Wake Forest Student Housing
Winston-Salem, NC 27587
Pref. Equity • STUDENT HOUSING

Min. Invest

$25K

Target Hold

5 Yr.

Preferred Returns

8%

PROGESS - 73% PLEDGED

Investment Summary

RealtyeVest has a stake in all real estate investments offered in our marketplace.

RealtyeVest has obtained exclusive rights to an investment opportunity for accredited investors, REV DEACON RENTAL, LLC . a Florida limited liability company (the “Company”). The manager of the company is RealtyeVest, LLC, a Florida limited liability company (the “Manager” and organizer of the company).

The Company has been formed for the purpose of providing investors the opportunity to the SMB Partners, LLC, a Virginia limited liability company (SMB), has partnered with Newman Development Group Capital Partners (NDG), an experienced student housing developer and operator, to acquire joint venture interests in a portfolio of 53 “cottage style” detached homes purpose-built for student housing, currently known as the Deacon Rental Properties. SMB and NDG will form a joint venture to coordinate and manage the acquisition of the Property.

The Sponsor’s business plan is to incorporate institutional professional management and marketing to produce higher returns. The levered internal rate of return (IRR) and equity multiple based on a 5-year hold are 19.1% and 2.1x, respectively. The average cash on cash (CoC) return over five years is 10.0%.

The Property includes 251-beds exclusively leased to Wake Forest University (“WFU”) students. The acquisition also includes 4.42 acres of vacant land with immediate and future development potential. The Property is well maintained and within close walking distance to campus. It is 97% leased for the 2017~2018 academic year, and 60% pre-leased for 2018/2019. NDG Student Living (an affiliate of NDG Capital Partners, LLC) is one of the highest-rated student housing managers in the industry and will manage the Property.


Investment Type:
Common Equity
8% preferred return 50/50 Waterfall
Term:
60 Months
Raise Amount: $1,400,000
 
Investor IRR:
19.1%
Investors Deal Multiple:
2.1X

Exit Strategy

The sponsor envisions a sale of the property in year 5. Proceeds from the sale will be used to pay Company liabilities, return investor (Class A) capital contributions, make up arrearages in Investor Preferred Returns if any, and split the remaining profits between investors and the manager in according with the Investors Subscription Agreement.

Why You Should Invest:

  • Strategic Purchase from Non-Institutional Owner. The Seller is a private builder/operator who identified demand for a highly desirable detached product for Wake Forest students. Most of the buildings were built since 2011; the average age is less than 5 years. The Property has consistently achieved higher occupancy than any of the competing properties in the market, while the Seller continued to develop new units. All along, rents have been increasing. The Seller is also the manager, and although they’ve done a good job of marketing the property, it’s clear professional management will produce greater results by maximizing revenue and decreasing expenses and applying an institutional mindset to optimize the Property for sale in the future. NDG Student Living (“NDGSL”) is one of the highest-rated student housing managers in the industry and has identified areas where the current owner is not maximizing the income potential of the Property
  • Favorable Market Fundamentals. WFU requires its students to live on-campus for three academic years, and currently offers 4,075 on -campus beds. The 4,000 seniors and graduate students can choose to live off campus. Based on industry guidelines, NDGSL estimates demand at 1,800 students of those likely to live off campus. This compares to the officially recognized registered off-campus housing of 975 beds (See Student Housing section for additional details); resulting in a near 2:1 ratio of eligible renters to the current stock (large and mid-sized properties only). Total enrollment is projected to continue to rise as the University expands, increasing demand for the current undersupply of housing, especially off-campus. The Wake Forest Housing office indicates there are no plans for additional dorms
  • Wake Forest University. Founded in 1834, WFU is a private liberal arts four-year institution, consisting of six schools including the highly ranked Schools of Law, Business, and Medicine. WFU consistently is among the top private liberal arts institutions nationally, ranking 27th in the 2017 Best Colleges edition. Total undergraduate and graduate enrollment was approximately 7,800 in the Fall 2016. Enrollment is expected to increase annually by 2.5% over the next three years, with a student population exceeding 8,400 in 2020
  • Future Development Opportunity. Approximately 4.42 acres of vacant land is included as part of the acquisition. Immediate construction of five homes (20 beds) will occur after closing. The remaining 3.1 acres for Future Phase II is approved for 16 beds but has the potential for 40+ beds
  • Conservative Underwriting. Pro Forma revenue is based on the current 2017/2018 leases in place at 98% occupancy. Proforma Year 1 expenses were increased 17% over the trailing-12-month expenses due to current ownership’s “mom and pop “management style. The going-in cap rate is 7.0% and the exit is 7%, both attractive and conservative given well-located student housing can trade at cap rates 100bps lower or more

Property Highlights

  • Every house has been fully remodeled and furnished within the past 5 years
  • Stable asset: ~98% occupied
  • 60% rented for year 2018-2019 School Year
  • Wake Forest University approved student housing
  • Walking distance to Wake Forest University
  • Rapidly growing employment opportunities
  • Over 5 acres of land on which more houses can be built to significantly increase revenue

Key Underwriting Assumptions:

  • Year 1 potential gross rent is based on the actual 2017-2018 academic year rent roll, vacant units at market rents
  • Rent from twenty (20) new beds start in Year 2 at $800/bed/mo
  • Real estate taxes reflect the current 2017 reassessment, and the 5 homes (20 beds) in Year 2
  • General vacancy: 4%. Will likely decrease as students abroad lease more units in the winter semester
  • General inflation for rent and expenses: 3%.
  • Expenses based on review of historical expenses and NDG Student Living guidance


Risk Disclosures:

The offering materials to be reviewed and considered by investors with respect to this offering include the information described in the website content relating to this offering (as amended and supplemented through and until the closing of the transaction) and the subscription agreement relating to such securities (see the "Documents" tab). We refer to all of this information collectively as the "Property Information Package". Investors should review the Property Information Package in its entirety before investing and should consult with appropriate legal, tax, and investment advisors. Please note that RealtyeVest is not serving as your fiduciary or advisor with respect to this opportunity.

Below are certain risks associated with this investment that should be carefully reviewed prior to any investment in this opportunity:

Forward-Looking Statements: Investors should not rely on any forward-looking statements made regarding this opportunity, because such statements are inherently uncertain and involve risks. We use words such as “anticipated,” “projected,” “forecasted,” “estimated,” “prospective,” “believes,” “expects,” "plans,” “future,” “intends,” “should,” “can,” “could,” “might,” “potential,” “continue,” “may,” “will,” and similar expressions to identify these forward-looking statements. Similarly, the financial forecasts contained herein and in any other offering materials are based on numerous assumptions. Although these assumptions are believed to be reasonable, they are all subject to uncertainty. Non-Transferability of Notes: The transferability of the Company's Notes is restricted both by the subscription agreement for that entity and by U.S. federal and state securities laws. In general, investors will not be able to sell or transfer the Notes. There is also no public market for the Notes and none is expected to be available in the future. Moreover, although there is a defined redemption date for the preferred equity investment in the Fund, an extension option may be exercised and in any event, there can be no assurance that the investment will be liquidated at or promptly after such maturity date (as it may be extended). Persons should not invest if they require any of their investment to be liquid. This is particularly important for persons of retirement age, who should plan carefully to assure that their assets last throughout retirement.

Real Estate Market Risk: Investments related to real estate are subject to market valuation risks that may be caused by changing economic and local market conditions such as local real estate market conditions, prevailing interest rates, the rate of unemployment, the level of consumer confidence, the value of the U.S. dollar, energy prices, changes in consumer spending, the number of personal bankruptcies, disruptions in the credit markets and other factors. Such conditions are beyond the control of the Company and of the Fund. Real estate markets are affected by many factors, such as general economic conditions, supply and demand for real estate investments, interest rates, the availability of financing, and other factors, all of which are beyond the control of both the Company and the Fund.

Borrower Credit Risk: The Company’s obligation to make payments on a Note will not be guaranteed for the length of the term corresponding to the borrower’s loan. The Company (and thus investors) will be relying on the borrower for the execution of its business plan in a way that enables the sponsor to repay the principal of the corresponding borrower loan. The borrower may not have a significant record of performance and may be unable to sell or refinance the underlying property in a way that enables the borrower to fulfill its obligations under the corresponding borrower loan. The borrower loan is being made with respect to a property that does not generally meet the financing criteria for conventional mortgages from institutional sources. Credit risk is inherent in the mortgage lending industry, and there can be no assurance that the creditworthiness of the borrower will be sufficient to assure the full repayment of the underlying borrower loan. The Company does not guarantee payment of the Notes or the corresponding borrower loan, and the Notes are not obligations of our borrower.

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Property Summary

This student housing portfolio in Winston-Salem, NC offers a unique opportunity for a significant cash flow Investment, located within walking distance of the Wake Forest University campus. 251 beds are spread among 65 fully furnished individual 3 & 4 bedroom homes as well as a leasing office. The homes have an average age of 5 years and range from 1,800 to 2,100 square feet with amenities designed for superior student living experience, including spacious porches and luscious landscaping, laundry facilities in every house, an abundant amount of off-street parking and the leasing and maintenance building located in the neighborhood. 98% of the leases are already in place for the 2017-2018 year, guaranteeing a stabilized asset through June 2018.


Property Overview

Beds 251
Rentable Square Feet 125,500 sf
No. of Buildings: 53
No. of Units: 65
No. of Stories: 1&2
Land: 10.00 Acres
Additional Land: 4.42 Acres
Year Built: (6) Buildings 1950’s (47) Buildings 2006-2016
Roof Structure: Pitched
Construction: Wood Framed with Vinyl Siding Finish
Utilities: Individual Electric Metered
Parking Spaces 251 Plus

Unit Mix: Unit Type:
242 4BR/4BA House
9 3BR/3BA House

Area Overview

Wake Forest University students make up the entirety of the tenant pool, and with projected growth to the university, the investment becomes an attractive opportunity for years to come. With the conservative assumption in place that application rates continue at 4.4% and admission and enrollment rates remain constant at 29% and 33%.

Property Name: Wake Forest Student Housing
Property Type Student Housing
# of Bedrooms 127
Year Built 1950
Units 65

Market Overview

Winston-Salem saw close to 10% employment growth within the past five years. Winston-Salem's top employment industries are healthcare and education, thanks partially to Wake Forest, a private research university with around 7,500 students. Wake Forest alone, in between the university and its medical center, employs over 15,000 people across the metro. Novant Health has an additional 14,000 workers within the Triad (consisting of Greensboro, Winston-Salem, and High-Point). Finance and banking are also key drivers for employment, and the Business District Submarket houses large banking institutions such as BB&T and Wells Fargo. This submarket saw the largest population growth by percentage within the metro, at 7% from 2010-15. The Business District is the second-largest submarket in terms of apartment inventory, following Downtown Winston-Salem, and the majority of newer development in the market has been concentrated here.

Downtown Winston-Salem and the Business District Submarket have mirrored each other in terms of vacancy; both historically average around 9.0%. The Business District Submarket, at 8.9%, surrounds the Sunnyside neighborhood and the intersection of I-40 and Highway 52. This submarket had the most deliveries over the past year, at 670 units, accounting for 10% of its total inventory. The Residences at the R.J. Reynolds Building opened in May 2016 within this submarket and has been met with high demand, leasing an average of 20 units/month. The Downtown Submarket sits above the Business District, encompassing Williamsburg Square. It has a historical vacancy of 9.0% and has not seen any new development since the beginning of 2015.

The Innovation Quarter, the highlight of new development in the Downtown Winston-Salem Submarket, serves as a catalyst for the innovation economy and currently contains 1.8 million SF of office, laboratory, and educational space. When fully built out, this development could contain up to six million SF of commercial space and produce 20,000 jobs. This submarket's favorable demographics include a high concentration of 20-34 -years-old (22%) and almost half of the population rents, spurring multifamily development. Within a mile of the Innovation Quarter, there have been four new communities constructed within the last two years, totaling 590 units.

Herbalife has also chosen to relocate and expand its Information Services group and other operations to its existing facility in Winston-Salem. This expansion will create 300 new jobs over the next two years with salaries ranging from $59,000-$63,000, which is higher than the market household income of $49,000. Along with Herbalife, Corning has committed to adding around 100 jobs in the market in return for economic incentives. Corning average salaries for new positions will be around $58,000, topping Catawba and Forsyth counties averages of $40,000 and $50,000.

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