investment 67 units in az

El Descanso Apartments

Offices: 555 W. 5

th St, 31

st Floor | Los Angeles, CA 90015 P a g e | 2

www.SolidusTeam.com

El Descanso Apartments – 67 Units 2726 W. Augusta Ave, Phoenix, AZ 85051

Property Information Package

Table of Contents

Contents

Regarding This Property Information Packet ......................... 3

Executive Summary .......................................................... 4

Area Overview .................................................................. 5

Major Employers & Employer Trends ................................... 7

Market Overview ............................................................... 9

Demographics ................................................................ 10

Community Profile........................................................... 11

Phoenix Financial Standing ............................................... 12

Phoenix Apartment Forecast ............................................. 13

Single Family Market Trends ............................................. 14

Rent Comparables ........................................................... 15

Financials ....................................................................... 17

Pro Forma Cash Flow Analysis .......................................... 17

Solidus Team ................................................................. 18

Contact Information ........................................................ 20

Offices: 555 W. 5

th St, 31


www.SolidusTeam.com


Regarding This Property Information Packet

This is not a public offering or offer or invitation to sell securities or make an investment. Securities may only be offered or sold in the state or states where they are registered or under an exempt offering.

This information is provided to the best of our knowledge. We make no warranties or representations of the information contained herein. Each individual shall conduct their own due diligence and independent investigation.

Any estimates of market rents and/or projected rents that may be provided do not necessarily mean that rents can be established at or increased to that level.

Legal and tax questions should be discussed with the appropriate professionals.

Questions or inquiries can be directed to: Solidus Capital Management, LLC c/o Ginger Macias

Cell: (714) 585-2185 Office: (213) 330-2722 x 700 Email: [email protected]

Offices: 555 W. 5

th St, 31


www.SolidusTeam.com


Executive Summary

• Excellent Unit Mix: 37 1 Bed/1 Bath & 30 2 Beds/1 Bath

• Built in 1983 • Rentable SF: 50,825 • Number of Buildings: 3

• Lot Size: 1.48 Acres • Parking: 92 Spaces • Swimming Pool & BBQ Area • Purchase Price is below replacement

costs • In the pathway of development of Metro Light Rail in the North Mountain Village Core

• Stable Market o Employment Strength o Strong Rental Market

• Only 5 hour drive or 40 minute flight from Los Angeles

• Construction – wood with pitched composition shingle roofs.

• The property is individually metered for electricity; water, sewer and trash are provided at the expense of the owner

• Community Features - Heated pool & BBQ area. Onsite laundry

• Unit Amenities – Walk-in closets & high speed internet access

Property Description

El Descanso is an under-performing apartment complex in Phoenix, AZ. It has 67 units and a management office.

There is some deferred maintenance & rents are currently below market rates.

The property is situated along the I-17 corridor & adjacent to the expanding Metro Light Rail. It's very close to shopping centers, transportation, and schools.

This is an opportunity to increase occupancy & increase rents to market value.

Property Highlights

Purchase Price: $2,550,000 $38,059/Unit

Rents (Pro Forma): #Units Rent Current Rent Market 1 Bd/1 Bth 37 $350 $12,950 $650 $24,050

2 Bds/1 Bth 30 $450 $13,500 $795 $23,850 Totals $26,450 $47,900

Value after Stabilization (Year 3) NOI: $301,137 Cap Rate: 6% Stabilized Value: $5,018,957 ($74,910/Unit)

Quick Analysis

Offices: 555 W. 5

th St, 31


www.SolidusTeam.com


Area Overview

El Descanso is located at 2726 West Augusta Avenue. The property is situated just south of Northern on 27th Avenue, a major north-south thoroughfare running through Phoenix, Arizona. There are numerous

retail centers as well as Rio Salado College one-half mile south of the subject property. El Descanso is also convenient to public transportation, with bus service provided along Northern Avenue.

The area immediately surrounding El Descanso contains a variety of schools, single-family residential properties, and retail centers. Several neighborhood shopping centers, parks, churches, and public

facilities are located within one mile of the property. Residents with children are close to numerous schools near El Descanso, including Washington High School, which received an “Excelling” rating from the Arizona Leading Education Board. Just a short drive from the property is the Phoenix Spectrum Mall and the

Westcor Metrocenter Regional Mall, which gives shoppers the choice of over 135 combined retail stores, including Target, Walmart, Macy’s, Sears and Dilliards Clearance Center, two Harkin’s theatres and endless restaurant dining. The Interstate 17 corridor to the north is a significant source of employment, with numerous office and industrial complexes located on both sides of the highway. The I-17 is located

one-half mile to the east of El Descanso. Source: Colliers International – El Descanso Marketing Brochure

Offices: 555 W. 5

th St, 31


www.SolidusTeam.com


Offices: 555 W. 5

th St, 31


www.SolidusTeam.com


Major Employers & Employer Trends Nearly 100 private companies have headcounts of 1,000 employees or more in the Phoenix metro area, providing a significant source of stable employment in the region. Collectively, these companies employ

roughly 400,000 workers in the Phoenix metro; these companies employ nearly one-in-four workers in the Phoenix metro area. These companies are also a source of recent and future employment gains. These businesses recorded average local employment growth of nearly 4 percent from year-end 2009 to year-

end 2010, compared to a minimal 0.3 percent increase in the metro area’s total nonfarm employment during the same timeframe. These companies have announced future staffing additions in the years to come: PayPal is adding 2,000 workers, Intel will add 1,000 positions, First Solar will hire at least 600 employees, USAA will grow by 500 representatives, and Freeport McMoRan and The Vanguard Group will

each add 300 positions. The largest private employers in the state represent a diverse mix of industries. Major retailers, including Walmart, McDonald’s, Target and Home Depot are all among the top employers in the metro. In addition, high-tech businesses such as Honeywell, Intel and General Dynamics all employ more than 5,000 workers each in the Phoenix area.

Healthcare accounts for a significant share of the local workforce and should be one of the fastest-growing segments going forward. Healthcare providers account for nearly 20 percent of the Phoenix area’s 30

largest employers, and this industry will continue to expand, particularly as the region’s population growth significantly outpaces the national average. The Phoenix metro area serves as the headquarters for seven companies on the 2011 Fortune 500 list, up from just four companies on the same list from 2006. The seven businesses combine to employ nearly

35,000 workers in the metro area. The Apollo Group—parent company of the University of Phoenix—is the largest local employer in this group, with approximately 12,000 workers in 2012. While the company has announced closures and staff cuts nationally, operations in the Greater Phoenix area should be largely

unaffected. In addition to serving as the headquarters for some of the country’s largest businesses, the Phoenix area is positioning itself to be home to some of the industries of the evolving economy going forward.

Renewable energy will be a primary source of employment growth in the Phoenix area in the coming years. Renewable energy sources, particularly solar, will be a source of future growth in the area. In addition, the city of Phoenix is establishing the Phoenix Biomedical Campus, which will ultimately feature more than 6 million square feet of biomedical-related research, academic and clinical facilities.

Source: Colliers International –Marketing Brochure

Highlights

• Recent and future employment growth • Major Employers Include: PayPal, Intel, First Solar, USAA, Freeport McMoRan, the Vanguard Group,

Walmart, McDonald's, Target, Home Depot, Honeywell, General Dynamics • Healthcare workforce growing rapidly • 7 Fortune 500 companies are headquartered in Phoenix and employ a combination of 35,000

workers in the metro area. • City of Phoenix is establishing Phoenix Biomedical Campus

Offices: 555 W. 5

th St, 31


www.SolidusTeam.com


Source: Quickfacts.census.gov

Offices: 555 W. 5

th St, 31


www.SolidusTeam.com


Market Overview The Greater Phoenix metro area consists of Maricopa County and Pinal County, which together include approximately 4.2 million residents. Greater Phoenix is the 13th largest Metropolitan Statistical Area

(MSA) in the United States and Phoenix is the fifth most populous city in the country. Major cities in the Phoenix MSA include: Phoenix (population 1.5 million), Mesa (population 448,000), Glendale (population 247,000), Chandler (population 241,000), Scottsdale (population 231,000), Gilbert (population 192,000)

and Tempe (population 170,000). Primary employment sectors include Downtown Phoenix, the Camelback Corridor, the Southeast Valley cities (Tempe, Chandler, Mesa and Gilbert) and Scottsdale. Populations in the West Valley cities, including

Buckeye, Avondale, Glendale and Surprise, are usually smaller than those to the north and the east, but are growing more rapidly than most established areas in the Phoenix MSA. Prior to the onset of the recession, the Phoenix market was routinely among the leaders for employment

and population growth that was common for many Sunbelt markets. As the economy slowed throughout the country, growth slowed in Phoenix as well. As the national economy has been transitioning back into an expansionary phase, population and employment growth in Metro Phoenix has begun to significantly

outpace national rates of growth, trends that are expected to continue in 2013 and 2014. Source: Colliers International –Marketing Brochure

Offices: 555 W. 5

th St, 31


www.SolidusTeam.com


Demographics Maricopa County

Source: Quickfacts.census.gov

Offices: 555 W. 5

th St, 31


www.SolidusTeam.com


Community Profile

Did you know... • Phoenix covers more than 519 square miles and has a population of more than 1.4 million, ranking it the sixth largest city in the country and the largest capital city in terms of population.

• Phoenix is a premier destination, with more than 300 sun-filled days a year and average temperature of 74.2 degrees.

• Greater Phoenix has consistently outpaced the U.S. population growth over the last 18 years. Projections show the region is expected to grow by nearly 60 percent by 2030, bringing the population to more than 6 million people.

• The primary employment sectors and their share of total employment in the Phoenix metropolitan area consist of service industry (43%); trade (18%); government (14%); construction (5%); financial activities (8%); and manufacturing (6%). Major employers of the Phoenix metropolitan area include the state of Arizona, Wal-Mart Stores, Inc., Banner Health Systems, city of Phoenix,

Wells Fargo and Company, Apollo Group, Inc., Maricopa County, Arizona State University, Bank of America, Intel Corporation, JP Morgan Chase and US Airways Group, Inc.

• Greater Phoenix is a $181 billion marketplace that serves as a hub for innovation and entrepreneurs by providing international access for aerospace, high-technology, bioscience,

advanced business services and sustainable technologies companies. Global companies such as Honeywell Aerospace, Freeport McMoran, Avnet, and Republic Services call Phoenix home, while companies such as American Express, USAA, SUMCO Phoenix Corporation, Charles Schwab, and

Mayo Clinic have major operations here. • In January 2000, after a yearlong, in-depth study of management efficiency by the Maxwell School of Citizenship and Public Affairs at Syracuse University, Phoenix was the only city among the nation's 35 largest urban centers to earn an overall grade of “A.” Phoenix also was named the

“Best Run City in the World” in 1993 by the Carl Bertelsmann Foundation and has earned numerous other awards for efficient government operations.

Source: City of Phoenix Planning and Development Department

City Incorporation 1881

Form of Government Council-Manager

City Population * (As of July 1, 2012 - makes Phoenix the sixth-largest U.S. city)

1,464,405

Arizona Population * (Official as of April 1, 2010)

6,392,017

Area (in square miles) 519.1 (larger than Los Angeles)

Elevation 1,124 feet (measured at the Phoenix Sky Harbor Airport)

Median Household Income* $47,085

Average Annual Temperature 74.2 Fahrenheit

Average Precipitation in Inches 7

Average Number of Days of Sunshine, Per Year 334

Moody's General Obligation Bond Rating Aa1

Standard and Poor's General Obligation Bond Rating AAA

Offices: 555 W. 5

th St, 31


www.SolidusTeam.com


Libraries

Library Facilities 17

Library Books and Audio Visual Materials 1,600,000

Library Card Holders 902,237

Annual Circulation 14,300,000

Annual Visitors 5,167,958

Parks & Recreation The statistics below are as of July 2011.

Acres of Developed City Parks 4,721

Acres of Desert Parks/Preserves 30,830

Acres of Desert Parks 7,693

Acres of Undeveloped Park Sites 1,165

Street Landscape Maintained 725 miles

City Parks 188

City Playgrounds 145

City Basketball Courts 137

Municipally-Operated Golf Courses 8

City Swimming Pools 29

Neighborhood/Recreation Centers 17

Full Service Community Centers 13

Public Transit The statistics below are as of July 2011.

Bus Fleet 515

Neighborhood Circulator Fleet 46

Bus and Circulator Service Miles Annually 18,772,193

Bus and Circulator Average Daily Ridership 129,983 Boardings

Light Rail Average Daily Ridership (Phoenix) 24,645 Boardings

Dial-a-Ride Vehicles 125

Dial-a-Ride Service Hours Annually 324,990

Reserve-a-Ride Transportation

(Elderly and disabled clients served) 164,689

Source: Phoenix.gov

Phoenix Financial Standing

Total City Budget * $3.47 Billion

Number of PLT Licenses* 66,000

Standard & Poor's General Obligation Bond Rating AAA

Moody's Bond Rating Aa1

City Retail Sales Tax Rate 2.0%

City Property Tax Rate (Per $100 of assessed valuation)

$1.82

* Projected 2011-12 Fiscal Year

Source: City of Phoenix Budget and Research Department

Offices: 555 W. 5

th St, 31


www.SolidusTeam.com


Phoenix Apartment Forecast Highlights

• Demand for apartment buildings is strong and demand is outpacing available listings • Class A apartments – low to mid-5 percent Cap Rate • Class B apartments (our target after reposition) – close to 6 percent Cap Rate

Source: Marcus & Millichap "Apartment Research Market Report" Phoenix Metro Area Third Quarter 2013

Vacancy, Rents, & Sale Trends Source: Marchus & Millichap Q3 2013 Report

• Renters prefer newer units with modern amenities dropping the vacancy rates to approximately 6

percent • North Glendale submarket has the lowest vacancy at 5%

• Vacancy Outlook: Greater renter

demand will outpace the surge in inventory additions

• Rents have increased over 3% and the

# of units offering concessions has decreased from 33% to 15.6%

• Rent Outlook: Increase occupancy will support increased rents

• Sales jumped 33% over past 4 quarters

• Sales Outlook: Quality inventory

should attract large buyers such as REITs, especially in the Valley

Offices: 555 W. 5

th St, 31


www.SolidusTeam.com


Single Family Market Trends

Highlights

• 17,500 permits were issued for single-family homes, increasing 38% over last 4 quarters of 2013 though it remains well below pre-recession levels.

• Home prices are rising as inventory decreases.

• Median home price is $174,300, a 19% increase since last year

• The monthly mortgage payment for a median-price home in Phoenix, including taxes and insurance, is $33 less than the average rent on an apartment built after 2000. This will limit the

amount that operators in some more affordable neighborhoods can raise rents.

Offices: 555 W. 5

th St, 31


www.SolidusTeam.com


Rent Comparables NOTE: El Descanso will be repositioned to a B property More comps available per request. This is a short list of properties

One Bed + One Bath

Property Name # of Units

(1 Bed)

Size (SF)

Rent Rent/SF Yr Built

Prop. Rank

Accolade 240 720 $625 $0.87 1984 92

Bell Tower 16 470 $579 $1.23 1986 88

Bell Tower 40 583 $589 $1.01 1986 88

Bell Tower 24 592 $605 $1.02 1986 88

Desert Wind 88 530 $600 $1.13 1987 91

Desert Wind 40 635 $627 $0.99 1987 91

Eagle Crest 96 537 $565 $1.05 1986 96

Eagle Crest 70 563 $585 $1.04 1986 96

Eagle Crest 74 627 $639 $1.02 1986 96

Glenridge 75 640 $625 $0.98 1985 90

NW Gardens 67 600 $649 $1.08 1984 95

Oak Ridge 112 625 $569 $0.91 1984 91

Oak Ridge 60 640 $609 $1.08 1984 91

Paradise Falls 8 564 $460 $0.82 1985 95

Paradise Falls 108 694 $565 $0.81 1985 95

Rancho Santa Fe 60 640 $625 $0.98 1985 96

Rancho Santa Fe 60 690 $655 $0.95 1985 96

Valle Cita Gardens 40 620 $695 $1.12 1985 93

AVERAGE 655 $648 $0.99

Two Beds + One Bath

Property Name # of

Units (2

Beds)

Size

(SF)

Rent Rent/SF Yr

Built

Prop.

Rank

Accolade 136 840 $740 $0.94 1984 92

Bell Tower 40 790 $740 $0.94 1986 88

Desert Wind 56 715 $709 $0.99 1987 91

Eagle Crest 74 783 $725 $0.93 1986 96

Glenridge 12 819 $675 $0.82 1985 90

NW Gardens 64 840 $769 $0.92 1984 95

Oak Ridge 24 850 $729 $0.86 1984 91

Paradise Falls 28 946 $649 $0.69 1985 95

Rancho Santa Fe 28 790 $695 $0.88 1985 96

Valle Cita Gardens 64 810 $745 $0.92 1985 93

Vaseo 128 865 $847 $0.98 1987 103

Vaseo 112 977 $872 $0.89 1987 103

Villa Encanto 40 818 $745 $0.91 1984 103

Westcreek 36 842 $700 $0.71 1983 88

AVERAGE 846 $742 $0.88

Source: RealData, Inc - 3Q 2013

Offices: 555 W. 5

th St, 31


www.SolidusTeam.com


Offices: 555 W. 5

th St, 31


www.SolidusTeam.com


Financials

Pro Forma Cash Flow Analysis

Unit Type No. of Beds Current Rent Total Current Rent

Stabilized Rent Total Stabilized Rent

1 Bed / 1 Bath 37 $350 $12,950 $650 $24,050 2 Beds / 1 Bath 30 $450 $13,500 $795 $23,850

TOTALS 67 $26,450 $47,900

Year 1 Year 2 Year 3 Year 4 Year 5 INCOME

Rents $317,400 $330,096 $574,800 $597,792 $621,704 Auxillary $8,040 $8,362 $8,696 $9,044 $9,406 Vacancy ($97,632) ($33,846) ($43,762) ($45,513) ($47,333)

Gross Operating Income $227,808 $304,612 $539,734 $561,323 $583,776 EXPENSES

$3,351/unit $204,800 $210,944 $217,272 $223,790 $230,504 Reserves: $300/unit $20,100 $20,703 $21,324 $21,964 $22,623

Total Expense $224,900 $231,647 $238,596 $245,754 $253,127 Net Operating Expenses $2,908 $72,965 $301,137 $315,569 $330,649 Debt Service $140,400 $140,400 $260,088 $260,088 $260,088 CASH FLOW ($137,492) ($67,435) $41,049 $55,481 $70,561 Cumulative Cash Flow ($137,492) ($204,927) ($163,878) ($108,397) ($37,836) Cash Flow Assumptions 1) Vacancy: 30% (Year 1); 10% (Year 2); 7.5% (Years 3+) 2) Expense Increase: 3% per year 3) Income increase: 4% per year 4) Debt Service: (Year 1-2) 9% fixed interest on $1.56M 5) Debt Service: (Year 3+) 5.25% fixed interest on $3.97M 6) Auxiliary Fees: Application fees, utility reimbursements, late charges, etc ($120/unit)

Offices: 555 W. 5

th St, 31


www.SolidusTeam.com


Solidus Team Dan Carrillo Operations / Administration

Mr. Carrillo is a principal in Solidus and manages the day to day operations. He also takes a role in the development and construction activities of all our ongoing projects.

Dan Carrillo's 32-year career in the real estate and housing industry is filled with a broad range of experiences and leadership roles. In the residential and commercial brokerage community, Dan's experience with successful real estate firms as an executive, sales manager, trainer, business

development expert and director of relocation and corporate services bring a unique mixture of talent and expertise to his current work as a consultant and principle owner of a residential and commercial brokerage here in Los Angeles.

Dan lives in the foothills of Pasadena California with his wife Christine. Ginger Macias, MPH, MS

Investor Relations Miss Macias is a principal at Solidus and is responsible investor relations. She handles all inquires and manages all communications and meetings with investors. Ginger also handles all SEC regulation

compliance requirements. Some of her other responsibilities include acquisitions and marketing. Ginger is an active wholesaler, rehabber, landlord, and educator. She founded OCWholesalers.com in 2008 which has been supplying investment properties at a discount

to rehabbers, landlords, and end-users. Ginger also is a popular mentor and speaker at local investment clubs where she teaches others how to get started in real estate. She owns www.RealEstateInsiders.co an online membership site dedicated to teaching real estate investment strategies online.

Ginger has two Master degrees from the University of Southern California in Epidemiology and Biostatistics.

Al Penaranda Development and Construction

Mr. Penaranda is a principal at Solidus and oversees all the development and construction. This includes conducting all the due diligence/feasibility reports, entitlement processes, and complying with green building standards.

Al Penaranda has been involved in real estate for 25 years. His background is in appraisal of commercial property. He received the MAI designation from the Appraisal Institute, which is considered the highest designation in the appraisal field. His training in appraisal is from the litigation side and for 10 years served as an expert witness in court. Appraisal work and

experience include analysis of virtually every product type, both existing and proposed. Property types include: commercial, industrial hotel/hospitality, recreational, residential care facilities, mixed use, golf courses, and special purpose properties and developments for a

diversified client base. Mr. Penaranda was CEO and owner of North by Northwest Commercial, a commercial appraisal firm located in Old Pasadena. Mr. Penaranda attended California State Long Beach and Los Angeles. He received a

Bachelor of Science degree, majoring in Real Estate.

Offices: 555 W. 5

th St, 31


www.SolidusTeam.com


Alain Romero Asset Acquisition and Sales

Mr. Romero is principal at Solidus and oversees the acquisition and deposition of assets. This includes deal evaluation, contract negotiations, and business development. He also supports investor relations within the company.

Alain Romero is also the broker of record and a managing partner at North By Northwest Capital, a boutique commercial real estate firm and has been practicing real estate for close to 10 years both on the transaction as well as the financing ends of the business.

In addition, his core expertise is in the area of valuation and viability assessment, and financial modeling. He holds a master’s degree in applied economics & finance, a bachelor’s degree in economics from University of California, and is a graduate of the Pepperdine

University, The Graziadio School of Business with Executive Business Management Certificate. Mr. Romero is a former board member of NHREP-LA and a Founder/President of The Society Of Latino Professionals.

Offices: 555 W. 5

th St, 31


www.SolidusTeam.com


Contact Information

If you are interested in learning about this or other opportunities feel free to contact us. Website: www.SolidusTeam.com

Email: [email protected]

Phone: (213) 330-2722 Mailing Address: 3579 E Foothill Blvd, #237

Pasadena, CA 91107 Offices:

555 West 5th Street, 31st Floor Los Angeles, CA 90013