Equity Pledge Debt Fund 814
Type: Debt
Target: $6,000,000
Annual Return: 8% - 8.25%
Min-invest Amount: $10,000
Duration: 3 - 6 Months
Offering Amount: $6,000,000 U.S. Dollars
Estimated Return: 8.00% - 8.25% Annualized Return*1
Investment Type: Equity Pledge Loan
Unit Price: $10,000 per Subscription Unit
Offering Date: November 2020
Investment Horizon: 3 - 6 Months(3+1+1+1 Months)
Dividend Schedule: Prepaid before per Period
Special offer: 3%Condominium Purchase Discount*2
*1 8% Annualized Return For Investment of 1-19 Units;8.25% Annualized Return for investment above 20 Units.
*2 Investor with more than 25 units; Accept RMB transactions.
Address: 134-37 35th Ave, Flushing, Queens, NY, 11354
Area: Flushing, Queens, New York
Lot Size: 42,050 Square Ft.(165*235 FT)
Zoning: R6, C2-2(FAR is 4.8 times)
Building Size: 201,840 Square Ft.
Closing Price of Land: $4,300,000 (2003)
Current Price of Land: $44,404,000 (2018)
The development is a mega mix-used building with 16 floors and a total of 280,000 square feet. After completion, it will contain 9 retail spaces, a 210-key Four Points by Sheraton hotel, and 100 condominiums from 9th to 16th floor. The building also include 186 parking lots.
The developer has purchased the land in 2003 at a price of $4.3 million. The proposed architectural plan and working permit of the proposed development were approved in July 2015, and the construction began in 2016. In December 2019 , the residential units of the development were completed and obtained TCO (Temporary Certificate of Occupancy). The condominiums are currently under operations, offering living facilities like swimming pool, gym, 24-hour doorkeeper and other services. The rest parts of the development are still under construction..
| Expected Dividend Calendar | |||||||
|---|---|---|---|---|---|---|---|
| Round of Dividend | Round of Investment | Funding Amount | Dividend Date *1 | Counting Date | Ending Date | Dividend Period | Notes |
| First | Phase I | $2,000,000 | No Later Than 12/14/2020 | 11/30/2020 | 2/28/2021 | 3 Months | Pre-Paid Dividend |
| Phase II | $2,000,000 | No Later Than 1/14/2021 | 12/30/2021 | 2/28/2021 | 2 Months | Pre-Paid Dividend | |
| Phase III | $2,000,000 | No Later Than 2/14/2021 | 1/31/2021 | 2/28/2021 *2 | 1 Month | Pre-Paid Dividend | |
| Second | No Later Than 3/14/2021 | 3/1/2021 | 3/31/2021 | 1 Month | Extension Options Owned by Developer | ||
| Third | No Later Than 4/14/2021 | 4/1/2021 | 4/30/2021 | 1 Month | Extension Options Owned by Developer | ||
| Fourth | No Later Than 5/14/2021 | 5/1/2021 | 5/31/2021 | 1 Month | Extension Options Owned by Developer | ||
*1 In case of holidays and non-working days, the dividend date will be automatically postponed to the next working day.
*2 After the expiration of the first Dividend Period, the developer has the option to extend the borrowing 3 times. If the developer chooses to extend, the investors will receive dividends at the same rate of return during the postponement.
Sufficient Value in the Collateral
According to the appraisal provided by CBRE in January 2018, after completion, the value of the property is estimated in $150 million.
Among the development, based on the latest sales projection in condo book, the value of 100 condominiums is around $108 million; the 210-key hotel is worth $61.8 million; 9 retail spaces are valued about $10.72 million; 3 community facilities are around $13.59 million; 186 parking lots have market value about $13.67 million. The total sale price of the project property is estimated over $208 million.
By the end of October 2020, the total loan outstanding of the development is $35 million, mortgaged by 100 condominiums. The rest of the development has not been collateralized.
The short-term loan provided by CrowdFunz Fund 814 is pledged by the borrowing entity’s 100% ownership interest. The developer’s own equity investment is over $37.5 million, which is 6.25 time of the loan provided by CrowdFunz Fund 814. As of this offering, the value of the developer’s pledged equity is estimated over $100 million. In addition, to protect the interests of fund investors, the developer also provides unlimited personal guarantee in this borrowing.
Prime Location, In Demand Market
The development is located in the prime area in Flushing, Queens. The surrounding public transportation is well developed, offering 7 train lines, Bus lines like Q25, Q34, Q50, and Q19. The tenants can reach various communities in Queens or take trains directly to Manhattan or Long Island. It also takes about 10-minutes driving from the site to JFK airport and 5-minutes to LGA airport.
In recent years, with the flourishing of Asian and Chinese communities, the demands for residential and commercial properties in Flushing have been increasing drastically. Compared with other areas in New York, Flushing is vibrant and growing with a large population density. The real estate market continuously shows its potential, aligning with the boom of regional business environment.
According to the data from Trulia and Zillow, the median price of house sold in Flushing is about $508,053, and the median monthly rental price is about $2100. Those increases have been steady over the last 7 years.
Transparent Fund Usage, Explicit Exit Strategy
Currently, all condominiums in the development have been completed with acquired TCO, and the construction of rest parts is in a process of 80%. The remaining works include installation of walls, doors and windows, completion of the interior decorations of the hotel and other spaces. It is materially considered that the construction risk in the development is low. The loan offered by CrowdFunz Fund 814 will help the developer fill urgent needs on construction and FF&E expenses, which affected by trade war and pandemics in this year. Upon completion, the developer will apply for refinancing to repay the loan originated by CrowdFunz Fund 814.
Seasoned Developer with Approved Experience
The developer has been deeply involved in real estate market of New York City for 30 years. It is well-known and has a good reputation in the local market. Its successful projects in the past are mainly concentrated in Queens. In recent years, it has extended the developments in medium-sized, mixed-use, and residential projects. In addition, the developer has successfully cooperated with CrowdFunz Holding LLC. through CrowdFunz Fund 810 and Fund 814. Both funds are currently under good operations, and the construction progresses are stable. Based on current cooperation, the developer’s past records, its development strength, and business reputation, we believe that CrowdFunz Fund 814 will help create a deeper cooperative relationship.
| Source of Capital | Percentage | |
|---|---|---|
| Mortgage Originated by bank of China | $55,000,000 | 55.84 % |
| Loan Originated by CrowdFunz Fund 814 | $6,000,000 | 6.09 % |
| Developer’s Equity Investment | $37,500,000 | 38.07% |
| Total | $98,500,000 | 100.00% |
After financing from CrowdFunz Fund 814, the total source of capital consists of a $55,000,000 first lien mortgage originated by Bank of China, accounted for 55.84%, a $6,000,000 mezzanine loan originated by CrowdFunz Fund 814, accounted for 6.09%, and $37,500,000 equity investment by the developer, accounted for 38.07%.
In the case of default, CrowdFunz Fund 814 has the right to directly take over the borrowing entity’s 100% ownership interest and the key shareholder’s personal asset, liquidating for investment repayments.
| Use of Capital | Percentage | ||
|---|---|---|---|
| Funding Gap | Expenses | ||
| Land Cost | $4,300,000 | 4.37 % | |
| Construction Cost | $3,300,000 | $58,500,000 | 62.74% |
| Interior Soft Cost | $2,700,000 | $7,800,000 | 10.66% |
| Soft Cost | $12,400,000 | 12.59% | |
| Financing Cost | $9,500,000 | 9.64% | |
| Total | $98,500,000 | 100.00% | |
The developer purchased the land in $4,300,000 17 years ago, waiting for development opportunity. The value of the land has appreciated nearly 10 times over time. The loan originated by CrowdFunz Fund 814 will be used for ongoing construction and interior decoration expenses. Since 80% of the development has been finished, soft cost and financing cost might be fixed. The loan provided by CrowdFunz Fund 814 will help the developer accelerate the processes so to obtain better refinancing opportunities and reduce total cost of capital.
| Fund Usage | Percentage | |
|---|---|---|
| Electrical | $255,000 | 4.25% |
| Plumbing | $387,000 | 6.45% |
| Doors and Window | $905,000 | 15.08% |
| Mechanical HVAC | $220,000 | 3.67% |
| Interior | $1,119,600 | 18.66% |
| FF&E | $1,300,000 | 21.67% |
| Finish Carpentry | $1,400,000 | 23.33% |
| Conveying System | $115,400 | 1.92% |
| Fire Alarm | $115,000 | 1.92% |
| Carpentry | $183,000 | 3.05% |
| Equity Pledge Debt Fund | $6,000,000 | 100.00% |
* Data Provided by Developer
We projected that the total mezzanine loan originated by CrowdFunz Fund 814 is up to $6,000,000 in three disbursements. The loan is expected to be used for the remaining construction and soft costs.
The loan will mainly assist the developer to accelerate the installation of the walls, doors and windows before the winter season of 2021 so the interior decoration can be protected against uncertain weather conditions. Another part of the loan will be used to pay the suppliers of wood furniture and soft decoration in order to reach on-time deliveries. These two parts comprise 60% of the entire loan provided by CrowdFunz Fund 814.
The rest of the loan is expected to be used for the construction of retail spaces, community facilities, and parking lot for reaching scheduled development completion.
Demographics:
| Zip Code 11354 | |
|---|---|
| Regional Population | 55,200 |
| Median Age | 44.7 |
| High School Education or Above | 73% |
| Ethnics | Asian(63%),White(16%),Latino(16%) |
| Family Median Income | $51,615 |
| White Collar/Blue Collar | 84.9%/15.1% |
| Child-Bearing Family | 25.2% |
| Average Family Size | 2.7 |
| Primary Residence | 39% |
Flushing has great foundation for living and businesses, with convenient traffic, excellent education system and well-developed facilities. The area becomes one of the top choices for many Asian enterprises and residents. Chinese investments and immigrations are extremely active in the area. There are more and more luxury apartments and large shopping malls constructed here, and the communities are experiencing the gentrification and modernization.
The population is diversified in this region. The majority of the residents is Asian; other groups include Latinos, Middle Easterners, Europeans, and African Americans.
The residents in the region are mainly middle-age families with stable income. The average age is 44.7 and ¼ of the families have children. The primary residence rate in the region is only 39%, which indicates strong demand for residential rental. Many new immigrants also make the rental market very hot. Due to the low housing inventory available for sale and high needs of buyers, the house prices are constantly going up. Investing in the real estate market in this region has certain potential.
* Data Source: United States Zip Codes. Org. & Esri Zip Code Lookup，2020.11.
Residential Properties Nearby
From the perspective of residential real estate market, low-to-middle-end condominiums were dominant in transactions before 2010, and only a few luxury residential properties were developed.
After 2010, with significant growth of new population and higher resident’s average income, the residential real estate market has been transforming to be more diversified. The prior inventories available for sale cannot satisfy buyers’ needs in consequence of more middle-to-high-end residential properties being built and sold. As of 2020, the median asking price of residential property is over $800,000. The transactions of low-end condominiums in 2015 was decreased to 40% of the amount in 2011.
* Data Source: StreetEasy, November 2020.
Location:
The surrounding public transportation of the site is well-developed, with a 7-minunte walking distance to the subway station of Line 7 and a 10-minute walking distance to LIRR train station, allowing passengers to take 30 minutes to Manhattan and Long Island. It takes about 2 minutes to walk to main bus lines nearly and takes 20-minute driving to JFK airport.
Transportation:
Subway: 7 (About 7-min Walking)
Bus: Q19、Q20、Q25、Q34、Q50(About 2-min Walking)
Train: LIRR：Flushing Main Street Port Washington(About 2-min Walking)
To Midtown Manhattan: 11 Miles (About 30-min Driving)
To JFK Airport: 8.7 Miles (About 20-min Driving)
To LGA Airport: 2.7 Miles (About 5-min Driving)
Nearby Schools:
There is an integrated basic education system in Flushing area, covering many elementary schools, junior high schools, and high schools. The schools can fit the residents 'needs on children's education. There are also many language learning centers and early childhood leaning institutions nearby.
Living Facilities:
Flushing is the largest Chinese–based business area in the Northeast America, which provides residents almost all Asian consumer needs. Large Chinese and Korean supermarkets are plenty distributed in this region; bilingual shopping centers are all over the communities.
Recreation:
There are museums, gyms and entertainment venues nearly. The Corona park is one of the cultural landmarks in this region. There are also New York Hall of Science , New York Badminton Center, National Tennis Center, Queens Museum, Queens Zoo and Citi Field close by.
Developer Company: Century Development Group
Website: http://www.centurygroupdevelopment.com/
Prior Cooperation: CrowdFunz Fund 810/CrowdFunz Fund 813
Century Development Group Established in 1990, it focuses on commercial and residential development projects. Successfully developed properties are spread across the Queens and Brooklyn in New York City. At present, the developer has worked on over a1 million square feet of real estate developments, and the total value of the developed projects exceeds $300 million.
The company has more than 30 years of local experience in the development of multi-family and condominiums. The projects currently under development are valued at more than $420 million. Relying on the expanding scale of development in mixed-use and residential properties, Century Development Group currently ranks among the leading Chinese developers in the New York area.
Successful Projects By Developer:
The loan originated by CrowFunz Fund 814 is a short-term mezzanine debt investment which helps the developer fill construction costs. The design of this fund is tailored for investors who are looking for short-term real estate investments with similar risk-adjusted return.
Affected by pandemics, all construction sites in New York have experienced mandatory stop-working order in the second quarter this year. Also, the supply chain of US-China construction materials as well as local construction supplies and logistics are materially impacted. The real estate projects currently under construction must overcome the increasing costs of labor and materials and postponed project deadline. Meanwhile, the short-term financing needs of good real estate projects create attractive investment opportunities.
We believe that the underlying development of CrowdFunz Fund 814 is solid, and we trust the developer’s reputation and credibility. From the perspective of the capital stack in this project, the debt ratio is low, and the developer has been invested $37.5 million cash in equity, which is 6.25 times greater than the loan provided by CrowdFunz Fund 814. The overall investment risk of CrowdFunz Fund 814 is relatively lower than the industrial level.
The whole investment process of CrowdFunz Fund 814 is controlled strictly based on the actual progress of the project. After evaluation, we will determine the loan disbursement schedule to help the developer reach the projected goals effectively while managing the risk of debt investment at the same time.
| RISK CATEGORY | 0 | 1 | 2 | 3 | 4 |
|---|---|---|---|---|---|
| Sponsor | |||||
| Experience | 1-3 Years | 3-5 Years | 5-10 Years | 10-15 Years | 15+ Years |
| Tracking Record | 0-3M | 3-10M | 10-30M | 30-50M | 50M+ |
| Credit Score | Low | Accept | Fair | Good | Excellent |
| Financials | |||||
| Investor Equity | 1-20% | 20-30% | 30-40% | 40-50% | 50-60% |
| Loan-to-cost ratio | 85-100% | 70%-85% | 65%-70% | 50-65% | 1-50% |
| Financial claims | Common Equity | Preferred Equity | Equity pledge debt | Secondary lien debt | First lien debt |
| Location | |||||
| Location | Sub Rural | Rural | Regional center | Suburban | Core Urban |
| Walk Score | <40 | 40-55 | 55-70 | 70-85 | 85-100 |
| Supply & Demand | S>>D | S>D | S≈D | S<D | S<<D |
| Property Status | |||||
| Development Phase | 0-20% | 20-40% | 40-60% | 60-80% | 80-100% |
| Property as Collateral | No | Extremely insufficient | Relatively insufficient | Relatively sufficient | Extremely sufficient |
| Investment Term | >48 Months | 37-48 Months | 25-36 Months | 13-24 Months | <12 Months |
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