Four Springs TEN31 Xchange Sponsor, LLC
Four Springs TEN31 Xchange Sponsor is the "Sponsor" of the Trust. The Sponsor is focused on arranging for tax deferred Section 1031 exchanges of retail, industrial/warehouse, healthcare and other commercial properties. The Sponsor is a wholly owned subsidiary of the Four Springs Capital Trust, a real estate investment trust (REIT) that is focused on acquiring and managing a diversified portfolio of single tenant new leased properties that are elased to investment grade and other creditworthy tenants. The Sponsor's management team has significant experience in acquiring, financing and managing net lease real estate, as well as substantital experience in capital markets transactions and operations of publicly traded REITs.http://www.fscap.net/
Mr. Dioguardi was also the founding shareholder of FSC, where he led the acquisition and management of net lease properties through syndication to investors. Prior to FSC, Mr. Dioguardi was President of Spencer Trask Ventures, Inc., a leading private equity firm based in New York City, at which Mr. Dioguardi led a team that invested in technology companies. Mr. Dioguardi also founded and built Vantage Securities where he assisted in taking numerous companies public. Prior to founding Vantage, Mr. Dioguardi served in several senior roles of increasing responsibility at Integrated Resources Equity Corp., at the time the largest real estate syndication firm in the United States. Mr. Dioguardi received a B.S. degree in Business Administration from Monmouth University. Active in community affairs for many years in Avon-by-the-Sea, New Jersey, Mr. Dioguardi served as Commissioner of Revenue and Finance from 1991 – 2003. In addition, from 2005-2015, he served as a member of the Board of Trustees of Monmouth University and the University’s Investment Committee, which he chaired for several years.
Johnson joined FSC in 2010 as a Managing Director focusing on all aspects of net lease real estate acquisition and investment. Prior to joining FSC, Mr. Johnson led the alternative investments group of a financial services firm, served in business development, operational and advisory roles for enterprises in industries including real estate, financial services and technology, and practiced corporate and securities law at major firms in Boston and Philadelphia. Mr. Johnson has participated in numerous real estate and capital markets transactions, including public and private equity and debt financings. Mr. Johnson received a B.A. in Economics from the University of Illinois – Urbana and a J.D. from Emory University School of Law.
Mr. Micera has more than 25 years of real estate investment banking, acquisitions, net lease structuring and dispositions experience. Mr. Micera was most recently the CIO for Office/Industrial at Cole Real Estate Investments, Inc. (NYSE: COLE). Mr. Micera established Cole’s office and industrial acquisition platform and was instrumental in helping Cole’s capital markets team to launch Cole’s 2011 inaugural office and industrial non-traded REIT, Cole Corporate Income Trust. Over a 3½ year period, Mr. Micera built an office/industrial acquisition team and oversaw the purchase of more than $4.4 billion of office and industrial assets, establishing Cole as the #1 acquirer of single tenant office assets and the #3 acquirer of single tenant industrial assets during this period. Prior to joining Cole, Mr. Micera was a Principal with Cardinal Industrial Real Estate Services where he was instrumental in expanding the firm’s business platform. Prior to Cardinal, he served as the Senior Vice President - National Head of Net Lease Investments at First Industrial Realty Trust (NYSE: FR), and provided real estate advisory and investment banking services at Ernst & Young LLP and J.P. Morgan Securities Inc., after starting his career in the corporate real estate group at Metropolitan Life Insurance Company. Mr. Micera received a B.A. in Engineering from Lafayette College and an M.B.A. in Finance from New York University, Leonard N. Stern School of Business.
Mr. Warch, a CPA who began his career at Deloitte & Touche, brings over 30 years of accounting and finance experience to the REIT. Prior to joining the REIT, Mr. Warch served as the Senior Vice President and Chief Accounting Officer of CapLease, Inc. (NYSE: LSE), a REIT focused on net leased properties, where he was responsible for all aspects of the financial infrastructure of a publicly-held real estate investment trust, managed financial and SEC reporting and compliance, responsible for Sarbanes- Oxley 404 compliance, and coordinated audits and reviews with independent accountants. Mr. Warch earned a B.S. in Accounting and an M.B.A. in Finance from St. John’s University.
Ms. Daly brings over 20 years of commercial real estate experience to the REIT. Prior to joining the REIT, Ms. Daly served as Executive Vice President and Director of Monmouth Real Estate Investment Corporation (“MREIC”) (NYSE:MNR), a REIT focused on net leased industrial properties. In her ten years at MREIC, Ms. Daly managed the growth of the REIT’s portfolio from $40 million to approximatelly $500 million market capitalization and helped the company’s property portfolio grow from approximately 1.5 million square feet to over 7 million square feet, with properties located in 26 states. Ms. Daly has primary responsibility for sourcing and screening investment opportunities, underwriting property acquisitions, presenting investment opportunities to the company’s investment committee, and managing the acquisition process. Ms. Daly earned a Bachelor of Arts in English from Lafayette College and an M.B.A. from Monmouth University.
The Sponsor closed on the property in August 2014 with a lease term in place of 18.24 years. The Sponsor then assigned the Property to the Trust pursuant to the terms of the Trust Agreement. The Property is now owned 100% by the Trust. The Trust is a passive owner of the Property and will not be involved in any manner in the active management of the Property. The Manager has been appointed to manage the Trust pursuant to the Trust Agreement.
In this transaction, RealtyMogul.com investors will be purchasing a beneficial interest in FSC AS Jonesboro AR, DST, a Delware Statutory Trust that owns the fee interest in the Property. The Trust expects to provide the Owners a return on their investment in two primary ways: (i) in the form of monthly cash distributions to the Owners; and (ii) upon any Disposition of the Properties. This strategy is anticipated to provide investors with the opportunity to perform another 1031 exchange.
Four Springs Capital Trust ("Four Springs" or "FSCT" or "Sponsor") is offering beneficial interests in FSC AS Jonesboro AR, DST, Four Spring's free-standing retail Delaware Statutory Trust ("DST") offering. The Property is a 71,541 SF single tenant free-standing Academy Sports store in Jonesboro, AR (approximately 80 miles west of Memphis, TN).
The Property is 100% absolute net-leased by Academy Sports + Outdoors, a leading sports, outdoor and lifestyle retailer guaranteed by New Academy Holding Company, LLC. As of January 31st, 2015, Academy had 190 stores and 22,000 employees.
The total offering amount is $3,920,000 and the DST closed on the Property in September, 2015.
This offering is designed for investors seeking to participate in a 1031 tax-deferred exchange as well as investors seeking a diversified net-leased real estate investment on a cash basis. Investors completing a 1031 exchange may invest for a minimum of $50,000; investments made on a cash basis are subject to a $25,000 minimum investment.
Built-to-suit for the tenant in 2012, the Property is a 71,541 sf free-standing Academy Sports store located in Jonesboro, AR. The Property is 100% absolute net leased to Academy Sports, LTD through 2032 with four (4) five-year renewal options. A summary of the lease terms can be found below:
- Tenant: Academy Sports LTD., a Delaware corporation d/b/a Academy Sports + Outdoors.
- Premises: Approximately 71,541 rentable square feet of retail space
- Lease Execution Date:
- Rent Commencement Date:
- Expiration Date of Initial Term:
- Options to Renew: Four five-year renewal options; rent at lower of (i)
- Annual Rent:
- Lease Years 1-5: $625,800.00
- Lease Years 6-10: $657,090.00
- Lease Years 11-15: $689,944.50
- Lease Years 16-20: $724,441.72
- Renewal Term 1: $760,663.80
- Renewal Term 2: $798,697.00
- Renewal Term 3: $838,631.85
- Renewal Term 4: $880,563.44
- Tenant's Obligations: Pursuant to Section 5 of the Lease, the Tenant is responsible for Basic Rent, any Additional Rent, all costs, expenses and obligations of any kind and nature relating to the Leased Premises and the appurtenances thereto and the use and occupancy thereof which may arise shall be paid by Tenant. Tenant will pay directly to the proper authorities all utilities or services used or consumed ont he Leased Premises prior to or during the Term, when due.
- Pursuant to section 8 of the Lease, the Tenant will pay and discharge all Taxes prior to delinquency directly to the applicable taxing authority.
- Pursuant to section 9 of the Lease, the Tenant will at all times, keep and maintain the Leased Premises, including, without limitation, the roof, landscaping, parking areas, sidewalks, walls (interior and exterior), footings, foundations and structural and non-structural components of the Leased Premises in good condition, repair and appearance, and will promptly make all repairs and replacements
The Property is constructed generally of steel and tilt up concrete panel construction with painted concrete panel exterior walls. The interior space consists of retail space, warehouse space, a break room, an office area and men and women's restroom facilities. According to the property condition report, the Property was considered to be in good condition. There was no evidence of any apparent, major structural or mechanical distress that was noted to be prevalent.
Academy Sports + Outdoors
The building is 100% leased to and guaranteed by Academy Sports + Outdoors under a 20 year absolute triple net lease that commenced in October 2012. The lease features rental increases every five years and four (4), five year renewal options. Academy Sports + Outdoors is a sports, outdoor and lifestyle retailer with a broad assortment of hunting, fishing, and camping equipment and gear along with sports and leisure products, footwear, and apparel. The Texas-based company, which is one of the nation's largest sporting goods and outdoor retailers, operates 190 stores with over 22,000 employees.
It is currently owned by funds advised by Kohlberg Kravis and Roberts & Co. L.P. (together with its affiliates, "KKR"), a global investment firm which acquired Academy Sports + Outdoors in 2011. Prior to 2011, the company was owned by the Gochman Family and led by Chairman and CEO David Gochman. David's grandfather, Max Gochman, started Academy Sports + Outdoors over 70 years ago when he opened Academy Tire Shop in 1938 in San Antonio, Texas. Sales reached $1 billion in 2004, $2 billion in 2007, and $3 billion in 2012. Currently, sales are $4.2 billion for FYE January 31st, 2015.
Appraisal for the Property is available upon request. Please email email@example.com.
The Property is located in the city of Jonesboro and southwest Craighead County, about 15 miles southwest of the Dallas Central Business District. Arkansas. Primary highway access to the area is via U.S. Highway 63. Secondary access is provided by U.S. Highway 49 and State Highway 1 (Stadium Boulevard). The Property is located 0.5 miles from The Mall at Turtle Creek, which is anchored by Dillard's, JCPenney, and Target on a well-established retail corridor. Arkansas State University's 1,376-acre campus which has a student body of over 13,000 students, is approximately 2 miles from the Property.
Jonesboro has a total area of 80 square miles and over 67,000 residents. There is no public transportation in the Jonesboro area. The Memphis International Airport is located about 80 miles from the Property; travel time is about 1 hour and 30 minutes, depending on traffic conditions. The Jonesboro Municipal Airport is located just to the west of the Property.
|Sources of Funds|
|Total Sources of Funds||$10,549,767|
|Acquisition Closing Costs||$118,823|
|Selling Commissions and Fees||$410,700|
|Total Uses of Funds||$10,549,767|
The property was acquired using $5,460,000 of loan proceeds that was assumed from the Original Borrower in connection with the Trust's acquisition of the property. The right, title and interest in the property was assigned to Wells Fargo Bank as Trustee for the holders of J.P. Morgan Chase Commercial Mortgage Securities Trust 2012-LC9. The Anticipated Repayment date of the Loan is 11/6/22 and the Stated Maturity Date is 11/6/32. Through 11/6/22, the loan is interest-only and has a fixed interest rate of 4.85%. After the Anticipated Repayment Date, the interest rate is 6.85% and monthly payments of principal and interest due.
The Sponsor will make distributions directly to investors who own a beneficial interest in the DST on a pro-rata basis.
Distributions are projected to start for each investor within 60 days of the completion of that investors beneficial interest in the DST. Distributions are projected to continue on a monthly basis thereafter. These distributions are at the discretion of the Sponsor and made directly by the Sponsor, neither Realty Mogul Co. nor any of its affiliates have any control or discretion on the timing or amount of distributions.
Certain fees and compensation will be paid over the life of the transaction. The following fees and compensation will be paid:
DST Structure Risk
DSTs are ill equipped to address the untimely and unexpected need to raise capital or to re-tenant a property or to carry a property in the event of excessive vacancies.
Although it is intended that interests will be acquired on a tax-deferred basis under Code Section 1031, each investor must satisfy a number of technical requirements to qualify for tax deferral under Section 1031. Also, no assurance can be given that investors will be able to complete a qualifying Section 1031 exchange in the future when the Properties are sold.
Risks Associated with Single Tenant Real Estate
Properties occupied by a single tenant are materially dependent on the financial stability of that tenant. Should this tenant be negatively affected by recent or future economic change and the tenant become unable to make rental payments, this could result in a significant reduction or cessation of distributions, and the possibility of a loan default and the total loss of your investment. Should this tenant default, it may be difficult to find a replacement tenant, and if a replacement tenant is found, DST restrictions prohibit the Trustee from entering into a new lease, raising additional capital or borrowing additional funds to cover releasing costs such as leasing commissions and tenant improvements, without rolling up into an LLC, which could have adverse tax consequences to the investors over the long term.
Exchange Option Risk
The Operating Partnership “Four Springs Capital Trust Operating Partnership” will have a two-tiered Exchange Option that it may exercise after all Beneficial Owners have held their Interests for one year. If the Exchange Option is exercised on or before 10/31/20, the Investors may (i) exchange their interests for Operating Partnership “OP” Units, or (ii) continue to hold their interests. If the option is exercised after 10/31/20, the Investors will be required to (i) exchange their Interests for OP Units, or (ii) accept a cash amount equal to the then fair market value of the Interests. The Operating Partnership has no current intent to exercise the Exchange Option.
If the Investors choose to exchange their interests for OP Units, they would then be limited partners in the Operating Partnership and will have the same rights and obligations of the other limited partners under the LP Agreement. If the Investors exchange their interests in the Trust for OP Units, they will not be able to engage in a subsequent Section 1031 Exchange. After limited partners have held their OP Units for at least one year, they have the option to exchange their units for shares in Four Springs Capital Trust (REIT).
Real Estate Investment Risk
Any investment in real estate carries certain inherent risks, and there is no guaranty as to the future occupancy of the property or operating results. Factors which might influence outcome include:
- Changes in national or local economic conditions
- Changes in the local market, including the entry of new competitors
- Changes in the financial condition of the major tenant
- The occurrence of casualties or natural disasters
- The enactment of unfavorable laws
Conflict of Interest Risk
There are various potential conflicts of interest among the Sponsor, the Trustees, the Signatory Trustees, the Property Managers, and others engagement in the management and operation of the properties, one or more of whom may be affiliated with the others.
IRS established seven prohibitions over the powers of the DST Trustee, which include the following:
- Once the offering is closed, there can be no future equity contribution to the DST by either current or new co-investors or beneficiaries
- The DST Trustee cannot renegotiate the terms of the existing loans, nor can it borrow any new funds from any other lender or party
- The DST Trustee cannot reinvest the proceeds from the sale of its investment real estate
- The DST Trustee is limited to making capital expenditures with respect to the property to those for a) normal repair and maintenance, (b) minor non-structural capital improvements, and (c) those required by law
- Any liquid cash held in the DST between distribution dates can only be invested in short-term debt obligations
- All cash, other than necessary reserves, must be distributed to the co-investors or beneficiaries on a current basis, and
- The Trustee cannot enter into new leases or renegotiate the current leases
Some of these restrictions are ameliorated in part by the introduction of a Master Tenant, who will have the ability, for example, to enter into or renegotiate leases. However, the existence of a Master Tenant carries with in its own set of risk factors. In addition, DST Members will have no voting rights, and therefore no control over future decisions regarding sale of the properties or roll-up into a limited liability company.
Specified matters discussed in this Memorandum are forward-looking statements. The Signatory Trustee has based these forward-looking statements on its current expectations and predictions about future events. These forward-looking statements are subject to risks, uncertainties and assumptions about the Property, including, among other things, factors discussed below:
- General economic performance of the local and national economy;
- Required capital expenditures at the Property
- Competition from properties similar to and near the Property
- Adverse changes in local population trends, market conditions, neighborhood values, and local economic and social conditions
- Supply and demand for property such as the Property
- Interest rates and real estate tax rates
- Governmental rules, regulations and fiscal policies
- The enactment of unfavorable real estate, rent control, environmental, zoning or hazardous material laws
- Uninsured losses
- Anticipated market capitalization rates at the time of sale
The Signatory Trustee intends to identify forward-looking statements in this Memorandum by using words or phrases such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “objective,” “plan,” “predict,” “project,” “may be” and “will be” and similar words or phrases, or the negative thereof or other variations thereof or comparable terminology. All forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual transactions, results, performance or achievements of the Property to be materially different from any future transactions, results, performance or achievements expressed or implied by such forward-looking statements. The cautionary statements set forth under the caption “Risk Factors” and elsewhere in this Memorandum identify important factors with respect to such forward-looking statements.
Limited Transferability of Securities
Each Purchaser will be required to represent that he is acquiring the Interests for investment and not with a view to distribution or resale, that such Purchaser understands the Interests are not freely transferable and, in any event, that such Purchaser must bear the economic risk of investment in the Interests for an indefinite period of time because: (i) the Interests have not been registered under the Act or applicable state “Blue Sky” or securities laws; and (ii) the Interests cannot be sold unless they are subsequently registered or an exemption from such registration is available. There will be no market for the Interests and the Purchasers cannot expect to be able to liquidate their investment in case of an emergency. See “Restrictions on Transferability” in the PPM. Finally, the sale of the Interests may have adverse federal income tax consequences. See “Federal Income Tax Consequences” in the PPM.
Sale of the Property
The proceeds realized from the sale of the Property will be distributed among the Beneficial Owners, but only after satisfaction of the claims of other third-party creditors and Affiliates of the Sponsor. The ability of a Beneficial Owner to recover all or any portion of its investment, accordingly, will depend on the amount of net proceeds realized from such sale and the amount of claims to be satisfied therefrom. There can be no assurance that the Beneficial Owners will realize gains on sale of the Property.
Loss of Deposit
The Signatory Trustee may on behalf of the Trust retain the deposit of a Purchaser who is in default under the Purchase Agreement. See “Summary of Purchase Agreement and Escrow Instructions - Deposit; Liquidated Damages” in the PPM.
No Representation of Beneficial Owners
Each Beneficial Owner acknowledges and agrees in the Purchase Agreement and Escrow Instructions that legal counsel representing the Depositor, the Signatory Trustee, the Property Manager and their Affiliates do not represent, and shall not be deemed under the applicable codes of professional responsibility to have represented or to be representing, any or all of the Beneficial Owners.
Receipt of Compensation Regardless of Profitability
The Sponsor, the Signatory Trustee, the Property Manager and their Affiliates are entitled to receive certain significant fees and other significant compensation, payments and reimbursements from the acquisition and operation of the Property regardless of whether the Property operate at a profit. See “Estimated Use of Proceeds" and “Compensation of the Sponsor and Affiliates” in the PPM.
No Fiduciary Duty
The Trust, the Signatory Trustee, and the Property Manager and their Affiliates will not have a fiduciary duty to the Beneficial Owners as would be applicable to a limited liability company, partnership, or corporation and, therefore, may take actions that would not be in the best interests of one or more of the Beneficial Owners. As permitted under applicable Delaware law, the Signatory Trustee and the Delaware Trustee have expressly disclaimed all duties to the Beneficial Owner except for the duties expressly contained under the Trust Agreement.
The above is not intended to be a full discussion of all the risks of this investment. Please see the Risk Factors in the Private Placement Memorandum for a discussion of additional risks.
The above presentation is based upon information supplied by the Sponsor and others. Realty Mogul, Co., along with its respective affiliates, officers, directors or representatives (the "RM Parties") hereby advise you that none of them has independently confirmed or verified any of the information contained herein. The RM Parties further make no representations as to the accuracy or completeness of any such information and undertake no obligation now or in the future to update or correct this presentation or any information contained herein.
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