Venture on Country Club

A flip. From hotel to much needed housing in Arizona.

About the project

Venture on Country Club plans to purchase a 120-unit hotel located at 1410 S Country Club, Mesa, Arizona 85210 and convert it into a multi-family residential apartment building.

The Property was originally built in 1985 and consists of 120 units - 35 studio units, 73 one-bedroom and one-bathroom units, and 12 two-bedroom and two-bathroom units. It is currently being operated as a hotel, but the Company’s plan is to convert it into a traditional multi-unit rental building. Zoning approval is required for this conversion and is expected to take about 12  months to obtain.

Neighborhood Ventures has formed Venture on Country Cub, LLC (the "Company") to purchase the Property. While the approval process is underway, the Company plans to first renovate the existing units in anticipation of the conversion, and then rent them as short-term stay AirBNB style units, to generate immediate cash flow. Renovations will begin as soon as the Property is acquired and should be completed within four months.

The Company plans to engage Eastfield Contracting, a third party contractor, to complete the renovations. The total renovation budget is expected to be $600,000. $100,000 is earmarked for both exterior and common area upgrades including painting, improvements to the front building facade, landscaping, improvements to the gym, lobby, and mail facilities and for the creation of a shared workspace exclusively for residents. $500,000 is planned for improvements to the 120 units to include painting, replacement flooring, fixtures, and appliances. Eastfield Contracting has completed renovations for the last five Projects purchased by Neighborhood Ventures.

The Company also plans to engage Sundial Real Estate as property manager. Sundial will manage the Property with the help of a live-in property manager, available for day-to-day management issues. Sundial currently manages over 2000 doors in the Phoenix area including all the Phoenix area properties owned by Neighborhood Ventures. Short-term leases will be structured to renew no more than every 30 days until the appropriate permitting and zoning is approved to convert the property to multifamily units. Short-term bookings will be marketed and managed by the Company (40 units), Sundial Real Estate (40 units) and an agreement is being finalized with an additional property management company to market and manage the final 40 units.

Once entitlements are approved, the Property will be leased up as a traditional multi-unit apartment and managed by Sundial Real Estate. The Company expects the Property to be fully leased and stabilized approximately six months after entitlements are approved.

It is anticipated that the property will either be sold or refinanced after a three-year period. The renovation of the unit will bring them up to market value. The current market monthly rents for comparable units in this area are as follows:

  • Studio unit - $751
  • One-bedroom unit - $877
  • Two-bedroom unit - $1,134

After renovations are completed, the Company expects to achieve the following rents:

  • Studio unit - $825
  • One-bedroom unit - $920
  • Two-bedroom unit - $1,350

Download a more detailed analysis of rental comparables here.

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About the project
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Renovation updates
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About the Change

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About the developer

The principals and executives of Neighborhood Ventures are John Kobierowski and Jamison Manwaring. Jamison Manwaring is Co-founder, Managing Partner, and CEO of Neighborhood Ventures. In 2020 he was selected as Phoenix Business Journal's 40 under 40. Before launching Neighborhood Ventures, he served as the Vice President of Investor Relations at LifeLock and assisted the company in its successful sale to Symantec in February of 2017.

Before working at LifeLock, Jamison was a technology analyst at Goldman Sachs where he participated in over a dozen software IPOs including Tableau, Alarm.com, and LifeLock. Jamison graduated from the University of Utah with a BS in Finance.

John Kobierowski is Co-founder, Managing Partner, and President of Real Estate at Neighborhood Ventures. He also co-founded ABI Multifamily in September 2013. In 2020 he became a contributing member of the Forbes Real Estate Council. John has over 25 years of commercial real estate experience. He bought his first small apartment building while still in college.

Over the course of his career, he has personally closed over 1,400 multifamily transactions, developed over 800 condominium units, and owned over 1,000 apartment units, homes, and condos. Prior to founding ABI, he was a founding adviser of Hendricks & Partners (Berkadia). John graduated from Arizona State University with a Bachelor of Science - Liberal Arts with a minor in Business and a concentration in Engineer and Architecture. In addition to being the co-founder to Neighborhood Ventures, and a local executive at ABI Multifamily, he owns The Grid Works co-working space in Uptown Phoenix.

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About the Company
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About past projects

The sponsor of the Project is Neighborhood Ventures. Neighborhood Ventures was launched in 2017. Since then, it has successfully raised funds for nine real estate projects on its website using Arizona’s Intrastate Crowdfunding Law.

Eight of the offerings reached their maximum offerings goals, ranging from $500,000 to $1.5 million, often selling out before the target date. The most recent offering, Venture on Broadway, Neighborhood Venture’s first retail offering, reached 92.8% of the maximum goal.

All of Neighborhood Ventures’ projects have been multifamily projects to date, except for the latest live offering, Venture on Broadway, which is their first retail project. The projects have ranged in size from 8 to 41 units and one, Venture on 66th, was purchased and operated by Neighborhood Management LLC as an Airbnb for a year before it was sold.

Three projects, Venture on Wilson, Venture on Marlette, and Venture on 66th have completed the full cycle, from raising funds through renovation and stabilization, and have been sold, returning all equity and the full 12% preferred offered to investors. Three more, Venture at Villa Hermosa, Venture at Mountain View  and Venture on 19th  are now stabilized and generating cash flow for investors. And the final two more recent offerings, Venture on Williams  and Venture on Elden, are currently in the renovation phase.

Project images can be viewed in the slide carousel below
 

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Past Projects
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About the Market

Phoenix has much lower business and living costs than neighboring California. Longer-term, this is expected to keep attracting businesses and residents to the area. In fact, three out of the top five metros from which residents relocated in 2020 were in California. The arbitrage has also benefited the well-paying high-tech sector in Phoenix, dubbed the Silicon Desert. It now accounts for about 5.4% of employment, +0.4% above the national average.

Phoenix has a favorable demographic profile for multifamily rentals, with Millennials making up about 21 percent of the population. More importantly, this cohort is expected to grow faster than the national average over the next five years. Helping to keep the metro young is Arizona State University, which had over 125,000 students enrolled for fall 2020 with about 75,000 indicating they would live in Phoenix.

The metro’s economy has transitioned over the past 20 years to include higher-paying sectors, such as professional services, education, and financial activities. Phoenix has become a financial center with about 9% of jobs in this sector compared to 6% nationally, in addition to having 17% of jobs in the well-paying professional services sector compared to about 14% nationally. As a bonus, these jobs can also be performed remotely.

The Project is located in the Southwest Mesa Submarket (zip codes 85202, 85204 and 85210) which had a total population of approximately 149,361 in 2019. Median family income was $49,846, with 27,439 renter-occupied housing units at that time. Rents have averaged $1,152 per month in 2021.

Databex, the Arizona construction project database developed and maintained by BEX Companies (fka Arizona Builders Exchange), lists 25 projects recently completed, in active planning or under construction in the three ZIP Codes making up the Southwest Mesa Submarket.

These projects total $777.3 million in scope and include nearly all types of commercial and residential development, including multifamily, transportation, industrial, infrastructure, education and urban expansion.  They include:

Downtown Mesa, the pedestrian-friendly hub of activity for the region offering a wealth of opportunities for business owners, consumers, and art enthusiasts alike. Downtown's cultural anchor, the renowned Mesa Arts Center draws over 387,000 patrons to events in its facilities annually. Downtown Mesa has 7,000 employees, 3,000 residents, and more than 11,000 daily visitors. Businesses established in Downtown Mesa are strategically located to take advantage of a large workforce that is accessible by three integrated freeways: the Superstition (US 60), Price (101), and Red Mountain (202), as well as, the first extension of Phoenix Metro Light Rail at Sycamore & Main Street. 

The Fiesta District, a 1.15 square mile business district featuring cutting-edge industry clusters, with Class A offices and hotels and having benefited from $519 million in redevelopment efforts over the last few years including tax relief programs and a $12 million streetscape program on Southern Avenue. 
Valley Metro Light Rail operates the region’s high-capacity transit system. Currently a 28.2-mile light rail line serving the cities of Phoenix, Tempe, and Mesa in Arizona, an additional 40 miles of line is in various phases of planning.

Valley Metro Light Rail operates the region’s high-capacity transit system. Currently a 28.2-mile light rail line serving the cities of Phoenix, Tempe, and Mesa in Arizona, an additional 40 miles of line is in various phases of planning.

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About the return

Under the Operating Agreement, all distributions will be made in the following order of priority, after all expenses, including debt service and fees:

  • First, to the Investor Members until they have received a full return of their investment.
  • Second, to the Investor Members until they have received a compounded annual return of 12% per year.
  • Third, to the Fund until it has received an additional compounded annual return of 3% per year.
  • Fourth, to Neighborhood Management.

Annual cash flow distributions to Investors averaging 6% are expected to start in December 2021.

The following is an example of the return the Company expects to distribute on a $5,000 investment:

Year Amount
Year One $225
Year Two $300
Year Three $6,381
Total Return $6,906

 

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Key deal points
  • Re-use. Conversion of a hotel into much needed housing
  • Experienced developer. This team has completed multiple housing projects
  • Quick turn-around. Quick conversion to ensure operating cash flow.
  • Three-year plan. Re-financing or sale planned in three years
  • Flexible capital stack. Funds raised and ready to fill an equity gap if needed
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About the Offering

The Company is engaged in a Regulation Crowdfunding (Reg CF) offering (the “Reg CF Offering”) to raise money for the planned acquisition and conversion of an hotel, located at 1410 S Country Club Drive, Mesa, AZ 85210, into approximately 120 short and long term rentals.

We are trying to raise a maximum of $1,000,000, but we will move forward with the Project and use investor funds if we are able to raise at least $100,000 (the “Target Amount”). If we have not raised at least the Target Amount by June 01, 2022, EST (the “Target Date”), we will terminate the Reg CF Offering and return 100% of their money to anyone who has subscribed.

The minimum you can invest in the Reg CF Offering is $1,000. Investments above $1,000 may be made in $1,000 increments (e.g., $2,000 or $3,000 but not $1,136). An investor may cancel his or her commitment up until 11:59 pm on May 29, 2022 (i.e., two days before the Target Date). If we have raised at least the Target Amount, we might decide to accept the funds and admit investors to the Company before the Target Date; in that case we will notify you and give you the right to cancel.

After we accept the funds and admit investors to the Company, whether on the Target Date or before, we will continue the Reg CF Offering until we have raised the maximum amount.

We plan to conduct our first closing on the last day of August 2021. This will be followed by interim closings for any additional funds raised on the last day of every other month that follow. In other words, closings will be held on the last day of October 2021, December 2021, February 2022, and April 2022 in addition to the final closing. For example, if you invest on the 10th of September, you may cancel your investment at any time until 48 hours before the end of October.

You can find the offering listed on the SEC website here, or you can download it here.

Concurrent Offerings

The Company is seeking to raise capital through three different offerings, all conducted at the same time:

  • This Reg CF Offering, with a maximum goal of $1 million.
  • An offering conducted under the Arizona intrastate crowdfunding laws, with a maximum goal of $3.5 million.
  • An offering conducted under SEC Rule 506(b) to Neighborhood Ventures Fund, LLC (the “Fund”), an affiliate, to make up any shortfalls in the first two offerings.  

The money raised in all three offerings will be used for the same purposes.  Investments under Reg CF are offered by NSSC Funding Portal, LLC, a licensed funding portal.

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About the finances

Project acquisition and development costs are expected to total approximately $14,767,000 million. The Company expects to finance the Project through a bank loan of 70% - 80% of the Project cost with the remainder being financed through the three offerings described above.

Two scenarios for anticipated sources and uses for the Project are outlined in the table below, although more are possible. 

Uses 70% Bank Loan 80% Bank Loan
Acquisition costs $13,200,000 $13,200,000
Renovaton $600,000 $600,000
Closing costs and reserves $967,000.00 $967,000.00
Total Project Cost $14,767,000 $14,767,000
Sources    
Bank loan $10,336,900 $11,813,600
Arizona Instrastate offeringq $2,000,000 $1,500,000
Reg CF offering $1,000,000 $1,000,000
Neighborhood Ventures Fund $1,430,100  $453,400
Total Project Sources $14,767,000 $14,767,000


Annual cash flow distributions to Investors averaging 6% are expected to start in December 2021. The Company plans to either sell or refinance the Property after three years. Upon the liquidation or refinance of the Property the Company shall provide a true-up to Investors to bring returns up to 12%. If there are sufficient funds available, and only after all Investors have received their 12% preferred return and equity back, an additional 3% preferred return may be distributed to the Neighborhood Ventures Fund. For more detail, see About the Return.

Address Sales Price Date Size (sf) Per s.f.
1006 West Main St, Mesa AZ 85201 $13,150,000 05/21 63,780 $206.18
1711 South Extension Road, Mesa AZ 85210 $65,800,000 03/21 259,898  $253.18
123 North RObson Street, Mesa AZ 85201 $16,500,000 03/21 62,210 $253.03
1464 South Stapley Drive, Mesa AZ 85204 $56,400,000 01/21 216,242 $260.82
Venture on Country Club, 1410 S Country Club Dr, Mesa AZ 85210 $13,200,000 In Escrow - 08/21 56,735  $232.66

For more detail review these Sales Comparables and the Company's Operating Proforma.  

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About the risks

A crowdfunding investment involves risk. You should not invest any funds in this offering unless you can afford to lose your entire investment. 

In making an investment decision, Investors must rely on their own examination of the issuer and the terms of the offering, including the merits and risks involved. These securities have not been recommended or approved by any federal or state securities commission or regulatory authority. Furthermore, these authorities have not passed upon the accuracy or adequacy of this document.

The U.S. Securities and Exchange Commission does not pass upon the merits of any securities offered or the terms of the offering, nor does it pass upon the accuracy or completeness of any offering document or literature.

These securities are offered under an exemption from registration; however, the U.S. Securities and Exchange Commission has not made an independent determination that these securities are exempt from registration.

Additional statement:

There are numerous risks to consider when making an investment such as this one and financial projections are just that - projections. Returns are not guaranteed. Conditions that may affect your investment include unforeseen construction costs, changes in market conditions, and potential disasters that are not covered by insurance. Pleae review this Risks of Investing document for a more expansive list of potential risks associated with an investment in this Company.

Unless otherwise noted, the images on the offering page are used to convey the personality of the neighborhood in which the project is planned. Properties shown in these images are not included in the offering and Investors will not receive an interest in any of them.

Covid 19 Disclosure

The Phoenix economy suffered a relatively mild downturn during the COVID 19 induced recession during the first half of 2020 and is already in recovery, adding back almost 80% of jobs lost by November 2020. Nevertheless, the metro’s recovery will slow during Q1 2021 due to rising COVID-19 cases and a softening U.S. economy.

The multifamily sector has been remarkably resilient in the face of the pandemic supported, in part, by ongoing migration to the metro. Over 76,000 residents flocked to Phoenix in 2020, on par with 2019’s 78,000 new residents. As a result, not only does the average vacancy rate remain low by historic standards at just 4.8% as of Q3 2020, but the average rate has returned to pre-pandemic levels already. Further, overall, rents have bounced back in the metro with an average quarterly rent growth of about +1.25% in Q3 2020. Even so, certain submarkets which are more densely populated and have seen strong growth in new supply over the past few years such as Central Phoenix, North Tempe and Scottsdale and have seen vacancy rates increase and rents continue to decline as residents choose to live in less populous West and East Valley locations where rents are cheaper, and it is easier to be socially distant.

With the COVID 19 vaccine starting to be administered, the economy is likely to rebound strongly in the latter part of 2021 as more and more residents are vaccinated. Longer-term, Phoenix is likely to remain one of the strongest economies in the country due to a warm climate and relatively low business and living costs. This and the vast amount of available land should continue to attract both employers and population long-term. As a result, the Phoenix economy should continue to outperform the national economy over the long run. 

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