NNN Developer Seeking Equity Investors
Update: An equity investor has committed to 150 units. As of 5/10/21, the remaining number of units is 350 sites).
Developer of 500 single-tenant medical properties is seeking additional investors who will agree to provide construction equity on a site by site basis for a large number of deliverable properties at a favorable cap rate.
All of the leases are:
20-Year brand new leases, commencing upon rent commencement
Absolute Triple Net (NNN) Leases
There are 2.00% Annual Increases in the rents.
The equity investor shall put up the costs of construction, thus allowing the developer to avoid having to obtain construction financing for each project which would slow down overall development.
As an example, with 150 sites recently committed to by an equity investor:
Project Cost: $3,112,500 (Equity from investor released in draws)
Build CAP: 10.00%
YR 1 NOI: $300,000
Sell CAP: 8.00%
Gross sales Price: $3,637,500
Gross Profit: $525,000 ($3,637,500 - $3,112,500)
Less 8.00% Pref on Money based on 6 months - $123,600 Paid to equity before distributions
Balance available for distributions between developer and equity: $400,500
Equity Investor receives 60% ($240,300)
The developer receives 40% ($160,200)
Total ROI to the equity investor is $364,800 ($240,300 + $160,200)
6 Month ROI: 11.72% (Annual ROI of $23.44%).
The above is an example the developer can discuss with potential equity investment partners.
Investors are buying at cap rates ranging from 7.50% to 8.00% cap rate, then turning around and putting these on the market immediately at a 6.00% cap rate! This flip, along with the initial return at first closing, adds up to a substantial return on each deal. The construction purchased cap rate will depend on the number of sites equity investors commit to.
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