The spreadsheet above summarizes the financial projections for our Morongo Triangle Project held in the 50/50 Fund, and is further explained below. It’s named the 50/50 Fund because investors will be entitled to 50% of the net profits from both the sales of buildings and 50% of the rental income derived from leased buildings.
Just south of The Morongo Triangle is the site of the future Morongo Industrial Business Park, making comparisons with neighboring properties relatively easy. In speaking with local professionals we have come up with the general estimates shown above in the top right corner of $165/ sq ft for buildings we sell and $3.25/ sq ft for buildings we lease. Other buildings are selling at an average of $174/ sq ft which is why we believe that coming in a little below that price will help us to sell more quickly.
Also on the top of the spreadsheet is the square footage of each of the ten buildings followed by the square footage of the buildings we plan to sell and lease, respectively. As you can see we intend to sell Buildings 102-110 and hold on to Building 101. You can also see the layout of the buildings by downloading this drawing. Please keep in mind that buildings 105-110 will be two stories.
In order to keep the project well capitalized and to provide investors with a relatively quick return, we plan to divide the project into at least two phases, selling some of the properties before completing construction on the others.
Considering the purchase price, closing costs, the costs of construction, and other misc. expenses we’re planning to raise approximately $5.5M for “phase one”. (Total costs of construction divided by two plus $1.1 million purchase price).
While all ten buildings need to be built, coming in at a total cost of $9.9 million, we should be able to sell nine of them for $21.1M as shown above. The difference between the two numbers is our overall profit, $11.1 million. After accounting for operating expenses, and with 50% of the profit going to investors, there remains $5,314,155.13 to share.
If an individual investor were to contribute $100,000 to the fund we would divide by the funds raised in order to get their percentage or share of the total funds raised (right side of spreadsheet). In this case we come out with approximately 2% which in dollars, leaves $95,820 to be distributed to that individual investor for a very healthy 96% ROI.
In the second year we introduce rental income. The reason there is no rental income during the first year is that in an effort to be conservative with our figures we’re assuming that it’ll take some time to construct the building, obtain the occupancy permits, and secure a qualified, properly vetted tenant.
When we repeat the same concept each year, our goal is to use the same investor funds to purchase, develop, and sell eight or more buildings for the same type of return. We’ll also continue to add more leased out buildings to the fund’s portfolio each year.
The first building to be leased is 24,000 square feet. Leasing it at $3.25/sqft we get $80,756 a month in shared profit [$969,072 Annually]. See bottom left corner of spreadsheet.
Multiplying out 12 months of rent [$969,072] and subtracting the 5% operating expenses fee [$48,454], we are left with $920,618, leaving our investors with $460,309. For an individual investor who contributed $100,000 and represents 2% of the fund, they can expect an 8.3% CAP rate, or an annual return of $8,300 from the leased buildings.
Please note that these financial projections will continue to change as we acquire more specific pricing information, with the total amount of funds raised, and with rounding. Actual investor returns will vary.
SAMPLE RETURNS BASED OFF A SINGLE INVESTMENT OF $100,000
|Year||Year 1||Year 2||Year 3||Year 4||Total|