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Completed Debt
Industrial
The Adams Beverages Facility
Opelika, AL
INVESTMENT STRATEGY
INVESTMENT TYPE
Debt
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100% funded
Offered By TenCal, LLC
%* TARGET IRR 12.0%-%
12.0%* TARGET AVG CASH ON CASH
* TARGET EQUITY MULTIPLE
Estimated Hold Period 12 Months
Estimated First Distribution
*Please carefully review the Disclaimers section below, including regarding Sponsor’s assumptions and target returns
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Overview
Management
Cumulative Distributions

TenCal, LLC

The Sponsor and asset manager is TenCal, LLC (“Sponsor”), an Alabama LLC formed in 2003 for the purpose of acquiring and managing income producing commercial properties. The Sponsors current portfolio includes industrial and office space in AL, TX, IN, NC and SC.

TenCal retains third party managers to provide day to day professional management for each of its properties. The principals of TENCAL provide continuous and on going asset management review for each property in the portfolio.

TenCal’s principals have over 75 years of experience acquiring, developing and operating commercial and industrial real estate. TenCal has historically raised capital from private investors for their acquisitions and have successfully raised $10,000,000 in equity capital acquiring ten (10) buildings, including the subject property. They currently operate our of Southern California and Tennessee.

http://www.tencal.com/Home/Commercial_Industrial_Investment_Properties.asp
  • Theodore J. Schwartz
Theodore J. Schwartz

Mr. Schwartz, a university graduate and certified public accountant, began his career in real estate and commercial financing with a regional office of a national commercial lending company. As an auditor and real estate lending officer he acquired significant experience in operations and financing.

Choosing to focus in the area of commercial and industrial real estate, Mr. Schwartz was appointed Controller of a successful Midwest industrial real estate developer. In his capacity as Controller, he developed the skills necessary to underwrite and structure construction and permanent financing, prepare detailed acquisition and development budgets and provide financial and tax analysis.

Mr. Schwartz founded Commercial Mortgage Underwriters, Inc. “CMU” in 1983, a real estate investment company and commercial real estate finance intermediary. Since its inception, CMU has arranged in excess of $2.5 Billion of transactions for its clients. Properties acquired and financed by CMU include office buildings, warehouses, shopping centers, apartments, hotels and healthcare facilities.

In 2003, Mr. Schwartz co-founded TenCal, LLC with Richard Botts. TENCAL has acquired and developed properties aggregating 1,350,000 square feet valued in excess of $40,000,000. Mr. Schwartz serves as asset manager for TENCAL and oversees the company’s property acquisition, development and financing activities.

Track Record

Business Plan
Property

RealtyMogul.com is offering investors the opportunity to invest in a $2.0MM (61% loan-to-value) bridge loan for a single-tenant, non owner-occupied industrial property in Opelika, AL. This is a pre-funded, full recourse loan to the Borrower and proceeds have been used to refinance a $1.84MM life company loan that recently matured. The remaining funds were applied to closing costs. The new loan was needed to bridge the gap between the maturity of the prior loan and the execution of a new lease by the tenant, Adams Beverages. The Adams Beverages lease expires in June 2017.

Adams Beverages has been in business since 1937 and has utilized the subject property as their headquarters and distribution facility since 1993. Because the property is built out specifically for the use of the tenant, including a cold storage facility, the Borrower and the Appraiser share a strong belief that the tenant will re-sign new lease terms prior to the current lease's expiration.

The Borrower plans to utilize the bridge loan for the next 12-24 months (two 6-month extensions are available) until Adams Beverage executes a long term lease. We expect our bridge loan will be refinanced with a fixed-rate permanent loan once the lease is extended. Additionally, to further mitigate risk, the borrower will also be depositing any excess cash flow into a lender controlled reserve account; to be utilized in the event the tenant decides not to renew the lease terms.

Deal Highlights:

  • Tenant is the sole Anheuser-Busch distributor to the 26,200-student Auburn University. 
  • Tenant has occupied the building for 22 years and the Borrower intends to negotiate a long-term lease within the next 12-24 months.
  • Tenant has made significant improvements to the building​ (including a 25,000 square foot refrigerated warehouse)​.
  • Local appraiser estimates the renewal probability at 90%.
  • Loan is full recourse to the borrower, who has a net worth of approximately $2.75 million.
  • Loan represents 61% of appraised value.

Loan Structure:

  • $2,000,000 total loan amount
  • 12% fixed rate
  • 12 month original term
  • Two 6-month extensions available
  • 6 month yield maintenance period
  • Full recourse to Borrower
  • All excess cash flow to be deposited into lender controlled reserve account*
  • First Deed of Trust

*The Appraiser has indicated that the hypothetical "go-dark" value is $2,010,000. In the event of a go-dark scenario, the property is protected with excess cash flow to accommodate necessary interest payments and/or Tenant Improvement Allowance and Leasing Commissions associated with the extension of the current lease or a new lease.

Property Details

The building is a 47,101 square foot industrial space built in 1989, located in an industrial park in Opelika, 10 miles east of Auburn, AL. The building includes 25,000 square feet of cooler space and 11,775 square feet of office space. Ceiling height ranges anywhere from 16 feet to 24 feet throughout the property. Additionally, the property includes 33 open parking spaces, 2 grade level overhead doors and 3 dock high overhead doors.

The property has been 100% leased for over twenty years to Adams Beverages, the local Anheuser-Busch distributor in business since 1937. Adams Beverage recently expanded with the purchase of the distribution rights to the Charlotte, NC market. Adams Beverage has annual revenues and Net Income of $150MM and $3.5MM, respectively.

The building is well maintained and would be difficult for the tenant to move and find comparable facilities. The appraiser estimates that the renewal probability incorporated within the market leasing assumptions has been estimated at 90%. This rate is considered reasonable based on the rent comparable data, a survey of market participants and the subject. RealtyMogul.com also conducted additional research in the market and did not locate any existing available properties with cold storage. Similar grade office buildings did not have the associated warehouse component and existing available warehouses lacked the high level of office finish of the current facility. Based on the available inventory, the ability to replace the existing facility with a comparable facility would seem to indicate that the tenant would need to construct a new facility or add cold storage and upgraded office to an existing industrial property. Both options would be a premium of the cost of a lease renewal.

Location

The property serves as the main headquarters and distribution center for Adams Beverages, one of the top Anheuser-Busch distribution companies in Alabama. Of the 16 other Anheuser-Busch distributors in the state, Adams Beverages is the sole distributor to the Auburn-Opelika market. The next closest distributor is located 50 miles away in Montgomery and has zero distribution rights in the county (Lee County). The pillar of the local Auburn-Opelika community is Auburn University, of which Adams Beverages has sole Budweiser distribution rights.

Auburn University is the third largest university in the state of Alabama and is one of the top members of the highly competitive Southeastern Conference (SEC). The school currently boasts a population of over 20,000 undergraduate students, 5,000 post-graduate students, and 1,200 faculty members.  The University's announced tuition increase for the fall semester is smaller than that proposed by the University of Alabama, helping the university compete for students across the state. Increasing enrollment will support revenue targets, but capital investment will hinge on a large fund-raising campaign to improve facilities and endow around 100 new faculty positions. As this trend continues, increasingly healthy finances will support new high-paying jobs and thus increased demand for goods and services in the broader Auburn-Opelika economy.

Along with the inherent economic influences of Auburn University, the local economy is further supported by a strong manufacturing and industrial market. The Auburn-Opelika area has already emerged as a hub for the development and production of new technology such as aviation components. High profit margins for these products have led manufacturing payrolls to grow by more than 20% since the trough of the Great Recession, compared to an 8% increase nationally.

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Disclaimers
Disclaimers

Risk Factors*

Risk Mitigation*

*The above is not intended to be a full discussion of all the risks of this investment.

  • Forward-Looking Statements: Investors should not rely on any forward-looking statements made regarding this opportunity, because such statements are inherently uncertain and involve risks. We use words such as “anticipated”, “projected”, “forecasted”, “estimated”, “prospective”, “believes”, “expects”, “plans”, “future”, “intends”, “should”, “can”, “could”, “might”, “potential”, “continue”, “may”, “will”, and similar expressions to identify these forward-looking statements.
  • Market Risk: Investments related to mortgages secured by real estate are subject to market valuation risks that may be caused by changing economic and local market conditions. The property underlying the corresponding borrower loan is expected to have reasonably acceptable loan-to-value ratios and to meet certain other valuation criteria, but estimated values made when the loan is originated may not fully represent current market values, and subsequent market values will in particular be affected by changing economic or local market conditions. Such conditions are beyond the control of Realty Mogul and of the corresponding borrower on this loan. Such conditions may change due to factors such as local real estate market conditions, prevailing interest rates, the rate of unemployment, the level of consumer confidence, the value of the U.S. dollar, energy prices, changes in consumer spending, the number of personal bankruptcies, disruptions in the credit markets and other factors.
  • Local Market Conditions May Impact Property: Local conditions may significantly affect occupancy, rental rates, and the operating performance of a property. Such risks include (but are not limited to): (i) plant closings, industry slowdowns and other facts that affect the local economy; (ii) an oversupply of, or a reduced demand for, similar properties; (iii) a decline in household formation or employment or lack of employment growth, (iv) laws that could inhibit the ability to raise rents or to sell a property; and (v) other economic conditions that might cause an increase in operating expenses, such as increases in property taxes, utilities, compensation of on-site personnel and routine maintenance.
  • Management Risk: Investors will be relying solely on the Borrower for the execution of its business plan and ability to pay back the loan. The Borrower may in turn rely on other key personnel with relevant experience and knowledge, including contractors and consultants.
  • Single Tenant Property: This property is currently only leased to a single tenant, Adams Beverages. Therefore, in the event tenant decides not to re-negotiate lease terms, the property will be 100% vacant for an unknown period of time.
  • Go Dark Value: The loan is 100% of the appraiser’s "go dark” value (the value of the property should the tenant move out), which is mitigated by the tenant’s occupancy for over 20 years and the lack of suitable comparable facilites in the marketplace.
  • Pending Merger Risk: Pending merger between Anheuser-Busch InBev and SABMiller may potentially pose future risks to local beverage distributors.
    • The borrower is a real estate company with a history and a track record of success that specializes in industrial projects in Alabama and throughout the Southeast. 
    • The Property's proximity and distribution license to the Auburn University community provides market advantages of limited competition in close proximity and high barriers to entry. 
    • RealtyMogul.com has analyzed the the comparable industrial properties in the area, and, while some have similar office components, there were none currently listed with cold storage. The determination was made that the ability to replace the existing facility would require the tenant to construct a new faciltity or add cold storage to an existing facility. Both options would be at a substantial premium of the cost of the lease renewal.
    • The tenant has occupied property for over twenty years and property is currently built out for unique tenant specifications.   
    • The underlying security interest is the Property.   
    • Investor returns are not contingent on the appreciation of the property value and investor returns do not increase based on any resale price. The borrower is still obligated to repay the corresponding borrower loan.
    • In a worst case scenario, a foreclose is possible. The investor is in the first position should such an event occur. 
    • After analyizing the geographic overlap between Anheuser-Busch and SABMiller distributors in the area, we have determined that the Adams Beverage facility would remain the sole distributor to the Auburn-Opelika market. There should be little material impact from the merger between Anheuser-Busch and SABMiller. 
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(877) 781-7062

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