We are an experienced operator in the Office and Mixed-use space. We are committed to providing superior returns to our investors. Our goal is to achieve a 15% to 20% cash on cash return, take advantage of the depreciation and tax credits that properties offer, minimize our income tax deductibility, pay down principal by gradual decline in the mortgage balance, and a gradual increase in the property’s equity, over time thus creating cash out for profit at the time of the sale or refinance for each of the properties within our portfolio. We focus on properties within the geographical areas of Philadelphia in Office and Mixed-use area Please contact us about direct investments. We have the following investment offering describe below.
Investor Offering #1- Commercial Space
Goal: To purchase and lease up commercial office space for non profits in Philadelphia. To expand on the additional purchase of real estate created by the need of meeting the auxiliary services that this non profits are here to service. These services usually require the leasing of day care, schools and housing. Therefore we would also service the acquisition of Mixed Use and Multifamily assets in the Philadelphia region for these auxiliary services that they are here for.
Real Estate Opportunity: We see an immediate buying opportunity on all districts that meet Federal, State and City funding requirement for these non profits. They must be in certain districts or zip code due to their funding requirements. We would capitalize on those zip codes or districts and focus on properties that are in the major business corridor supported with parking capability and very close proximity to transportation. Our ideal purchase is a building on a commercial corridor supported by sufficient parking capability, a bus stop across the entrance and a train station within one block from the purchased property. These locations are supported by some retail & restaurant needs and it would be considered a premium location for long term tenancy.
Most nonprofits tenants that we attract have long term history with mature annual budgets. Most move because their leases are soon to expire and they have discovered that they have outgrown their space due to growth or reduction needs and in addition their current space has become obsolete to their current needs. Most obsolete action is due to years of over building in the same space and creating ineffective space, HVAC disruption of air balancing and constant HVAC issues or technology wiring needs that have become too expensive to re create. We often capitalize on this opportunity with much success. We have the expertise and infrastructure to deliver those custom needs.
Acquisition strategy:. We would purchase from a minimum of 5,000 sq. ft to 50,000 sq. ft commercial building on commercial corridors. We would like to acquire these units at around a cost of $10.00 to $75.00 per sq. ft. and when completed with a value of $125.00 to $150.00 a sq. ft value. We would update via renovation to premium standard to support long term leases. Our typical leases would carry a minimum of 5 year lease with options for additional years. We would also prepare the individual leasing space to vanilla renovation for preparation for future tenants. We could possibly do the fit out for the tenants on a long term lease and do rental adjustment for the added fit out. The tenant could choose to do the fit out renovation for the Unit.
Our intentions are to increase the value by as much as 50% or more and continue to operate the properties at a positive cash flow. We will seek to return to the investors a preferred rate with equity.
Principals: The principals for Smith Houston Inc (The Company) Stan Smith as the principal has extensive successful management & construction experience of this specific market. Please see stansmith.me for his resume.
Funding Requirements: The Company seeks to raise between $250,000 dollars up to $5,000,000 dollars for down payment purpose for these investments.
Investment Strategy: We are looking for 25-30 % percent equity investment per deal. We are targeting a return of 15-20 % percent cash on cash return per property and seeking as much of a 12+ percent IRR on the investment. We also hope to take advantage of greater economies of scale to negotiate service and financial rates.
Benefit of Investment: As typical of traditional real estate investment we expect to benefit from depreciation which creates reduces tax on income or tax deductibility but with distribution being made with a minimum tax consequence. The investments will create gradual decline in the mortgage balance, and a gradual increase in the property’s equity, over time thus creating cash out for profit at the time of the sale or refinancing.
We will seek the following structure to the investors.
- Initial capital to be return through a refinance or sale of the property.
- Offer preferred rate with equity
- Or strait out equity with the option to be an active investor rather than passive.
Banking Financing: The financing market for loans will be in the conventional financing market for terms of 5 yr – 7 yr with 5 year options. In some situation we might be in non recourse term sheet of maximum 10 year terms with 30 year amortization.
Operational Strategy: Investors will be kept up to date on the investment through audited financials, 24/7 management monthly reporting & quarterly financials. We have in house bookkeeper, administrator, data entry, IT and CPA accountant for us to be able to submit accurate quarterly or monthly reporting. We send our year end reporting to an outside CPA firm for annual tax return.
Exit Strategy: At the term of the loan we expect to either: sell the property for cash out or refinance to pull cash to re purchase newer acquisition or reduce investor principal.