RTI Properties / World Class Capital Group
RTI Properties and World Class Capital Group as co-sponsoring this transaction.
RTI Properties ("RTI") was founded in 1986 originally as a property management and real estate investment company based in the Southern California city of Gardena. RTI has been at the same location since its inception over 25 years ago.
Over the years, RTI has diversified its real estate services into a “best in class” full service operation. By growing a selective employee base with unique skill sets that numbers well over 100, and by also cultivating strategic alliances with established operations, RTI can offer its clients a wide array of real estate related services.
RTI divisions include property management/asset management, acquisitions/investments, private money lending, development, and brokerage. Leveraging the operational efficiencies and cultural congruity of these disciplines under one roof is how RTI has created the “best in class” experience for its tenants, owners and investors.
World Class Capital Group
World Class Capital Group ("WCCG") is a leading national real estate investment firm focused on acquiring, developing, and managing high-quality real estate. WCCG is principally engaged in the ownership, development, financing, management, and acquisition of commercial real estate and land throughout the United States. WCCG targets opportunistic real estate investments across a broad range of asset types through single-asset and portfolio acquisitions. WCCG's primary focus is the acquisition of complex or undervalued real estate assets in which there are opportunities to create value through repositioning, redevelopment or leveraging our exceptional asset and property management platforms to uncover underlying operational inefficiencies
WCCG is a national leader in the real estate value-add investment arena. Investment partners include major public and private pension funds, insurance companies, financial institutions, foundations, family offices, and high net-worth individuals. Our investment professionals in our Austin and New York offices constantly search for investment opportunities that allow us to achieve superior risk-adjusted returns.
WCCG owns and operates a portfolio of high quality real estate properties nationwide. Their operating portfolio consists of a diverse mix of real estate properties including office buildings, retail centers, apartments, student housing, hotels, marinas, self-storage facilities, and industrial warehouses. WCCG owns over 5 million square feet in 12 states and 23 markets in its national portfolio.
Robert Abbasi is the founder and president of RTI Properties, Inc. RTI was established in Los Angeles in 1986 to purchase small apartment complexes. Since that time, Mr. Abbasi has grown the real estate business into a nationally recognized real estate company. Today, RTI is diversified into several divisions including commercial property management which owns and manages nearly 4,000 multi-family units; a commercial brokerage; private money lending division; a commercial development company; as well as owning and operating a number of retail, multi-residential, and commercial properties throughout the country.
Mr. Abbasi graduated from the University of Southern California with a degree in Economics and was chosen into the National Honors Society, Phi Beta Kappa, as well as graduated Magna Cum Laude. He also obtained his MBA from USC with honors. Mr. Abbasi was a former bank board director at a Los Angeles bank and has much banking experience as well both as a former director as well as borrower for his own projects.
Brian Shniderson is an entrepreneurial business leader with broad experiences in restructuring and building companies. Over his 25 years of corporate life, Brian has created and sold several businesses in the service, technology, manufacturing and distribution industries. Twice, Brian has landed his companies on the INC. 500’s Fastest Growing Companies List - and both awards were achieved before he reached the age of 30.
Brian has been involved in real estate as an investor, developer, lender and workout consultant for the past 20 years. He is a frequent speaker and panelist on the subject of distressed real estate, and is often quoted in national real estate publications.
Brian earned his Bachelor of Science degree in Political Science from the University of California Los Angeles and is a graduate of Harvard Business School's Executive Education program in Corporate Reconstruction, Private Equity and Venture Capital.
Nate Paul is the President, Chief Executive Officer & Founder of World Class Capital Group ("WCCG"). He is involved in all phases of the firm’s development and operations, and is responsible for the overall strategic direction of the firm’s investment strategy. Mr. Paul founded WCCG with aspirations of building it into a leading global private investment firm. He previously served as President of NPE, a multi-venture holding company. WCCG has a portfolio valued at over $500 million, with assets in 13 states and 25 sub-markets nationwide.
Mr. Paul was a recipient of the 2005 Texas Youth Entrepreneur of the Year Award presented by Texas Christian University, KPMG, and Compass Bank. He has been featured as a guest speaker at many colleges, universities and conferences speaking on the topics of entrepreneurship, real estate, and investment management. He is an active member of the Pension Real Estate Association, NAREIT, International Council of Shopping Centers, Real Estate Council of Austin, and the Turnaround Management Association.
Mr. Paul attended the McCombs School of Business at the University of Texas, where he was a member of the world champion team at the Thammasat International Case Competition in Bangkok, Thailand.
At A Glance
|Investment Strategy:||Buy and Hold|
|Hold Period:||4-5 years|
|Total Budget (New Equity):||$1,600,000|
|Net Rentable Area:||134,766 square feet|
|Distributions to Realty Mogul 13, LLC:||8% preferred return with excess cash flow and appreciation shared 50/50|
|Implied Purchase Cap Rate:||9.10% (property is already owned - this calculation considers the value of executed leases)|
In this transaction, RTI Properties ("RTI") and World Class Capital Group ("WCCG") are obtaining additional financing to continue the repositioning of Westpark Plaza Retail Center ("Westpark Plaza"), a 134,766 square feet retail center located in the northwest area of San Antonio on the NW Loop 410 Expressway in San Antonio, Texas. Westpark Plaza is shadow anchored by the Ingram Park Mall, a 1.1 million square foot regional mall with major anchors such as Macy's, Dillard's and JCPenney.
Realty Mogul investors have an opportunity to invest in Realty Mogul 13, LLC. Realty Mogul 13, LLC will be making an investment in BNR - Westpark Plaza San Antonio, LP, a Delaware limited partnership that currently holds title to Westpark Plaza.
RTI and WCCG acquired the property below replacement cost in April 2011 for $6.9 million ($50 psf). At the time, the property was in distress with low occupancy levels. The objective for RTI and WCCG was to revitalize the retail center in two phases with two injections of capital for the property. The initial equity raised for the acquisition was $1.75 million of which $550,000 was directly contributed by RTI and WCCG. Phase one of this project included raising sufficient capital to acquire and clean up the center to attract new credit tenants and has been executed. The current occupancy of the center has grown to 86% due to three leases recently executed by RTI and WCCG. These spaces were vacant when the property was acquired.
Now, RTI and WCCG are providing investors the rare opportunity to invest in the retail center after a significant amount of the risk associated with leasing the retail space has been removed. The second phase of this project, which includes Realty Mogul 13, LLC's investment, includes raising capital to fund recently executed lease costs, property improvements, and to establish a sufficient working capital reserve for future tenant improvements and leasing commissions. A detailed capital expenditures budget is included as a PDF attachment above. RTI and WCCG will be responsible for negotiating lease renewals and leasing up the remaining vacant space, working with a dedicated local leasing agent and focused property management team.
Upon stabilization of the property, RTI and WCCG plan to refinance the existing loan in year three, which should return a substantial amount of investor equity prior to a sale of the property.
RTI, WCCG, and Realty Mogul plan on holding the property for 4-5 years before exiting the investment, although the hold period may be longer or shorter. Realty Mogul investors have the opportunity to participate as equity stakeholders and earn a share of the cash-flow and appreciation. Investors can expect to receive quarterly updates and quarterly distributions, with the first distribution expected in the second quarter after the investment is closed.
Westpark Plaza represents a unique opportunity to invest in a now stabilized shopping center in a high-growth corridor that continues to have future growth prospects. The property has existing, in-place cash flow while also offering investors value-add potential through certain needed renovations and a lease-up program aimed at bringing the property up to a fully leased state.
- Experienced Management and Alignment of Interest: RTI Properties is a diversified real estate company that owns and operates a number of retail, multi-family, and other commercial properties, as well as running a commercial property management unit overseeing nearly 4,000 multi-family units, a commercial brokerage, a private money lending division, and a commercial development company. World Class Capital Group has a portfolio valued at more than $500 million, with assets in 13 states across the nation. RTI and WCCG collectively own and manage over one million leasable square feet of retail space in Texas. RTI and WCCG have collectively invested $550,000 into this transaction, and there is further alignment of interest based on the cash flow distribution structure, as the majority of their compensation is earned when the property is sold.
- Potential Upside From Remaining Lease-Up: Over the last two years, RTI Properties and World Class Capital Group have leased up the center and made significant progress in stabilizing Westpark Plaza. The center is currently 86% leased and is occupied by a diverse service-oriented tenant base that includes FAMSA (a major Mexico-based household furniture/electronics chain), a large fitness center, a Fuddrucker's restaurant, a prominent bingo hall, an Asian buffet restaurant (one of the biggest in the area), and an Eye Mart Express optical store. After the completion of the renovation and leasing costs associated with both current and anticipated tenants, RTI and WCCG plan to fully lease-up the center in the next 12-18 months, which will further increase cash flow at the center.
- Excellent Location on Major Freeway with Large Retailers in the Immediate Area: Westpark Plaza is located along San Antonio's NW Loop 410, with a traffic count of 150,000 vehicles per day, and is easily accessible from nearby off-ramps. The property is shadow anchored by the large regional Ingram Park Mall, which features traditional anchor tenants such as Macy's, Dillard's and JCPenney, as well as over 150 boutique retailers.
- Improving Market Fundamentals: Local construction of retail centers is expected to increase, and many chains have announced expansion plans in the San Antonio area. Despite this expected growth in new construction, heavy pre-leasing activity and higher tenant demand are expected to push vacancy rates down this year, which is expected to allow property operators to record the largest rent growth in nearly six years.
- Strategically Located For Future Growth: San Antonio is the seventh most populous city in the United States and is the second most populous city in Texas. Of the top 10 largest cities in the U.S., San Antonio was the fastest growing city in 2000-2010 , with a population of more than 1.3 million people. Economic growth in San Antonio is expected to intensify in 2014, and the improving housing market and employment growth are expected to bolster the retail sector.
- Accelerated Return of Capital: Westpark Plaza is currently 86% leased and nearing stabilization. As the center continues to lease up in the next two years, RTI and WCCG plan to refinance the current loan in 2016, pay off the entire remaining balance, and return to investors all or most of their initial investment from the net proceeds. Based on the projected financials, a significant portion of invested capital will potentially be returned to investors in year three (after the refinance is completed).
Risks and Risk Mitigation*
- Lease-up of Vacant Space: Given that the retail center is currently 86% leased, there is a risk that the property will be difficult to fully lease. The previous owner did not efficiently manage the property, and over the past two years, RTI and WCCG have substantially increased the occupancy rate of the center. RTI and WCCG will continue to work to partially mitigate this risk by utilizing Transwestern for leasing and property management services. Transwestern is one of the top real estate services firms in the region and are well versed in retail leasing in this area. The broker for the center is a top broker at Transwestern and is intimately familiar with the San Antonio market. RTI and WCCG have been working closely with Transwestern to screen potential tenants at the center and assist in the leasing process as needed. Transwestern is also the local management company handling the day-to-day operations of the property.
- Existing Loan Refinance: The original loan amount was $5,508,000, financed by the seller at a rate of 7% per annum, with principal and interest payments amortized over 30 years and due and payable in full on or before (with no prepayment premium) five (5) years after closing. This loan is still in existence and the current balance is approximately $5.34 million. There is a risk that the refinance will be difficult to obtain in the future capital markets environment. RTI and WCCG have partially mitigated this risk by obtaining several new tenants for the center, bringing the property up to 86% occupancy and much closer to stabilization. The anticipated refinance terms are as follows - 65% LTV, 9% appraisal cap rate, 5.5% interest rate, and 30 year amortization.
*The above is not intended to be a full discussion of all the risks of this investment. Please see the Risk Factors in the Investor Document Package for a discussion of additional risks.
|Address:||6707 NW Loop 410
San Antonio, Texas 78238
|Net Rentable Area:||134,766 square feet|
|Parking:||490 spaces (with 30 more potential spaces in the back)
3.6 spaces per 1,000 square feet of rentable area
|Access:||From NW Loop 410 frontage via a single point of access|
|TENANT NAME||SQUARE FOOTAGE CURRENTLY LEASED|
|ABH Property (Bingo)||11,828|
Westpark Plaza is a well built, multi-tenant retail center totaling approximately 134,766 square feet that is located along (and has good visibility from) the NW Loop 410 Expressway in San Antonio, Texas, an expressway carrying approximately 150,000 vehicles per day. The center consists of four (4) buildings situated on approximately 10.8 acres of land.
- FAMSA is a Mexico-based household retailer with 25 stores in the United States, primarily in Texas and Illinois. FAMSA sells household goods including furniture, mattresses, appliances, computers, and electronics. FAMSA has a large presence in Central America (over 350 stores in Mexico) and offers an inter-store delivery program whereby customers in the U.S. can make purchases in the U.S. for delivery to friends or family in Mexico, El Salvador or Guatemala. It is the largest tenant in Westpark Plaza with a space totaling over 40,000 square feet and is under lease until the end of 2015. This location is reportedly one of the most successful locations in Texas, and FAMSA is expected to renew using one of its several 5-year options.
- Teppanyaki Grill & Buffet is a restaurant featuring Chinese, Japanese, and American food, along with a hibachi station, an in-store yogurt bar and a large game room. It entered into a new lease in 2012 for 27,096 square feet at Westpark Plaza, making it one of the largest Asian buffets in Texas. The tenant is under lease until 2023.
- Blast Fitness is a national chain fitness center that includes women-only areas, cardio and strength equipment that feature individual TVs, group exercise and spinning classes. Blast Fitness was another recent addition, leasing over 25,000 square feet of Westpark Plaza in late 2013. It is under lease until 2019.
- A premier bingo hall (bingo games for charity are very popular in some markets) is also a recent addition to Westpark Plaza. The bingo hall leases 11,828 square feet and is under lease until 2024.
- Fuddruckers is a national hamburger restaurant chain that was founded in San Antonio and now boasts over 180 restaurants nationwide. Fuddruckers leases 7,400 square feet and has been in the center since 1985. Their lease is currently month-to-month. RTI and WCCG are currently budgeting $100,000 in tenant improvements for Fuddruckers' new lease, but since this is one of their top locations in Texas and Westpark Plaza is quickly approaching full occupancy, RTI and WCCG anticipate that the full tenant improvement allowance will not be necessary.
- Eyemart Express is the 7th largest optical retailer in the United States, with over 143 locations in 33 states, and focuses on getting customers their glasses in one hour. The tenant is currently leasing 3,500 square feet at Westpark Plaza and is under lease until October 2018.
A current rent roll, sale and lease comparables, and market reports are attached below the map on the right hand side of this page.
Westpark Plaza is strategically located along NW Loop 410 Expressway. It has great visibility from both directions of the highway, and approximately 150,000 cars per day travel in front of the center. Westpark Plaza is situated in San Antonio's energetic Northwest area and is shadow-anchored by the 1.1 million square foot Ingram Park mall that features Macy's, Dillards, JCPenney, and more than 150 specialty retailers.
San Antonio Area Overview
San Antonio is the seventh most populous city in the United States and is the second most populous city in Texas (after Houston). Of the top 10 largest cities in the U.S., during 2000 - 2010 San Antonio was the fastest growing city - it now boasts more than 1,300,000 people.
San Antonio has a diversified economy featuring the military, health care, financial services, oil and gas, and tourism sectors. San Antonio is home to six Fortune 500 companies -- Valero Energy, Tesoro, USAA, Clear Channel Communications, NuStar Energy, and CST Brands. Other large companies that operate regional headquarters in the city include Nationwide Insurance, Kohl's, AllState, Chase Bank, Philips, Wells Fargo, Toyota, Medtronic, Sysco, Caterpillar, AT&T, Citigroup, Boeing, QVC, and Lockheed.
The city is also home to one of the largest military concentrations in the United States. Among other installations, it is home to Joint Base San Antonio, which includes Fort Sam Houston, Randolph Air Force Base, and Lackland Air Force Base, which is the sole basic military training facility for the U.S. Air Force. The defense industry in San Antonio employs over 89,000 people and provides a $5.25 billion impact to the city's economy.
Over the past twenty years, San Antonio has also become a significant location for American-based call centers and has added a strong manufacturing sector centered around automobiles. The city also has a robust tourism industry with an estimated 27 million visitor annually, primarily due to the Alamo and Riverwalk, a network of walkways lined by shops and restaurants along the banks of the San Antonio River just below the streets of downtown San Antonio.
Economic growth in San Antonio is expected to intensify in 2014, and the improving housing market and employment growth are expected to bolster the retail sector. Local payrolls are expected to post their largest year-on-year gain since 2005. Some of this will be due to expansions of the local military bases, while the leisure and hospitality sectors are also expected to be growth drivers. Local energy companies are also expected to be growth drivers, with expanded drilling in shale formations expected to result in increased hiring in the industry.
San Antonio Retail Overview
Local construction of retail centers is expected to increase, and many chains have announced expansion plans in the San Antonio area. Despite an expected growth in new construction, heavy pre-leasing activity and higher tenant demand are expected to push vacancy rates down this year, which is expected to allow property operators to record the largest rent growth in nearly six years. Tenant activity has also continued to backfill anchor space within area shopping centers. US Foods, for example, re-tenanted a 54,318-square-foot portion of the former Target store located in The Concourse Shopping Center situated along US 281 just south of Loop 410 in the North Central sector.
Nearly 600,000 square feet of big box retail space has been delivered to the market in the form of four Walmart Supercenters located at IH-35 & Palo Alto, Foster Road & Binz-Engleman, Bandera Road & Leslie Road, and Culebra Road & Tezel. While these stand-alone stores are not included in the tracked set of shopping center lease space, their construction indicates the beginning of a new development cycle in the local retail market. There is additional 1.4 million square feet of big box retail space under construction including several more Walmart stores, two Sam’s stores and the recent groundbreaking of the H-E-B grocery store in Stone Oak.
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