199 Vertical Loan Payoff $2,163,163 Total Net Revenue $938,837 Equity Balance $269,856 Finished Lot Value $360,000 Operating Capital $1,398,006 Asset Value $2,966,699 Horizontal Loan $328,500 Net Asset Value $2,638,199

11 WYNDHAM HILL TOWNHOMES Phase Four Blocks 9, 10, 11, Homes Adjustment Balance Equity $269,856 $95,232 $174,624 Loans: Horizontal Loan $328,500 $270,000 $58,500 Vertical Loan $2,457,996 $2,457,996 Asset: Homes $3,600,000 Finished Lots $144,000 Equity Balance $174,624 Operating Capital $2,336,843 Asset Total $6,255,467 Total Loans $2,516,496 Sales: Revenue $3,600,000 Sales Cost $216,000 Gross Revenue $3,384,000 Net Asset $3,738,971 Vertical Loan Payoff $2,457,996 Net Revenue $926,004 Equity Balance $174,624 Finished Lot Value $144,000 Operating Capital $2,336,843 Asset Value $3,581,471 Horizontal Loan $58,500 Net Asset Value $3,522,971

12 WYNDHAM HILL TOWNHOMES Phase Five Fourteen Lots - Blocks 7, 8, Homes Adjustment Balance Equity $174,624 $87,296 $87,328 Loans: Horizontal Loan $234,000 $180,000 $54,000 Vertical Loan $2,185,663 $2,185,663 Asset: Homes $3,300,000 Finished Lots $198,000 Equity Balance $87,328 Operating Capital $3,262,847 Asset Total $6,848,175 Total Loans $2,239,663 Sales: Revenue $3,300,000 Sales Cost $198,000 Gross Revenue $3,102,000 Net Asset $4,608,512 Vertical Loan Payoff $2,185,663 Net Revenue $916,337 Equity Balance $87,328 Finished Lot Value $198,000 Operating Capital $3,262,847 Asset Value $4,464,512 Horizontal Loan $54,000 Net Asset Value $4,410,512

13 WYNDHAM HILL TOWNHOMES Phase Six Blocks 4, 5, 6-11 Homes Adjustment Balance Equity $87,328 $87,328 $- Loans: Horizontal Loan $112,500 $112,500 $- Vertical Loan $2,101,684 $2,101,684 Asset: Homes $3,300,000 Finished Lots $- Equity Balance $- Operating Capital $4,179,184 Asset Total $7,479,184 Total Loans $2,101,684 Net Asset $5,377,500 Sales: Revenue $3,300,000 Sales Cost $198,000 Gross Revenue $3,102,000 $12,586,500 Loans: $11,487,000 Vertical Loan Payoff $2,101,684 $1,099,500 Horizontal Loan Balance $- Total $2,101,684 Net Revenue $1,000,316 Equity Balance $- Finished Lot Value $- Operating Capital $4,179,184 Net Asset Value $5,179,500 Original Equity $500,000 Net Profit $4,679,500

14