CURRENT OPPORTUNITY

Marble Creek

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Investment Highlights

Western Wealth Capital is acquiring the property at approximately $69,000 per unit – below comparable sales in the submarket over the past 12 months.

  • Incredible Location – the property is located in the Southwest Valley just five miles from the I-17 corridor (the second largest employment hub in the Valley) and a short drive away from the I-10 industrial corridor where major global companies have set-up distribution facilities employing thousands of people.
  • High Demand Rental Market – Marble Creek is situated in a high demand rental market with rents increasing more than 7% in the past year
  • High Returns – Western Wealth Capital Management believes investors could realize an annualized return on investment as high as 21% and up to 77% of equity returned within 4 years.
Total Units 244
Year Built 1985
Net Rentable Square Feet 206,080
Number of Buildings 22
Landsize 9.72 Acres

The Business Plan

The business plan involves increasing the net operating income by more than 40% over a five-year period. The four main drivers to increase the net operating income are:

  • Normalize Rents – The current owners are operating with significant disparity between rents of like-units across the property and Western Wealth Capital intends to reduce that disparity using our proven lease management approach. This action has the potential to bring a further $115,151 in rental income which corresponds to approximately $1,919,187 in increased value to the property based on a 6% cap rate.
  • Washer & Dryer Value-Add Opportunity – Western Wealth Capital plans to install washers and dryers in 200 of the 244 units, enabling an increase of $50 per unit per month of rental income.
  • Interior Upgrade Value-Add Opportunity – There is a huge potential for interior upgrades on this property. Western Wealth Capital plans to complete interior upgrades to 150 of the 244 units over two years. We have modelled a conservative projected $75 per month per unit increase in rental income for upgraded units.
  • Bring rents to market average – Rents are forecast to be increased approximately 4% per year. (Rents in this sub-market have increased by 7% in the last year.)
Purchase Price $16,750,000
Equity Required $5,750,000
Projected Property Value
Year 1 Year 2 Year 3 Year 4 Year 5
Gross Income $2,107,874 $2,325,679 $2,468,535 $2,562,264 $2,670,726
Total Expenses ($1,014,524) ($1,043,387) ($1,070,692) ($1,097,241) ($1,124,975)
NOI $1,093,350 $1,282,292 $1,397,843 $1,465,023 $1,545,751
Non-Recurring Expenses ($137,679) ($144,213) ($148,499) ($151,311) ($154,565)
Property Value $18,222,503 $21,371,533 $23,297,383 $24,417,055 $25,762,519
Net Cash Flows
Year 1 Year 2 Year 3 Year 4 Year 5
Net Cash Flow $515,305 $664,250 $474,508 $505,617 $572,858
Per Year Return 9.0% 11.6% 8.3% 8.8% 10.0%
Principal Paydown     $234,082 $233,879 $244,112
Net Cash Flows plus Principal Paydown     $708,590 $739,496 $816,970
Effective Annual Return (Excluding Appreciation) 9.0% 11.6% 12.3% 12.9% 14.2%

Investment Summary

Western Wealth Capital XXVII Limited Partnership is proud to offer investors an opportunity to invest in a cash-flowing property in one of North America’s hottest real estate markets.

The Limited Partnership intends to invest in Marble Creek Apartments, a 244-unit apartment community located in the Southwest Valley of the Metropolitan Phoenix Area, in the heart of the industrial fulfillment industry sector. The property is just five miles from the I-17 corridor (the second largest employment hub in the Valley) and a short drive away from the I-10 industrial corridor where major global companies — including Amazon, Target, and PetSmart — have set-up distribution facilities employing thousands of people.

Marble Creek is also just eight miles away from downtown Phoenix, an employment hub of 63,000 people and home to government, legal, and financial institutions as well as Arizona State University, the University of Arizona and the Phoenix Biomedical Campus.

The property is being acquired for approximately $69,000 per unit, well below average comparable market prices. The buildings and property are in excellent condition allowing Western Wealth Capital to realize the asset’s potential using our market expertise and triedand-tested value adding programs as we have with our previous 31 multifamily acquisitions in the Greater Phoenix Area.

Property Details

Marble Creek is a 244 unit multifamily community built in 1985 comprising of 108 one bedroom/ one bath, 48 two bedroom/ one bath and 88 two bedroom/ two bath units. The property demonstrates excellent function and design within the interior living space. The property offers a tremendous value add opportunity as only the model unit has been upgraded and none of the units have washer/dryers. The interiors feature full-sized appliances in a spacious, open plan kitchen/dining room and living area. The units benefit from a private patio or balcony and select units have additional outside storage areas.

Some unique community features in the property include a resort-style swimming pool, spa and sundeck, playground, barbecue area and fitness center. The recent renovations include capital improvements such as a new parking lot, re-plastered swimming pool, perimeter fencing/masonry walls, monument sign enhancements and automatic entry gate. This provides Western Wealth Capital the opportunity to focus on upgrading unit interiors and washer/dryers installations.

Community Amenities

  • On-Site Laundry Facilities
  • Barbecue Grills
  • Courtyard
  • Covered Parking
  • Emergency Maintenance
  • Fitness Center
  • Gated Community
  • Playground with Shade Sail/Canopy
  • Pool
  • Spa
  • Sport Court/Tether Ball

Unit Amenities

  • Full size appliances
  • Outside Storage
  • Oversized closets
  • Patio
  • Balcony
  • Ceiling fans
  • Spacious Floor Plans
  • Two-tone paint
  • Cable Ready
  • High Speed Internet Available

Location

Marble Creek Apartments is located in West Phoenix along McDowell Road, one block west of 59th Avenue, a major north-south thoroughfare running through Phoenix, Arizona. Freeway access to Interstate-10 is immediately south of the property and the Loop 101 Highway is less than six miles west of the property, providing easy access to all parts of the metropolitan area and to major employment sources including the Phoenix Warehouse District.

Nearby manufacturing and warehousing employment generators include the Coronado Industrial Park, Santa Fe Phoenix Industrial Park, Payne Industrial District, and the Airhaven Industrial District, which are located four miles east along Grand Avenue, also known as US Highway 60.

Banner-University Medical Center Phoenix is located eight miles east of the property and Banner Estrella Medical is less than six miles west.

Marble Creek is minutes from Arizona State University-West Campus, University of Phoenix-West Campus, and Grand Canyon University. Grand Canyon University (2015 on-campus enrollment: 14,500 and 2015 overall enrollment: 74,200) is aggressively growing their presence as an educational institution. GCU is currently undergoing a campus expansion project that will include adding a variety of residence halls, classroom buildings, dining facilities and student amenities. This has significantly increased the demand for housing in the area which will continue as GCU expands within their 100 acre site.

Debt Structure

Interest Only Variable Rate Loan for two years. Subsequently converted into a 30-year Amortizing Loan.

Investment Management & General Partner

The general partner is Western Wealth Capital Management LTD and the principals are Janet LePage and Dave Steele. They will be responsible for the strategic and financial direction on Marble Creek.

Janet LePage has completed over 80 real estate projects in Arizona. Dave 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.

Supplemental Financing

Our unique supplemental financing option allows us to access additional financing proceeds after approximately 18 months if we can increase the net operating income. Traditionally, refinancing includes brokerage & legal fees similar to the costs of acquiring a new property. We have negotiated this supplemental financing option with the lender at a negligible cost compared to a traditional loan. A reappraisal that results in an increased property value will allow the limited partnership to increase the loan and distribute the net loan proceeds to the limited partners.

Original Equity: $5,750,000
Year 2 Year 3 Year 4
Estimated Proceeds from Refinance $2,216,219 $1,405,870 $817,361
Cumulative Percentage of Original Equity 39% 63% 77%

Equity Required

The breakdown of the equity is as follows:

Investment Breakdown
Cost
Purchase Price $16,750,000
Mortgage ($13,385,000)
Down Payment $3,365,000
Legal & Closing Costs. $217,117
General Partner Fees $588,850
Deposit Accounts $113,207
Reserves & Capital Improvements $1,465,827
TOTAL EQUITY REQUIRED $5,750,000

Investor Worksheets

Below is a breakdown of the modeled profits on a 3-year and 5-year investment, based on management’s assumptions as outlined in this document.

3 Year Investor Worksheet
  Year 3
Value at Estimated Cap Rate. $23,297,383
Sales Costs + PPP 1% ($331,509)
Loan Repayment ($13,150,918)
Net Sales Proceeds $9,814,955
Cumulative Cash Flow $1,654,063
LESS: Investor Equity ($5,750,000)
LESS: Disposition Fee 5% ($203,248)
Total Distributions $5,515,770
Total Investor Return (65% of Distribution) $3,585,251
Limited Partner Return on Capital 62%
   
Limited Partner Annualized Return on Capital 21%
5 Year Investor Worksheet
  Year 5
Value at Estimated Cap Rate. $25,762,519
Sales Costs + PPP 1% ($326,729)
Loan Repayment ($12,672,927)
Net Sales Proceeds $12,762,863
Cumulative Cash Flow $2,732,538
LESS: Investor Equity ($5,750,000)
LESS: Disposition Fee 5% ($350,643)
Total Distributions $9,394,757
Total Investor Return (65% of Distribution) $6,106,592
Limited Partner Return on Capital 106%
   
Limited Partner Annualized Return on Capital 21%

Investors are cautioned that actual results may vary from the estimated rates of returns. Though, as at the date of this document, we anticipate that the projections indicated above are reasonable and the assumptions on which the forward-looking statement are made are reasonable, they are forward looking statements that are subject to risks, uncertainties and assumptions, and based on management’s past performance, and not specific to this project’s current performance individually. The projections have not been audited nor reviewed by experts, nor prepared in accordance with Canadian generally accepted accounting principles. Accordingly, there is significant risk that actual results achieved for the projected period may vary from the projected results, and that such variations may be material. We provide no representation or assurances that the actual results achieved during the projected period will be the same as that projected. The projections are intended to illustrate the projected performance, and not appropriate for any other purpose.

Private Placement Terms

Issuer: Western Wealth Capital XXVII Limited Partnership (THE PARTNERSHIP)

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
  • Asset setup fee: $8,500 paid upon closing the identified asset.
  • 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.
  • Profit sharing, if any, as described in the Disposition Waterfall below

The Partnership

Although we believe that the assumptions on which the forward-looking statements are made are reasonable, based on the information available to it on the date such statements were made, no assurances can be given as to whether these assumptions will prove to be correct. Accordingly, readers should not place undue reliance on forward-looking statements. We will not update any forward-looking information except as, and to the extent, required by applicable Canadian securities laws. The forward-looking statements contained herein, and all subsequent written and oral forwardlooking statements attributable to the Partnership, or persons acting on any of their behalf, are expressly qualified in their entirety by this cautionary statement.

Market data and certain industry statistics used throughout this executive summary were obtained from market research, informational and marketing materials provided to the Western Wealth Capital Management, publicly available information and industry publications. Industry publications generally state that the information contained therein has been obtained from sources believed to be reliable, but that the accuracy and completeness of such information is not guaranteed. No representation or warranty is made by the Partnership as to the accuracy or completeness of any of the information contained herein. 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. In considering the prior performance information contained herein, prospective investors should bear in mind that past performance is not necessarily indicative of future results, and there can be no assurance that the Partnership will achieve comparable results.

Annual Distributions

The partnership plans to distribute free cash flow annually on November 30 of each calendar year.

Net Cash Flows
Year 1 Year 2 Year 3 Year 4 Year 5
Cash Flow $515,305 $664,250 $474,508 $505,617 $572,858
Per Year Return 9.0% 11.6% 8.3% 8.8% 10.0%
Principal Paydown $234,082 $233,879 $244,112
Net Cash Flows plus Pricipal Paydown $708,590 $739,496 $816,970
Effective Annual Return (Excluding Appreciation) 9.0% 11.6% 12.3% 12.9% 14.2%

Disposition Waterfall

Any possible distributions made by THE PARTNERSHIP will be in the following order:

  • The Limited Partners will be paid back their initial investment first.
  • Limited Partners will then be paid 65% of the profit, if any.
  • The General Partner will then receive 35% of the profit, if any.

Assumptions

Material factors or assumptions that were applied in drawing a conclusion or making an estimate set out in the forward-looking statements include that: building upgrade plans and related expenses will proceed as anticipated; the Partnership will remain in good standing with respect to its obligations to any senior lenders; the general economy is stable; local real estate conditions are stable; interest rates are relatively stable; equity and debt markets continue to provide access to capital; that the Partnership’s expenses will not be materially greater than anticipated. These factors and assumptions should be considered carefully by readers. Readers are cautioned not to place undue reliance on the forward-looking statements or the assumptions on which the forward-looking statements are based on. Investors are further cautioned that the foregoing list of factors and assumptions is not exhaustive.

In addition, information regarding targeted returns is based on the following principles and assumptions: the Partnership will maintain a consistent level of cash flow and indebtedness and will not materially incur additional indebtedness, other than with respect to ordinary operating costs or as disclosed herein; the consumer price index, property taxes, operating expense growth, and market rent growth will be as anticipated; existing tenants will fulfill their current contractual lease obligations and remain in occupancy and pay rent for the term of their leases; upon expiry of their leases, the number of retained tenants will meet historical retention experience; and the Partnership will maintain cash reserves as anticipated.

Other assumptions used by Western Wealth Capital Management LTD to model the costs and create the worksheets laid out in this document.

  • Bring rents to market levels in year one then in increase by 4% per year thereafter.
  • Occupancy remains at an average of 95% per year.
  • Sales commissions at time of sale are 1.5% of sales price.
  • Asset value at time of sale is calculated using a 6.0% 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 the Units and it is not guaranteed 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 downturn or job losses in a given marketplace 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.
  • The limited partnership intends to acquire units in an Arizona Limited Partnership (the “LP”). The Arizona Limited Partnership will own all of the issued units of a second pass-through Arizona Limited Partnership, which will be the owner of the property. The limited partnership will own units in the LP. In the event of a refinance of the property the limited partnership will be entitled to participate in the net proceeds of the refinance on a pari passu basis. For more information, investors are advised to contact the principals of the limited partnership and to review all of the various agreements governing the relationships described herein.