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Canyon Creek Prospectus

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Prospectus for Canyon Creek Builders

Prospectus for Canyon Creek Builders

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  • 1. INVESTMENT PROSPECTUS Contents: Pg. Investment Objectives 1 Development History and Future 2 The Relevant Market 3 Investment/Financial Details 4 The Canyon Creek Builders Team 5 Appendices Demographic Modeling 9 Media Articles 10 Marjorie Cox Bio 14 John Cox Bio 15 Canyon Creek Plats 16 Canyon Creek Maps 18 1
  • 2. Investment Objectives Canyon Creek Builders is looking for investors that are seeking short-term investments with an expected return greater than standard money market interest or CD interest rates to balance a portfolio that my include securities which have proven volatile in recent years. Canyon Creek Builders seeks initial investments with a term of six (6) months to fund construction, marketing, and closing of single-family homes within the Canyon Creek development. Home construction will occur during the first 90-120 days of the investment with the balance of the term used for marketing and closing. Investments will be secured by a Deed of Trust, with the investor holding title to the property during the construction and sales period. With an expected average loan-to-value ratio of 75%, each investment would provide an average equity position of 25%. The risk management profile includes a General Liability policy by JCP, builder’s risk insurance for each house and Certificates of Insurance by the primary subcontractors. Canyon Creek Builders looks to use the private capital market to take advantage of its experience and market opportunities to develop the Canyon Creek subdivision. With seven closings over a nine-month period and numerous lost sales in Canyon Creek due to lack of available inventory, Canyon Creek Builders is well-positioned to succeed with the strategy outlined within this Prospectus. 1
  • 3. Canyon Creek Development – History and Future Nestled in the rolling landscape of North Montgomery County is Canyon Creek Development. Upon completion, the development will include over 225 homes ranging from 1,600 to 2,500 square feet in size on lots from 50’ to 60’ in width. The original sixty homes were constructed from 2004 – 2006 by a nationally recognized builder. In 2007, the previous developer sold seventeen lots in Section 1, and an additional 35 acres of undeveloped land that will yield 150 lots, to John W. Cox Partners, LTD (JCP). JCP initially sponsored two local custom builders to construct homes. In 2009, JCP transitioned to its own building company, Canyon Creek Builders. The previous builder, a publicly traded company, sold the original sixty houses over a two-year period during the market peak. As developer/builder, JCP has constructed and sold eight homes in eighteen months. Canyon Creek Builders - Recently Sold Homes Date Address SF Price $/SF 10/3/2008 1780 Canyon Lake Creek Dr 2,223 $204,000 $91.77 5/30/2009 1794 Canyon Lake Creek Dr 1,750 $164,500 $94.00 6/4/2009 1796 Canyon Lake Creek Dr 2,016 $179,500 $89.04 8/14/2009 1792 Canyon Lake Creek Dr 2,182 $197,000 $90.28 8/21/2009 1762 Canyon Lake Creek Dr 2,182 $204,500 $93.72 11/20/2009 1768 Canyon Lake Creek Dr 1,750 $169,750 $97.00 2/3/2010 1764 Canyon Lake Creek Dr 2,182 $206,000 $94.41 2/15/2010 1776 Canyon Lake Creek Dr 1,750 $171,000 $97.71 Average 2,004 $93.49 Of the 17 lots acquired in Section 1, JCP has six remaining lots on which to build homes. Upon completion of Section 1, JCP will extend Amy Lee Lane to develop thirteen lots for the next phase of construction. The community, with cottage-style homes, offers a six-acre nature preserve with walking trail to its residents. A Dog Park and soccer fields will be featured in Section 2. The property is bounded by White Oak Creek to the east, Longmire Road to the north, Tink Calfee road to the west and offset from Highway 105 to the south in Conroe, Texas. 2
  • 4. The Market Canyon Creek Builders engaged Metrostudy to perform a market analysis in order to provide a third-party perspective of the potential of this project. Metrostudy is the nation’s leading provider of primary and secondary market information to the housing, retail and related industries. During 2009, the Conroe market supported the sale of 64 new construction homes in the same price point as Canyon Creek (Metrostudy, p. 5). Further, over 100 of the 338 new construction closings in the Conroe Market Area during the twelve months of 2009 were on 50’-55’ lots, comparable to Canyon Creek (Metrostudy, p. 24). Metrostudy’s report indicates that Canyon Creek has the potential to absorb 10 – 12 new homes in 2010 (Metrostudy, p. 11). A copy of the report is available upon request. Recent articles from the Houston Business Journal and The Houston Chronicle addressing job growth, market conditions and the impact of the recession on the area are included in the Appendix. 3
  • 5. Investment/Financial Details Canyon Creek Builders is seeking investors to provide financing for the construction of six homes in the remaining Section 1 and commencement of Section 2 during 2010. Investors will be paid interest ranging from $4,500 to $6,000 for an annualized rate of return of 9%, upon closing of the home; specific earnings dependent upon the original loan amount and maturity. The investor will hold a Deed of Trust to the property until the final closing to the consumer. Upon the sale of the initial home, investors will have the opportunity to roll the funds into the construction of a new home. One-half of the principal investment would be paid at building commencement with the balance payable in sixty days. The investment interest, equivalent to an annualized rate of 9.0%, will be paid at closing of the house to the consumer. If the investment term exceeds six months, the interest rate will increase at a rate of .05% per month, up to a maximum total interest of 10.2% per annum on the investment. The opportunities by investment in each proposed house are listed below. Period/ Annualized Lot Plan Sales Price Loan Amount Mos Rate Total Interest Lot 1 Azalea $197,400 $120,000 6 9.0% $4,500 Lot 2 Magnolia $171,000 $120,000 6 9.0% $4,500 Lot 9 Azalea $197,400 $142,000 6 9.0% $5,325 Lot 11 Lily $225,600 $160,000 6 9.0% $6,000 Lot 12 Bluebonnet $206,800 $147,000 6 9.0% $5,513 Lot 13 Azalea $197,400 $142,000 6 9.0% $5,325 Lot 15 Paintbrush $188,000 $136,000 6 9.0% $5,100 Lot 18 Lily $225,600 $160,000 6 9.0% $6,000 With plans and specifications pre-approved by the Canyon Creek HOA Architectural Control Committee on platted lots, Canyon Creek Builders can commence building within days of funding by investors. The average construction timeframe is 90-120 days. The Company seeks to have eight homes on the ground during 2010. 4
  • 6. The Canyon Creek Builders Team Marjorie Cox is responsible for the day-to-day operations including home construction, marketing, sales and financing activities of Canyon Creek Builders. After a three-year stint in home building and residential real estate brokerage, Ms. Cox began a twenty year commercial real estate career in the 1980’s. Ms. Cox provided real estate outsourcing duties to Fortune 100 companies in program management, transactions and operational oversight prior to engaging in the development of Canyon Creek. John Cox acts in an advisory capacity to the home building efforts. Mr. Cox developed twenty subdivisions consisting of 250 lots in Galveston County over thirty years. Further, he performed as general contractor in over 50 homes in order to stimulate the market in these projects. After relocating to Lake Conroe in 2004, Mr. Cox acquired two subdivisions for development in Stewart Hill and Canyon Creek. Mr. Cox will implement the development of future sections in Canyon Creek as market conditions warrant. Bruce Eskildsen is the superintendent for Canyon Creek Builders in which he is responsible for engaging and managing sub contractors for the construction of houses. Mr. Eskildsen has constructed homes in The Woodlands and Montgomery County for 30 years, having worked for several large builders during the initial development phase of The Woodlands. He obtains and performs comparisons of bids, manages tasks and schedules, ensures compliance with local codes, and reviews work through completion. Melinda Zuber is the on-site sales representative for Canyon Creek and is directly responsible for marketing homes to walk-in traffic, a prospect database, and via the real estate community. Ms. Zuber was licensed as a Realtor and Accredited Buyer Representative in 1983. She has been a dynamic member of the real estate community in The Woodlands and Spring and joined Keller Williams Conroe/Lake Conroe in 2007. Actively involved in numerous community organizations, Ms. Zuber is a Chamber of Commerce Diplomat, member of Lions Club, Toastmasters, Commercial Real Estate Association of Montgomery County as well as several roles with St. James Church. Catherine Wagner supports the team as office manager in the implementation of contractor schedules, monitoring permit and utility processes, and review and payment of invoices. She also assists with marketing, and buyer coordination. Resumes of the principals are included within the Appendix. 5
  • 7. Canyon Creek Builders Investment Team Marjorie Cox John Cox Operations Advisor Sales Agent/ Superintendent Office Manager Marketing The marketing platform for Canyon Creek has included a billboard on Highway 105, website at www.canyoncreeklife.com, direct mail campaign to over 20,000 targeted consumers, web-based marketing, Zillow, Trulia, CraigsList, Multiple Listing Service/TEMPO, and advertising in publications including The Courier, Houston Chronicle, Review-It Magazine, and Homes Focus Magazine. Other Relevant Experience: The Canyon Creek Builders team has constructed an additional six homes in three communities outside of Canyon Creek during this period to grow its market share. The business strategy includes a “Build On Your Lot” program in which owners fund the construction of custom homes on their own property with three completed during 2009-2010. 6
  • 8. Disclaimer Investors should consider carefully information contained in this real estate building prospectus including investment objectives, risks, charges and expenses. You may request any additional data, information or supporting documents regarding this development and the construction of homes in Canyon Creek. Please consult an investment advisor, appraiser, or real estate broker familiar with market conditions. Please read the prospectus carefully and understand any inherent risks in real estate before investing. 7
  • 9. APPENDIX 8
  • 10. Demographic Modeling The Houston-Galveston Area Council (H-GAC) is a regional planning agency for the Houston region. Organizationally, H-GAC is a voluntary association of local governments and local elected officials in the 13-county Gulf Coast Planning Region – an area of 12,500 square miles with almost 5.4 million people. H-GAC’s chief mission is to serve local governments today while helping them plan for tomorrow. H-GAC’s Forecasting Group develops long range forecasting for Population and Employment in the Houston Transportation Management Area (TMA) that includes Brazoria, Chambers, Galveston, Fort Bend, Harris, Liberty, Montgomery, and Waller Counties. Canyon Creek is located in Montgomery County. The Forecast Horizon by H-GAC demographic modeling is for the period from 2005 to 2035. The chart below represents the Population Forecast for the subject area; specifically Canyon Creek located in zip code 77304, the City of Conroe, Montgomery County. While the growth in 77304 from 2005 to 2035 is projected at 182%, the period from 2010 to 2015 in which the expansion of Canyon Creek will occur represents a growth of 18% in the zip code 77304. Houston-Galveston Area Council Population Forecast 30,000 250,000 25,000 200,000 Households 20,000 150,000 15,000 100,000 10,000 5,000 50,000 0 0 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 Year 77304 Conroe Montgomery County The data in the above chart can be located at http://www.h- gac.com/rds/forecasts/default.aspx. 9
  • 11. Wednesday, April 14, 2010, 7:00am CDT Institute for Regional Forecasting: Houston jobs, people to grow by 2.5% a year Houston Business Journal Houston will grow by 3.7 million people and 1.5 million jobs in the next 25 years, according to the Institute for Regional Forecasting’s annual long-term forecast for the eight county Houston Consolidated Metropolitan Statistical Area. Barton Smith, professor of economics and director of the institute, said, “While economic growth has recently been stunted by the national and global recessions, Houston will continue to expand over the long term.” The area currently has 5.1 million people and 2.5 million jobs. The institute predicts that to increase to 7.4 million and 3.2 million, respectively, by 2020 at a growth rate of 2.5 percent a year. By 2035, the IRF estimates that the area’s employment will have reached 4 million jobs and population will have soared to 9.5 million people. “While the growth rate will decline during the subsequent 15 years to around 1.5 percent, it will be mostly due to sheer city size as the negative effects of ‘city bigness’ take its toll on overall growth,” said Smith. The IRF report also shows that the decentralization of Houston will continue with suburban counties capturing an increasingly larger share of new job and population growth. Most recently the suburban counties have been capturing about 44 percent of all employment growth and 51 percent of all population growth. “This trend will continue well into the future,” Smith said, noting that by 2035 the suburban counties will be capturing 63 percent of all new jobs and 78 percent of all new population. He warned, however, that suburban counties “can’t allow themselves to get overwhelmed by the growth that is coming their way or they will lose the quality of life that they now cherish.” All contents of this site © American City Business Journals Inc. All rights reserved. 10
  • 12. Friday, April 23, 2010 New home sales jump 27 percent Houston Business Journal - by Jeff Clabaugh Washington Business Journal A day after a report showing a gain in sales of existing homes, the government says sales of new homes surged 26.9 percent in March, the biggest one-month gain in five decades. The Department of Commerce report says sales of single-family homes were at an annual rate of 411,000 in March. New home sales were up 23.8 percent from a year earlier. The number of new homes on the market at the end of March stood at 228,000, a 6.7-month supply of inventory at the current rate of sales. Sales of single-family homes in the Houston market posted a 10.8 percent increase in March compared to last year, according to the Houston Association of Realtors. Earlier this week, the National Association of Realtors reported sales of existing homes — the lion’s share of housing sales transactions — rose 6.8 percent in March compared to February. Existing home sales last month were up 16.1 percent from a year ago. March sales gains were attributed in part to better weather and buyers racing to beat the deadline for the expiration of the government’s homebuyer tax credit. jclabaugh@bizjournals.com All contents of this site © American City Business Journals Inc. All rights reserved. 11
  • 13. City may be quick to exit recession By NANCY SARNOFF Copyright 2010 Houston Chronicle May 6, 2010, 7:59PM Modest job growth throughout 2010 will help boost Houston's real estate market, Houston economist Barton Smith said Thursday in what was his last forecast speech as head of the University of Houston's Institute for Regional Forecasting. Houston is working its way out of the recession more quickly than he and most other observers anticipated, said the longtime prognosticator and UH economics professor, who is retiring at the end of the summer. “The old wisdom that because Houston was so late in getting into the recession that it would be late in getting out of it simply proved to be wrong,” he said during a luncheon speech in the Imperial Ballroom of downtown's Hyatt Regency Houston. Modest job growth His forecast shows employers creating no more than 1,500 new jobs per month throughout the rest of this year. Job growth should accelerate in 2011 and beyond with regional growth leveling off at 2 percent to 2.5 percent per year over the next five years. Smith cited two key reasons Houston's economy has held up better than most of the country: a fast oil price recovery and stable home prices. The lack of a significant drop in home prices meant that Houston-area residents didn't experience as sharp a decline in personal wealth as the rest of the nation, Smith said, and that puts area consumers in a much better position to aid in the recovery. Home prices fell last year by 0.2 percent. Values today, he said, are no different from their 2007 highs. “Houston never participated in the home price bubble,” Smith said. “There was no need for prices here to correct.” Even though the area lost almost 100,000 jobs last year, the local housing market is in much better shape today than in the mid-1980s because new construction slowed more quickly in response to the latest downturn than during the oil bust in the earlier decade. Indeed, the market for new construction took the biggest hit in the real estate industry as builders pulled back on construction long before the recession hit Houston. But developers should look to the future, Smith said. 12
  • 14. In the year 2035 By 2035, the Houston metropolitan area is expected to have a population of 9.5 million with a work force of 4 million. This long-term growth will require an enormous amount of new real estate capital over the next 25 years: more than 850,000 new homes; more than 330,000 new apartment units; and approximately 110 million square feet of office space and 90 million square feet of commercial retail space, according to the Institute for Regional Forecasting. While the central city will see some of this growth, most will occur in suburban Harris County and its surrounding counties, which will capture almost 80 percent of the population growth and 64 percent of employment. The 2035 population in Fort Bend and Montgomery counties will each exceed more than 1 million. “The boundaries of Houston are growing dramatically,” Smith said. “The boundaries of Houston are growing dramatically,” Smith said. Other predictions from Smith's forecast: • The apartment market should capture more renters as mortgage rates rise. • Companies should be able to take advantage of lower premiums on top-class office rents. • Some retail vacancies may become permanent as shop owners have chosen newer space. nancy.sarnoff@chron.com 13
  • 15. Marjorie L. Cox 713.398.5734 EXPERIENCE Morning Cloud Investments, LLC 2006-2010 President Perform real estate consulting and buyer/tenant representation in Montgomery County. Develop, as joint venture partner, the expansion of Canyon Creek in Conroe, Texas. Managed construction of eleven homes in Montgomery and Galveston County. Plum Creek Timber 2004-2006 Director Land Asset Management Services Managed the disposition of non-strategic properties via an outside real estate firm and twelve internal team members. Implemented program, as reported to Wall Street in December, 2003, which was a key business strategy encompassing the sale of 1.2 million acres valued at $500 million over a seven year period to provide capital to invest in strategic timber lands. Trammell Crow Company 1994-2003 Senior Vice President Managed outsourced corporate real estate services provided to McKesson Corporation based in San Francisco, CA with annual account budgets of $4.8 million. Provided management oversight for corporate accounts based in Houston, Texas which included Facilities Management, Transaction Services, Project Management and Office Services with responsibility for annual budgets of $7.5 million. Generated net revenues in excess of $700,000 over a three-year period on the Compaq account. Provided ad hoc real estate consulting to the Company’s client base in order to service unique real estate assignments or in the pursuit & expansion of new business. EDUCATION Bachelor of Science – Housing; Business Administration Minor 1985 The University of North Texas; Denton, Texas Texas Real Estate Broker 1987 0343919 14
  • 16. John W. Cox 281.910.2003 EXPERIENCE John W. Cox Realty & Investments, Inc. 1978-2010 President Owned and operated residential brokerage and development firm with operations in Galveston County. Engaged in (via self, employees or independent contractors) real estate sales, property management and appraisals from 1978 to 1994. Appointed as Commissioner by Galveston County Probate and District Courts to serve in Eminent Domain proceedings including the locale known as Kemah Boardwalk. Developed various subdivisions in Galveston and Montgomery Counties by acquisition of land, completion of engineering and permitting, and construction of roads and utilities. Sold lots to builders on a take-down basis as well as constructed homes to generate interest in community. Over the past ten years, projects have included: 2007 – Acquired Canyon Creek, Section 1 lots and development acreage 2005 – Developed Stewart Hill a 37-lot subdivision in Montgomery, Texas 2004 – Developed Prairie Knoll II a 49-lot subdivision in LaMarque, Texas 2000 – Developed Prairie Knoll Estates, a 59-lot subdivision in LaMarque. Bank of Galveston 1972-1978 Senior Vice President Managed real estate and commercial lending departments. Texas City National Bank 1959-1972 Vice President Administered consumer loans, public and community relations. EDUCATION Bachelor of Arts 1957 Southern Methodist University; Dallas, Texas Southwest Graduate School of Banking 1965 Southern Methodist University; Dallas, Texas Texas Real Estate Broker 1977 15
  • 17. SECTION 1 PLAT 16
  • 18. SECTION 2 PLAT 17
  • 19. CANYON CREEK, SECTION 1 Sections 2 & 3 18
  • 20. CANYON CREEK, CONROE, TEXAS 19