Investment Summary Arizona Investment Opportunity
June 2014
This document is not, and under no circumstances is to be considered as a public offering of securities. This document is for information purposes only for persons who may qualify as purchasers under certain exemptions from prospectus requirements contained in securities legislation in jurisdictions where the securities referred to in summary form hereunder may be offered. No securities commission or similar regulatory authority has passes on the merits of the securities referred to hereunder and any representation to the contrary is an offence. Investment Summary Villa Serena 4221 W. Dunlop Ave. Phoenix, Arizona
Executive Summary Western Wealth Capital II Limited Partnership is proud to offer investors an opportunity to purchase a cash-flowing property in one of North America’s hottest real estate markets. The limited partnership intends to acquire Villa Serena - a 137 unit apartment complex in Phoenix, Arizona.
Investment Highlights • Increase NOI - By integrating current market conditions with our assumptions (detailed below), we believe, the Net Operating Income (NOI) has the potential to increase from $370,000 to $560,000 in a 55 month period • Incredible Price - Purchasing at 50% of 2007 prices • Excellent Financing Leverage - Western Wealth Capital Management LTD has secured 75% financing with interest rates currently below 4% • Annual Cash Distributions - The partnership plans to distribute 80%+ of free cash flow annually. The projected annual returns are as follows:
NET Cash Flows Year 1 Year 2 Year 3 Year 4 Year 5 NET Cash Flow $89,259 $139,986 $161,869 $177,685 $193,923 Cash on Cash Return 4.2% 6.6% 7.6% 8.3% 9.1%
Total Cash Flow $762,723
“This will end up being the best buying opportunity in your lifetime.” - Elliott Pollack, Economist Property Description Villa Serena is an apartment community built in 1982, comprising 137 rental units. The 10 buildings of Villa Serena are constructed on approximately 5.04 acres. The unit mix is approximately 46% one-bedroom and 54% two-bedroom/two- bathroom units with an average unit size of about 859 SF. Construction is of typical wood frame with painted stucco siding. Unit amenities include walk-in closets, washer/dryer hook-ups, oversized private patios or balconies, outside storage rooms, and individual climate controls. Every unit has in-suite washer/dryer hook-ups and Villa Serena currently owns 28 washer/dryers installed in the units and collects a premium of $50 per month from tenants. Community amenities include a swimming pool, laundry facilities, outdoor barbecues and 137 covered parking spaces plus 85 additional open parking spaces.
Total Units ...... 137 Year Built...... 1982 Net Rentable Square Feet...... 117,732 Number of Buildings ...... 10 Land Size...... 5.04 acres
Property Highlights • Desirable Location - Situated on the corner of 43rd and Dunlop, both major thoroughfares running through Phoenix with a traffic count of over 130,000 cars each day • High-density employment corridor - Situated 2 miles West of one of the highest density employment corridors in metro Phoenix offering over 65,000 jobs • Minutes to multiple Universities/Colleges - Over 27,000 students attend school within minutes of the property and there is a college 1 block from Villa Serena • Privacy - Personal patios and outside storage provide tenants with privacy and space they need Location Villa Serena Apartments is located at 4221 W. Dunlap Avenue in Phoenix, Arizona. The property is situated just east of 43rd Avenue and just south of Dunlap Avenue, both major thoroughfares running through Phoenix, Arizona seeing traffic volumes over 130,000 cars per day. Villa Serena is within walking distance of Arizona College (formerly Arizona College of Allied Health) which offers healthcare degree programs, as well as employment generation, to the surrounding area. Within minutes of Villa Serena there are a number of colleges with enrollment totaling over 27,000 students, most notably, Glendale Community College and Arizona State University West Campus. The immediate neighborhood surrounding Villa Serena comprises a mixture of single-family homes, multifamily projects, and commercial / industrial developments, all with a middle-income profile. The property is approximately two miles from Metrocenter Mall, which contains numerous national retailers including Dillard’s, Macy’s and Sears. A Walmart Neighborhood Market and Fry’s Food-anchored shopping center is conveniently located one mile west of Villa Serena on 51st Avenue. Additional retailers and establishments are located two miles southwest of the subject property at the Walmart Supercenter-anchored Northern Crossing Shopping Center, situated on the southeast corner of Northern Avenue and 59th Avenue. Retailers at Northern Crossing include Lowes, PetSmart, Verizon Wireless, Wells Fargo Bank, Chase Bank, and several restaurants. Public schools are nearby, and residents are also within five miles of the recently expanded Grand Canyon University and Arizona State University’s West Campus. Nearby employment is concentrated along Interstate-17, approximately two miles to the east offering over 65,000 jobs within 1 block of the highway. Business Plan The business plan involves increasing the net operating income from $370,000-$560,000 over a five-year period. The 3 drivers to increase the net operating income are 1) add washers and dryers to the suites and increase the rents by an estimated $50 per month. 2) install gates to create private patios on select units 3) capitalize on the high- demand location. • Install washer/dryer in ~70% of units. Top reason a tenant does not rent at Villa Serena or moves out is no in-suite washer/dryer. The ability to install washer/dryer units is very easy costing approximately $1000 per unit. • Install private gates on 20% of units creating a small yard/patio for children and pets. There are a number of ground floor units where we plan to install a gate which will enclose the patio making it secure for children and pets. This is a highly desirable feature and we anticipate being able to charge a premium. • Villa Serena has marketing visibility to over 130,000 cars per day. It is situated 1 mile west of one of the highest density employment corridors in metro Phoenix. There are 12,000 school-aged students that attend school within a 2 mile radius and over 27,000 college students. Currently there is a very small sign in front of the property and it does not market the washer/dryer amenity or that units are 150 SQFT larger than the average unit. A refined marketing plan will capitalize on this. Current rents are 10% below market rent and our assumptions only reflects an average 2.5% increase per year.
Strong Cash Flow + Washers/Dryers Installed Cash Investment $2,131,204 May 31, 2014 NOI $368,562
Year 1 Year 2 Year 3 Year 4 Year 5
NOI $424,270 $424,270 $424,270 $424,270 $424,270 Annual Rent Increase $ - $48,419 $74,626 $101,619 $129,422 W/D Income $31,840 $45,120 $51,600 $51,600 $51,600 Increase Expenses per Inflation ($10,972) ($21,776) ($32,953) ($44,519) NEW NOI $456,110 $506,837 $528,720 $544,536 $560,773
Investment Timeframe Expected timeframe of ownership for Villa Serena is 3-5 years.
Property Management Consolidated Asset Management (CAM) will oversee the day-to-day operations. CAM has been a property management company since 1992 in Phoenix, Arizona and currently manages over 5000 units across Maricopa County.
Investment Management & General Partner The general partner is Western Wealth Capital Management LTD and the principals are Janet LePage and David Steele. They will be responsible for the strategic and financial direction on Villa Serena. Janet LePage has completed over 65 real estate projects in Arizona. David Steele has developed over 85 projects, valued at over $1,500,000,000 and has helped individual investors acquire over 10,000 investment properties in Canada and the United States. Together, Janet and Dave have over 30 years of experience in acquiring, managing, repositioning and divesting multi-family real estate. Equity Required Western Wealth Capital II Limited Partnership is looking to raise $2,130,000 by July 11th, 2014. The breakdown of the equity is as follows:
Investment Breakdown COST Purchase Price...... $6,420,000 Mortgage...... ($4,815,000) Down Payment . $1,605,000 Closing & Partnership Costs...... $336,114 Reserves & Deposit Accounts...... $190,000 TOTAL EQUITY REQUIRED...... $2,131,204
Investor Worksheets Using the assumptions outlined in this document, Western Wealth Capital Management LTD believes investors could realize returns as high as 26% per year. Below is the breakdown of the modeled profits on a three year and five year investment timeframe.
3 Year Worksheet Cash Investment...... $2,131,204 New Property Value...... $8,812,000 Sales Costs...... ($264,360) Initial Costs . ($6,946,204) Total Cash Flow...... $391,115 Total Principal Paydown ...... $266,313 Total...... $2,258,864 Management Fee ...... ($624,770) Total Profit...... $1,634,094 Return on Investment...... 77% Annual Return on Investment ...... 26%
5 Year Worksheet Cash Investment...... $2,131,204 New Property Value...... $9,346,219 Sales Costs...... ($280,387) Initial Costs . ($6,946,204) Total Cash Flow...... $762,723 Total Principal Paydown ...... $462,269 Total...... $3,344,621 Management Fee ...... ($915,641) Total Profit...... $2,428,979 Return on Investment...... 114% Annual Return on Investment ...... 23%
Limited Partnership Partnership Name - Western Wealth Capital II Limited Partnership Western Wealth Capital II Limited Partnership (WWC II) has been organized to enable investors to realize strong rates of return through distributions and capital appreciation by participating in the acquisition and management of an apartment building located in the US. Private Placement Terms General • Issuer - Western Wealth Capital II Limited Partnership (WWC II) • Minimum Subscription - $150,000 USD
Fees Fees paid to the general partner: • Acquisition fee - 1% of the total costs of the acquisition of the identified asset to be paid upon closing of the identified asset. • Asset management fee - 3% of monthly rents. • Mortgage guarantee fee - 1% of the amount guaranteed for any acquisition loan, financing or refinancing. • Disposition fee - 5% paid upon liquidation of the identified asset, payable only on the amount of the increase over the purchase price of the identified asset.
Fees paid for capital raising: Capital raising fees-paid to individuals or companies who qualify under the relevant securities legislation in an amount equal to up to 5% of the funds raised by such individuals or companies any such capital raising fees will be paid upon closing of acquisition of the identified asset.
Annual Distributions The partnership plans to distribute 80% of free cash flow annually.
NET Cash Flows Year 1 Year 2 Year 3 Year 4 Year 5 NET Cash Flow $89,259 $139,986 $161,869 $177,685 $193,923 Cash on Cash Return 4.2% 6.6% 7.6% 8.3% 9.1%
Total Cash Flow $762,763
Disposition Waterfall • The Limited partners will be paid back their initial investment first. • Limited partners will then be paid 75% of the profit. • The general partner will then receive 25% of the profit.
Assumptions Below are a series of assumptions used by Western Wealth Capital Management LTD to model the costs and create the worksheets laid out in this document. • We plan to install washer/dryer in 70% of units and generate $50 per unit of additional rent each month for that amenity • Annual rent increase average 2.5% per year • Occupancy remains at an average of 94% per year • Sale commissions at time of sale are 3% • Asset value at time of sale is calculated using a 6% CAP rate Risk Factors Investment in the Partnership involves a high degree of risk and is suitable only for sophisticated investors and requires the financial ability and willingness to accept the high risks and lack of liquidity inherent in an investment in the Partnership. No assurance, representation or warranty can be given that the Partnership’s investment objectives will be achieved or that investors will receive a return of their capital. An investment in Units is subject to risk. Standard risks applicable to investments of this nature include: • No market for Units - There is currently no resale market for these Units and it is not anticipated that any market will develop. The Units are not transferable without the approval of General Partner and in compliance with applicable securities laws and regulations. • Vacancy Rates - The apartment building business relies on a steady supply of good quality tenants. A shortage of quality tenants due to an economic down turn or job losses in a given market place could result in higher than expected vacancy and lower than expected revenue. • No guaranteed return - The projected returns described in this Investment Summary are not guaranteed. An investment in Units is not suitable for investors who cannot afford to assume significant risks in connection with their investments. • Tax matters - Investors should consult their own tax advisors for advice with respect to the tax consequences of an investment in the Units based on their particular circumstances.