Wynwood Five

Wynwood Five

10 little units making a home in eclectic and artsy Wynwood.

About the project

We’re raising $300,000 for a new ground-up three-story building, to be built at 3041 NW 5th Avenue in Wynwood, Florida. The building will be approximately 9,585 square feet in size, with ten fully furnished rental units averaging 625 s.f. in size. The building will be operated as a B2B short term rental and will be used primarily for corporate short-stay accomodations. 

Wynwood Manager, LLC, (the “Company”) is raising the equity while the building (the “Project”) will be developed and owned by Wynwood Five, LLC (“Wynwood Five” or the “Project Entity”). The Company will own an interest in the Project Entity and also act as its designated managing member. The operating agreement for Wynwood Five is attached as Exhibit G. 

The Project is designed as a building with two modules, separated by a central circulation area which will provide access to the rooftop. The ground floor is expected to contain: 4 units, each 1 bedroom and 1 bathroom and the second floor is expected to contain 6 duplex units each with 2 bedrooms and 1 bathroom.  In addition plans include 4 parking spaces, a shared office space and a rooftop common area. Rent is expected to range from $1,500 to $2,700 per month. Total project cost is expected to be approximately $3,108,440 and will be financed through a construction loan, owner equity and the funds raised through this offering.

The Project is located just a block from the Wynwood Business Improvement District (BID). The BID manages the 50-city-block Wynwood Arts District through the oversight of a municipal board of the City of Miami representing more than 400 property owners. You’ll find more detail about Wynwood in About the Market.

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Conceptual drawings
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About the building

The Project is planned to have a total of 10 units, totaling 6,254 leasable square feet, and with the following unit mix:

  • Two Type A studio units averaging 376 square feet;
  • Two Type B one-bedroom, one-bath units averaging 478 square feet; 
  • Four Type C two-bedroom, one-bath units, averaging 773 square feet; and
  • Two Type D two-bedroom, one-bath units, averaging 727 square feet.

The units are designed to feature modern architectural details with designer finishes throughout, including high-quality fixtures, nine foot ceilings, private patios and balconies, programmable thermostats for energy management, stainless steel appliances, under-mount kitchen sinks, European cabinets and quartz countertops. All units will be furnished.

In addition, the building plans include a shared office space on the ground floor and a rooftop accessible to all tenants, with outdoor kitchen and furniture with sufficient open space for fitness or other recreational activities. 

The project architect is SD Collaborative, a full-service architectural firm headquartered in Miami. With licenses in Florida and ten other States, Primi Conde, the owner of SD Collaborative, has 31 years of experience as an architect, leading architectural and engineering teams on a wide range of projects including corporate offices, residential and mixed use projects, resorts, cruise terminal structures, and more in both domestic and international markets. Selection is underway for the property management team.

The project timeline is anticipated to be as follows:

August 2020 - Site plan approval anticipated
December 2020 - Project funding finalized
March 2021 - Construction drawings completed
Summer  2021 - Building permits finalized
Summer 2021 - Construction start
May 2022 - Marketing and lease up begins
Summer 2022 - Construction complete and operations begin
October 2024. - Anticipate refinancing and repayment of equity

It is anticipated that the Project will stabilize in approximately four years, or two years after construction is complete, at which point Wynwood Five plans to refinance or sell the property and return investor funds along with any outstanding balance in preferred equity payments that are due.

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About the change

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About the developer

The developer of the Project is RH-RP Management LLC, a company owned by Ricardo Hernandez and Reinaldo Padron. Ricardo Hernandez is a multi-disciplinary real estate expert with over 25-years’ experience in the real estate industry. He has experience and expertise in brokerage, real estate development, financial analysis, project management and architectural design. As the founder and CEO of the Office America Group, Ricardo is well versed in evaluating and executing acquisitions through financial modeling and market research for ground up residential, commercial and mixed-use developments. Office America Group, a boutique real estate development company located in Miami, Florida has developed commercial and residential projects in the $5 - $15 million range. Currently, the group has five projects in the permitting process, three in Miami and one in Palm Beach, Florida and one in Jamaica Plain in Boston, Massachusetts. When completed, these projects will yield 191,000 square feet of developed space, including 261 rental units and +/- 6,000 SF of retail. Previously Ricardo built and managed a 36,000 square foot office building for the Florida Department of Health which was sold in 2018. Ricardo was the successful bidder in an Request For Proposals invitation for this project.

In addition, Ricardo is a senior commercial real estate advisor at ONE Commercial and ONE Sotheby’s, where he helps investors and developers find real estate opportunities in the South Florida market.  Ricardo also represents owners in the acquisition/disposition of real estate assets. Past professional roles have included CFO and Executive VP at Riviera Point Development Group, where he oversaw company financials and evaluated potential acquisitions and dispositions and VP Real Estate Special Assets Officer at Mercantil Commercebank where he analyzed risk factors associated with various types of real estate credit facilities.

Ricardo holds a master’s degree in real estate development from Columbia University, a Master of Science in Project Management, a Bachelor of Science in Architecture, and advanced courses at MIT.

Reinaldo Padron, is a civil engineer, real estate analyst and marketing expert. Throughout the years he has combined and applied his experience to different projects, most often related to the real estate industry. An entrepreneur by nature and a blockchain advocate, Reinaldo successfully launched a sports/wellness application in Mexico, which was featured on Shark Tank (MX). Reinaldo is planning to launch a real estate division under this brand, to provide holistic wellness design services to real estate projects.

Past experience includes:

  • Loma Linda. 262 acres comprised of 316 lots of mixed-use development including 312 residential units. Reinaldo managed the completion of this project in Caracas Venezuela, playing a role in visioning, financial, legal, development, capital raising and land use solutions.
  • Mixed-use in Orlando. Project Manager for MIR Developments for the construction of 213,000 square feet of mixed-use projects.
  • South Zone Santa Barbara Master Plan. Business Development Manager coordinating and conceptualizing a land development master plan proposal for 131 acres in Curacao with a potential gross buildable area of 2.9 million square foot. The project included residential, commercial, touristic, cultural and recreational uses for Santa Barbara Development and Construction N. V. a company owned by SFT Investments Limited, in Curacao, a subsidiary of one of the biggest hedge fund firms in the world CITCO.  
  • Residencias 906. Reinaldo managed the land acquisition, project design and joint venture for the construction of this 76,800 SF residential building in Caracas, Venezuela. The project is under construction and is expected to be completed in winter 2020.

Reinaldo holds a Master of Science in International Real Estate, a Master of Science In Marketing, both from Florida International University and a Bachelor of Science in Civil Engineering from Universidad Metropolitana (VE).

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About the neighborhood
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About the market

The Project is located in the Wynwood neighborhood of Miami, Florida, just one block from the Wynwood Business Improvement District (BID), north of Downtown Miami and next to the Edgewater district. It is a short fifteen-minute drive to Miami International Airport and a nine-minute drive to the new Virgin Miami Central Rail Station, the new hub for all things transportation, leisure, and business. Future plans for the Tri-Rail Downtown Miami Link and the new Brightline intercity express train, propose new station locations at Wynwood/Midtown, providing even better transportation options in the future.

Wynwood is divided into two discrete areas; the Wynwood Fashion District which runs along West 5th Avenue and the Wynwood Arts District, which is home to over 70 galleries, museums and collections that has become one of the largest open-air street art installations in the world.

Over the last 5 years, approximately 3,900,000 square feet of improved building area has been added to the district. This development activity is the result of a change in zoning that was implemented in 2015. Key leadership created a Neighborhood Revitalization District Plan (NRD) with the goal of creating an internationally recognized center for arts, innovation and culture. The NRD sets forth new zoning regulations for Wynwood that encourage more density, and new developments focused on mixed use, neighborhood improvements, pedestrian friendly streets and preservation of the historic industrial character of the neighborhood.

Wynwood has emerged as a redevelopment hub with increased investments and new development projects ranging in a variety of uses, from office to retail, recreational, residential and transit oriented. This once neglected and shuttered warehouse and manufacturing district is being transformed into a vibrant neighborhood of art complexes, galleries, performing art spaces, restaurants, cafes, lounges, and other creative businesses. Silicon Valley companies are setting down roots in Wynwood as well, according to The Real Deal Silicon. According to a Wynwood market report presented by Integra Realty Resources, new and improved building area is projected to increase by an additional 35% to around 5.3 million square feet in the next 5 years.

The multi-family market inside the Wynwood BID district is quite limited. Existing stock consists of 403 units in low-density Class C buildings dating back to the 1950's and 1960’s. Residential inventory is on the rise since 2015, with the addition of 464 new units. There are an additional 612 units in planning with 189 of them expected to be completed before the end of 2020.

Images of Wynwood by @Amanda_Julca

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Key deal points
  • Proximity to a scene. Adjacent to Miami’s Wynwood Arts District.
  • A cultural hub. Galleries, museums and open-air art installations.
  • Good transit. Plenty of transportation options nearby.
  • Density encouraged. New zoning regulations that encourage density and mixed use.
  • A redevelopment hub. Lots of development underway nearby. 
  • Supports the big picture. Part of a comprehensive neighborhood plan.
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About the Offering

The Company is engaged in two simultaneous offerings of its securities:

  • An offering under Regulation CF (where anyone can invest), which we refer to as the “Reg CF Offering”; and
  • An offering under SEC Rule 506(c) (where only “accredited Investors” can invest), which we refer to as the “Reg D Offering.”

We plan to use the proceeds of the two offerings, together with a loan from a bank, to invest in a real estate project to build a three-story building, approximately 9,585 s.f. in size, with ten fully furnished rental units at 3041 NW 5th Avenue in Wynwood, Florida. 

We are trying to raise a maximum of $300,000 but we will move forward with the Project and use investor funds if we are able to raise at least $150,000 (the “Minimum Goal”). If we have not raised at least the Minimum Goal by 11:59 pm on January 31, 2021, EST, (the “Target Date”), we will terminate the Offering and return 100% of their money to anyone who has subscribed.

In an offering under Regulation CF the issuer is required to state a “Target Amount,” meaning the minimum amount the issuer will raise in the Regulation CF offering to complete the offering. For the reason just described, our Target Amount for the Reg CF Offering is $1,000. It doesn’t matter how much is raised in the Reg CF Offering and how much is raised in the Reg D Offering. Thus, if we raise $1,000 in the Reg CF Offering and at least $149,000 in the Reg D Offering we will proceed, and vice versa.

If you are investing in the Reg CF offering, the minimum you can invest is $200. Investments above $200 may be made in $200 increments (e.g., $400 or $600 but not $336). An investor may cancel his or her commitment up until 11:59 pm on January, 29, 2021 (i.e., two days before the Target Date). If we have raised at least the Minimum Goal 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.

If you are investing in the Reg D offering, the minimum you can invest is $3,000. Investments above $3,000 may be made in $200 increments (e.g., $3,200 or $3,400 but not $3,336). When we have raised the Minimum Goal we plan to accept the funds invested through the Reg D offering and admit the Reg D investors to the Company.

The SEC is considering other changes to Reg CF, in addition to raising the maximum offering amount. Where applicable, we will reference possible changes in the applicable sections of this Form C. 

The full disclosure documents, which include Form C can also be downloaded and viewed on the Securities and Exchange Commission’s website.

Investments under Reg CF are offered by NSSC Funding Portal, LLC, a licensed funding portal, while investments under Reg D are offered by NSSC Crowd, LLC. 

 

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About the finances

Total acquisition and development costs of approximately $3,108,440 million will be financed with a $2,117,911 million construction loan, $503,284 in owner equity and the $300,000 in equity raised through this Offering. In addition developer fees of approximately $187,244 will be deferred until the Project is refinanced or sold. Approximately two years after construction has been completed, Wynwood Five expects to repay both the equity raised and the construction loan with a permanent loan of approximately $2,456,011 million or through the sale of the property. At this time any outstanding balance of Investor member equity and returns will be paid, if the cash is available.

The financing assumptions to purchase and develop the project are as follows:

Project costs    
   Land acquisition   $502,005
   Soft costs   $806,846
   Hard costs   $1,799,589
Total expected project costs   $3,108,440
Project sources    
   Construction loan 68.13% of project cost $2,117,911
   Owner equity 16.20% of project cost $503,284
   Small Change equity 9.66% of project cost $300,000
   Developer deferred fees 6.00% of project cost $187,244
Total expected sources   $3,108,440

For more detail review the operating pro forma and project cash flow

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About investor return

Under the Company’s LLC agreement, the Company will make distributions to its owners quarterly, starting at the end of the first quarter after this Offering closes. The source of the distribution is immaterial. Instead, all distributions will be made in the following order of priority:

  1. First, the Available Cash shall be distributed to the Investor Members until they have received their Preferred Return for the current year.
  2. Second, the balance of the Available Cash, if any, shall be distributed to the Investor Members until they have received any shortfall in the Preferred Return for any prior year.
  3. Third, the balance of the Available Cash, if any, shall be distributed to the Investor Members until they have received a full return of their Unreturned Investment.
  4. Fourth, the balance of the Available Cash, if any, shall be distributed to the Sponsor as a promoted interest.

Each Investor will receive an annual preferred return of 8% on their investment, which will accumulate but not be compounded starting on the date the investment is made. The Company plans to sell or refinance the property approximately 2 years after construction is completed and expects the sale price of the property at that time to be approximatetly $4,000,000.

If the Project does not move forward for any reason, the Company plans to sell the property and return the funds invested. The current value of the property is estimated to be $470,000 as compared to similar-sized lots sold near the Project property over the last 20 months.

Address Lot size s.f. Sale date Sales price Per s.f.
175 NW 31 Street 7,150 June 2020 $453,800 $63
267 NW 33 Street 5,000 Sept 2019 $310,000 $62
227 NW 33 Street 5,000 July 2019 $375,000 $75
435 NW 34 Street 7,000 Nov 2019 $470,000 $67
3327 NW 3 Ave 6,511 Oct 2018 $415,000 $64
Average       $66
3041 NW 5 Ave 7,200 Jan 2020 $470,000 $65
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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 Companies and the terms of this 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 this offering, nor does it pass upon the accuracy or completeness of any offering document or literature related to this offering. 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.

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. You can download a more expansive list of potential risks here.

COVID19 Disclosure.

The declaration of COVID-19 by the World Health Organization (WHO) on March 11, 2020 as a worldwide pandemic has created considerable uncertainty in the worldwide financial markets. Unemployment rates in the US have reached levels as never seen before and concerns about the ongoing spread of the COVID-19 have impacted the normal operations of the vast majority of businesses at every level.

The real estate market has not seen yet a significant negative impact due to COVID-19 with the evident temporary exception of the retail market. However, a prolonged outbreak could have a significant (and yet incalculable) impact on other real estate sectors, considering that the value of real estate assets as any other business type are dependent on the cash flow it generates.

Given the degree of overall uncertainty present in the economy, forecasts and projections contained herein may change dramatically. Even though our project completion date is expected to be in summer 2022 a prolonged outbreak of COVID-19 could slow down the rental rates growth having a direct impact on our projected cash flow. 

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Follow the change.