Market Overview
Diversified Properties, LLC is developing a 60-unit Class-A multifamily community in Western Morris County, N.J., one of New Jersey's most sought-after housing markets.
The site is located in the Town of Montgomery, Orange County, NY, approximately 60 miles northwest of New York City, directly north of the New Jersey – New York border and west of the Hudson River. The site is readily accessible to Interstate 84, Interstate 87, and Palisades Parkway, as well as local roads US Routes 6, 9W, and 209.
According to the United States Census Bureau, Orange County's total 2020 population was 401,310 (a 7.6% increase over 2010) and has been among the fastest-growing regions in the NYC metropolitan area. The Town of Montgomery's 2020 population was 23,322 (a 3.2% increase over 2010).
According to the Orange County Partnership Center of Economic Development, the site is also easily accessible to many of Orange County's largest employers, including US Military Academy (West Point), Orange County Regional Medical Center, Crystal Run Health, Access: Supports for Living, St. Luke's Cornwall Hospital, Elant, C&S Wholesale Grocers, Amscan and Empire Blue Cross/Blue Shield.
Submarket Overview
The Town of Montgomery, which has a total area of 51.1 square miles, is bordered on the east by the town of Newburgh and on the north by Shawangunk in Ulster County. The Property is proximate to several large retailers, including Costco, Walmart, Home Depot, and Target.
Sources provided by niche.com, U.S. Census Burea, CoStar, and VisitNC.com.
The site is located at 674 Route 17k in the Town of Montgomery and is readily accessible via Interstate 84, Interstate 87, and Palisades Parkway, as well as local roads US Routes 6, 9W, and 209. The town also benefits from extensive mass transit options, including Stewart International Airport/Air Force Base, the Metro-North Railroad, and numerous bus lines.
Square foot per capita in the 10-mile radius is 2.97 square feet/capita. This compares with 8.33 sqft/capita within a 3 miles radius and 10.92 sqft/capita within a 5 miles radius. For other comparison purposes, the US national average is 7.46 sqft/capita.
The rental rate in this market has trended up in the last 3 months, by a total of 1.43%. This would indicate an increased demand against available supply. In addition to the Subject, within a 3 miles radius, there is one known new development and within a 5 miles radius, there is one known new development. The Property is located on 17K, a well-trafficked road near Route 87 and conveniently accessible to several cities in the area.
This investment offers platform investors an attractive target internal rate of return of 20.0% and equity multiple of 1.50x.
This development will bring a new, Class-A rental apartment product to Western Morris County. The apartment market has benefitted from the outflow of residents from dense urban locales. The Western Morris County submarket's overall apartment vacancy rate is a low 4.7% and landlords are experiencing strong rent growth (7.9% over the last 12 months). A vast majority (95% of the 1,245 units currently under construction) will be delivered to the submarket in 4Q21 and are anticipated to be stabilized when our development is available for lease in the 3Q23.
Morris County is home to 33 Fortune 500 businesses and other major area employers, including AT&T, Pfizer, ExxonMobil, Novartis, Picatinny Arsenal, and St. Clare's Health System. While Morris County has a high cost of living (median home price of $515,800 compared to the national average of $291,700), niche.com ranks Morris County #2 in terms of best counties to live in N.J. in 2021 due to quality public schools, favorable family environment, jobs, diversity, and nightlife. The county is also well connected to the region and NYC metro area via a robust highway system and public transportation network.
| # of Units |
60 |
| # of Buildings |
1 |
| Construction Completion Date |
10/1/2023 |
| Parking Ratio |
2.0 Per Unit |
| Development Yield on Cost |
5.93% |
| Acquisition Price |
$2,536,650 |
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Attractive investor target internal rate of return of 20.0% and target equity multiple of 1.50x.
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Construction will be directly managed by the sponsor's hands-on executive team and its in-house construction management firm, Morris Construction Management, LLC. In addition, the Sponsor will manage the lease up and its affiliate, DP Property Management, LLC, will manage the Property.
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The Sponsor has extensive experience developing and constructing multifamily projects in New Jersey. The Sponsor has developed over 10,000 multifamily units across New Jersey, New York, Pennsylvania, Connecticut, and Maryland. Diversified Properties, LLC, recently named by NJBIZ as one of New Jersey's top 2021 developers, currently manages an existing and development pipeline totaling 4,000 residential units across 10 diverse communities.
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The Property has been vacated and the Sponsor has commenced site improvements leading to a solidified construction and lease-up timeline
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Strong apartment market fundamentals make this development Project attractive to investors and buyers of multifamily product (4.7% submarket vacancy rate and 7.9% asking rent growth over the last 12 months).
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Through 2025, Northern N.J. job growth is projected to meet or exceed the national average and the current median household income well above the national average ($92,000 vs $69,000). In addition, several large employers, including AT&T, Pfizer, ExxonMobil, Novartis, Picatinny Arsenal, and St. Clare's Health System, are proximate to the site.
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The site offers direct mass transit access to New York City and regional connectivity via Interstates 80, 287, and Route 46.
Business Plan
The business plan is to develop a 60-unit Class A multifamily community in Wharton, NJ. The land is under contract for $2,250,000. Tapping into unmet demand for rental housing, the Sponsor will leverage its 20+ year track record of successful multifamily development in developing Irondale at Wharton. The investment represents a unique opportunity to enter Morris County's extraordinarily high barrier-to-entry housing market.
Total capitalization is approximately $19,500,000 (or $325K per unit). The investment will be funded by a $13,665,000 construction loan (70% LTC), $5,000,000 in LP equity and $850,000 in Sponsor equity. Construction is anticipated to be 15 months (complete by Oct 2023) and the community is projected to be stabilized in 19 months (Feb 2024). The Project is anticipated to be sold in Oct 2024 for gross sale proceeds of $23,100,000 (or $385K per unit), representing a 5.00% cap rate.
There will be 54 market-rate units and 6 affordable rate units (as mandated by state law). The unit mix is as follows: 4 studio units (7% of mix), 39 1BR/1BA + Den units (65%), 11 2BR/2BA units (18%) and 6 affordable units (10%). The average unit size is 844 square feet, and the community will feature underground parking and a community gym. Unit amenities include washer/dryers and a fully equipped kitchen with stainless steel appliances and granite countertops.
Development Budget
|
Acquisition Cost |
$ Amount |
Per Unit |
Per SF |
| Purchase Price |
$2,250,000 |
$37,500 |
$37.25 |
| Closing Costs |
$286,650 |
$4,778 |
$4.75 |
| Total Acquisition Costs |
$2,536,650 |
$42,278 |
$41.99 |
|
|
|
|
| Capital Expenditures - Hard Costs |
$ Amount |
Per Unit |
Per SF |
| Hard Costs (Residential) |
$10,098,000 |
$168,300 |
$167.16 |
| Hard Cost Contingency (Residential) |
$1,009,800 |
$16,830 |
$13.34 |
| Site Work |
$2,022,657 |
$33,711 |
$26.73 |
| Site Work Contingency |
$101,133 |
$1,686 |
$1.34 |
| Total Hard Costs |
$13,231,590 |
$220,527 |
$219.03 |
|
|
|
|
| Capital Expenditures - Soft Costs |
$ Amount |
Per Unit |
Per SF |
| Legal |
$50,000 |
$833 |
$0.83 |
| Environmental |
$35,720 |
$595 |
$0.59 |
| Engineering and Surveying |
$20,000 |
$333 |
$0.33 |
| Architectural |
$150,000 |
$2,500 |
$2.48 |
| Consultants |
$50,835 |
$847 |
$0.84 |
| Project Permit Fees |
$95,571 |
$1,593 |
$1.58 |
| Utility and Design Connection Fees |
$256,792 |
$4,280 |
$4.25 |
| Performance and Maintenance Bonds |
$6,000 |
$100 |
| Insurance |
$345,000 |
$5,750 |
$5.71 |
| Salaries and Marketing |
$500,000 |
$8,333 |
$8.28 |
| Bank Financing Fees |
$81,450 |
$1,358 |
$1.35 |
| Real Estate Taxes (During Construction) |
$60,626 |
$1,010 |
$1.00 |
| Operating Expense Deficit (During Leaseup) |
$28,600 |
$477 |
$0.47 |
| Construction Management Fees |
$661,579 |
$11,026 |
$10.95 |
| Soft Cost Contingency |
$131,441 |
$2,191 |
$2.18 |
| Total Soft Costs |
$2,473,614 |
$41,227 |
$40.95 |
|
|
|
|
| Other |
$ Amount |
Per Unit |
Per SF |
| Construction Interest Reserve - Financing |
$751,620 |
$12,527 |
$12.44 |
| Developer Fee |
$529,263 |
$8,821 |
$8.76 |
| Grand Total |
$19,522,737 |
$325,379 |
$323.18 |
|
|
|
|
Reliance Technologies, LLC, an affiliate of RelianceProperties, operates the RelianceProperties Platform. Reliance Technologies, LLC charges a fixed, non-percentage-based fee for real estate companies and their sponsors to use the Platform and for Platform-related services. Please see the Fees and Disclaimers sections below for additional information concerning fees paid to Reliance Technologies, LLC.
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Sources and Uses
Total Capitalization
| Sources of Funds |
$ Amount |
$/Unit |
| Debt |
$13,665,916 |
$227,765 |
| GP Investor Equity |
$856,821 |
$14,280 |
| LP Investor Equity |
$5,000,000 |
$83,333 |
| Total Sources of Funds |
$19,522,737 |
$325,379 |
|
|
|
| Uses of Funds |
$ Amount |
$/Unit |
| Purchase Price |
$2,250,000 |
$37,500 |
| Closing Costs |
$286,650 |
$4,778 |
| Hard Costs |
$12,120,657 |
$202,011 |
| Hard Cost Contingency |
$1,110,933 |
$18,516 |
| Soft Costs |
$2,342,173 |
$39,036 |
| Soft Cost Contingency |
$131,441 |
$2,191 |
| Interest Reserve |
$751,620 |
$12,527 |
| Developer Fee |
$529,263 |
$8,821 |
| Total Uses of Funds |
$19,522,737 |
$325,379 |
(1). The Sponsor's equity contribution may consist of friends and family equity and equity from funds controlled by the Sponsor.
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Debt Assumptions
The expected terms of the debt financing are as follows:
- Loan-To-Value:70.0%
- Estimated Proceeds: $13,665,916
- Interest Type: Floating
- Spread Above One-Month PRIME: 0.50% [PRIME + 50bps (Floor Rate 4.00%)]
- Interest-Only Period:2 Years
- Amortization: None
- Estimated Proceeds: $33,000,000
- Prepayment Terms: Exit Fee of 33 bps if sold at stabilization
- Modeled Refinance : No
A substantial portion of the total acquisition for the Property will be paid with borrowed funds, i.e., debt. Please carefully review the Disclaimers section below for additional information concerning the Sponsors use of debt
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Distributions
Diversified Properties, LLC intends to make distributions from DP Wharton LLC as follows:
(1). 85% / 15% (85% to Investors / 15% to Promote/Carried Interest) of excess cash flow to a 8.0% IRR;
(2). 75% / 25% (75% to Investors / 25% to Promote/Carried Interest) of excess cash flow to a 12.0% IRR;
(3). 65% / 35% (65% to Investors / 35% to Promote/Carried Interest) of excess cash flow to a 14% IRR;
(4). 60% / 40% (60% to Investors / 40% to Promote/Carried Interest) of excess cash flow thereafter.
Diversified Properties, LLC intends to make distributions to investors after the payment of the company's liabilities (loan payments, operating expenses, and other fees as more specifically set forth in the LLC agreements, in addition to any member loans or returns due on member loan).
Distributions are expected to start in January 2024 and are projected to continue on a quarterly basis thereafter. Distributions are at the discretion of Diversified Properties, LLC, who may decide to delay distributions for any reason, including maintenance or capital reserves.
Diversified Properties, LLC will receive a promoted/carried interest as indicated above, and a portion of this promoted/carried interest may be received by RP Admin, LLC.
Cash Flow Summary
|
Year 1 |
Year 2 |
Year 3 |
| Effective Gross Revenue |
$0 |
$1,026,392 |
$855,124 |
| Total Operating Expenses |
$0 |
$389,213 |
$285,928 |
| Net Operating Income |
$0 |
$637,179 |
$569,195 |
|
|
|
|
| Project-Level Cash Flows |
|
|
|
|
Year 0 |
Year 1 |
Year 2 |
| Net Cash Flow |
($5,856,821) |
$0 |
$449,273 |
|
|
|
|
| Investor-Level Cash Flows |
|
|
|
|
Year 0 |
Year 1 |
Year 2 |
| Net Cash Flow |
($50,000) |
$0 |
$4,511 |
(1). (1) Reliance Technologies, LLC and its affiliates do not provide any assurance of returns. Returns presented are net of all fees. Please carefully review the Fees and Disclaimers sections below for additional information concerning Sponsor's use or projected returns and fees paid to Sponsor and Reliance Technologies, LLC.
Management
Diversified Properties, LLC
Diversified Properties, LLC (the "Sponsor") is a Montville, N.J.-based residential and commercial development and management company founded in 2000, specializing in value creation through the successful execution of multifamily, office, self-storage, retail, and industrial ground-up development and redevelopment projects throughout the northeastern United States. The Sponsor utilizes its substantial in-house expertise in acquisitions, architectural and engineering design, land use, entitlements, construction, leasing, sales, and property management, within an agile and scalable operational structure to capitalize on opportunities in key growth markets. Diversified Properties, LLC currently has developed real estate valued at more than $1.5 billion and boasts a portfolio valued in excess of $500 million.
With deep experience in multifamily development and management, Diversified Properties, LLC has successfully created dozens of multifamily communities comprising over 10,000 units across N.J., N.Y., PA, MD and CT and, today, manages an existing and development pipeline spanning 4,000 residential units across 10 diverse communities.
Highlighting their leadership position in N.J.'s real estate community, the sponsor was recently recognized as one of the state’s Leaders in Real Estate, Construction and Design by NJBIZ. Founder Nicholas Minoia was also recently named to NJBIZ's 2021 Power 50 in Real Estate list and was selected as a GlobeSt. Real Estate Forum Multifamily Influencer in 2021.
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Diversified Properties Track Records
| Property Name |
City |
State |
Units |
Year Built |
Date Acquired |
Sale Date |
IRR |
| Clemson |
Clemson |
SC |
146 |
2011 |
12/31/2013 |
12/1/2016 |
137% |
| Newing Oak |
Austin |
TX> |
20 |
1970 |
4/1/2013 |
2/1/2018 |
43% |
| Sola Flats |
Austin |
TX |
16 |
1972 |
2/1/2012 |
4/4/2018 |
36% |
| Midtown Flats |
Austin |
TX |
41 |
1972 |
4/15/2015 |
4/30/2018 |
75% |
| Mueller Place |
TX |
86 |
1969 |
8/15/2015 |
7/31/2018 |
28% |
| Highland Flats |
Austin |
TX |
24 |
1972 |
5/8/2015 |
8/21/2018 |
39% |
| Harmon Square |
Austin |
TX |
74 |
1968 |
12/1/2017 |
10/4/2018 |
133% |
| Soco Flats |
Austin |
TX |
20 |
1972 |
2/1/2015 |
10/15/2018 |
56% |
| Vanitas |
Austin |
TX |
126 |
1971 |
9/15/2016 |
10/23/2018 |
29% |
| Velo |
Austin |
TX |
70 |
1979 |
11/30/2016 |
10/26/2018 |
22% |
| Sum/Average |
|
48 |
9,656 |
1976 |
11/10/2017 |
10/15/2020 |
45% |
Disclaimers
Sponsor's Projects and Targets
*Assumptions and projections included in the information on this Page, including pro forma projections (collectively “Projections”) were provided by the Sponsor or an affiliate thereof and are not reflective of the position or opinions of, nor are they endorsed by, Reliance Technologies, LLC or its affiliates, or any other person or entity other than the Sponsor or its affiliates. Reliance Technologies, LLC and its affiliates
do not provide any assurance of returns or the accuracy or reasonableness of the Projections provided by the Sponsor or its affiliates. There can be no assurance that the Sponsor’s methodology used for calculating any Projections, including Target IRR, Target Annualized Cash-on-Cash Return, and Target Equity Multiple (“Targets”), are appropriate or adequate. The Sponsor’s Projections and Targets are hypothetical, are not based on actual investment results, and are presented solely for the purpose of providing insight into the Sponsor’s investment objectives, detailing its anticipated risk and reward characteristics and for establishing a benchmark for future evaluation of the Sponsor’s performance. The Sponsor’s Projections and Targets are not a predictor, projection or guarantee of future performance. There can be no assurance that the Sponsor's Projections or Targets will be met or that the Sponsor will be successful in meeting these Projections and Targets. Projections and Target returns should not be used as a primary basis for an investor’s decision to invest.
No Approval, Opinion or Representation, or Warranty by Reliance Technologies, LLC or it Affiliates
The information on this Page, including the Sponsor's offering documentation, which may include without limitation the Private Placement Memorandum, Operating or Limited Partnership Agreement, Subscription Agreement, the Project Summary and all exhibits and other documents attached thereto or referenced therein (collectively, the “Investment Documents”) was provided by the Sponsor or an affiliate thereof.
Reliance Technologies, LLC makes no representations or warranties as to the accuracy of such information and accepts no liability therefor. No part of the information on this Page is intended to be binding on Reliance Technologies, LLC or its affiliates, or to supersede any of the Sponsor's Investment Documents.
The opinions expressed on this page are solely the opinions of the Sponsor and its affiliates and none of the opinions expressed on this Page are the opinions of, nor are they endorsed by, Reliance Technologies, LLC or its affiliates.
Sponsor's Information Qualified by Investment Documents
The Information on this Page, including of the principal terms of the Sponsor's offering, is qualified in its entirety by reference to the more complete information about the offering contained in the Sponsor's Investment Documents. The information on this Page is not complete, and each prospective investor should carefully read all of the Investment Documents and any supplements thereto, copies of which are available by clicking the links above or upon request, before deciding whether to make an investment. The information on this page should not be used as a primary basis for an investor's decision to invest. In the event of an inconsistency between the information on this Page and the Investment Documents, investors should rely on the information contained in the Investment Documents. The information on this Page and the information in the Investment Documents are subject to last minute changes up to the closing date at the sole discretion of the Sponsor and its affiliates.
Risk of Investment
This real estate investment is speculative and involves substantial risk. There can be no assurances that all or any of the assumptions will be true or that actual performance will bear any relation to the hypothetical illustrations herein, and no guarantee or representation is made that investment objectives of the Sponsor will be achieved. In the event that actual performance is below the Sponsor's Targets, your investment could be materially and adversely affected, and there can be no assurance that investors will not suffer significant losses. A loss of part or all of the principal value of your investment may occur. You should not invest unless you can readily bear the consequences of such loss. Please see the Sponsor's Investment Documents for additional information, including the Sponsor's discussion concerning risk factors
Risk of Forward-Looking Statements
Forward-looking statements are found here and in the applicable Investment Documents and may include words like “expects,” “intends,” “anticipates,” “estimates” and other similar words. These statements are intended to convey the Project Sponsor's projections or expectations as of the date made. These statements are inherently subject to a variety of risks and uncertainties. Please see the applicable Investment Documents for disclosure relating to forward-looking statements. All forward-looking statements attributable to the Sponsor or its affiliates apply only as of the date of the offering and are expressly qualified in their entirety by the cautionary statements included elsewhere in the Investment Documents. Any financial projections are preliminary and subject to change; the Sponsor undertakes no obligation to update or revise these forward-looking statements to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events. Inevitably, some assumptions will not materialize, and unanticipated events and circumstances may affect the ultimate financial results. Projections are inherently subject to substantial and numerous uncertainties and to a wide variety of significant business, economic and competitive risks, and the assumptions underlying the projections may be inaccurate in any material respect. Therefore, the actual results achieved may vary significantly from the forecasts, and the variations may be material.
Sponsor's use of Debt
A substantial portion of the total acquisition for the Property will be paid with borrowed funds, i.e., debt. There can be no assurance that the Sponsor will secure debt on the rates and terms noted above, or at all. All of the Sponsor's estimated rates and terms of the debt financing are subject to lender approval, including but not limited to the annual interest rate and possible increases in capital reserve requirements for funds to be held in a lender-controlled capital reserve account. The use of borrowed money to acquire real estate is referred to as leveraging. Leveraging increases the risk of loss. If the Sponsor were unable to pay the payments on the borrowed funds (called a "default"), the lender might foreclose, and the Sponsor could lose its investment in its property.
In addition, unless the debt provides for a fixed rate of interest during the term of the loan and/or any subsequent extensions, the total amount of interest paid over the term of the debt will increase by the same amount as the related index. For example, if the index rate increases by 0.50% (50 basis points) the interest rate on the loan will increase by the same amount. The amount of such interest rate increases may be capped either by its terms or as the result of the Sponsor entering into an arrangement that caps the interest rate with respect to the debt at a particular rate.
Sponsor's Offering is Not Registered
The interests offered by the Sponsor will not be registered under the Securities Act of 1933, as amended (the “Securities Act”) in reliance upon the exemptions from registration pursuant to Rule 506(c) of Regulation D as promulgated under the Securities Act (“Private Placement.”). In addition, the interests will not be registered under any state securities laws in reliance on exemptions from registration. Such interests are subject to restrictions on transferability and resale and may not be transferred or resold except as permitted under applicable state and federal securities laws pursuant to registration or an available exemption. All Private Placements on the RelianceProperties Platform are intended solely for “Accredited Investors,” as that term is defined Rule 501(a) of the Securities Act. Prospective investors must certify that they are Accredited Investors and provide either certain supporting documents or third party verification, and must acknowledge that they have received and read all investment materials.
Reliance Technologies, LLC Fees and Conflicts
Reliance Technologies, LLC, an affiliate of RelianceProperties, operates the RelianceProperties Platform. Reliance Technologies, LLC charges a fixed, non-percentage-based licensing fee for real estate companies and their sponsors to license and use the Reliance Technologies LLC's proprietary Platform, including one-time flat licensing fees for its Technology Solution and an ongoing quarterly flat licensing fees for its Administration Solution. An estimate of the Technology Solution licensing fee is included in the Closing Costs above and is intended to be capitalized into the transaction at the discretion of the Sponsor. The licensing fees received by Reliance Technologies, LLC are disclosed in the relevant operating agreement(s). Additionally, from time to time, employees of Reliance Technologies, LL C and its affiliates invest in Sponsor's offering. Reliance Technologies LLC's receipt of licensing fees and its employee's investments in Sponsor's offering creates a conflict of interest between EquinoxProperties and its affiliates, and investors or prospective investors.
No Investment Advice
RelianceProperties and Reliance Technologies, LLC are not a registered broker-dealer, investment adviser or crowdfunding portal. Nothing on this Page should not be regarded as investment advice, either on behalf of a particular security or regarding an overall investment strategy, a recommendation, an offer to sell, or a solicitation of or an offer to buy any security. Advice from a securities professional is strongly advised,
and we recommend that you consult with a financial advisor, attorney, accountant, and any other professional that can help you to understand and assess the risks associated with any real estate investment.
For additional information on risks and disclosures visit https://www.reliancepropertiesrealtor.com/investment-disclosure.php.
