Investment memorandum narrated

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Investment Memorandum for Western Region Fund

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Investment memorandum narrated

  1. 1. INVESTMENT MEMORANDUM U.S. Real Estate Opportunity Fund (Western Region) in the amount of: $100,000,000.00Released: 02/2012
  2. 2. EXECUTIVE SUMMARY Released: 02/2012 U.S. Real Estate Opportunity Fund (Western Region) Fund Entity: Western Region Fund, LLC Type: Private Equity Fund Capitalization: $100,000,000.00 Unit: $500,000.00 Use: Formation of a Private REIT Term: Dissolution is ±5 years Assets: Segregated Portfolio Local: Western Region (Office, Retail and Industrial) (WA, OR, CA & NV) Values: Equity ±$100,000,000 ±30% Returns: Internal Rate of Return ±15.5% Mortgage ±$215,000,000 ±70% Cash-On-Cash ±210% Acquisitions ±$315,000,000 Disposition ±$450,000,000 General Mgr.: MagnuM Opes Corporation Closing: May 31, 2012U.S. Real Estate Opportunity Fund Home Table of Links Next Slide Previous Slide Page 2
  3. 3. FUND SYNOPSIS Released: 02/2012 Fund Description The U.S. Real Estate Opportunity Fund is a group of private equity funds established for the acquisition and operation of income producing real estate for profit. The initial fund is established to acquire real estate in the U.S. western region. The U.S. Real Estate Opportunity Fund (Western Region) shall operate as an independent private equity investment company titled Western Region Fund, LLC. It is the intent of the U.S. Real Estate Opportunity Fund to make future offerings for other U.S. regions. Statement of Purpose The purpose of the Fund is to acquire a portfolio of undervalued real estate in recovering metropolitan areas of the U.S. and to increase the value of that real estate with the intent to:  Reposition the portfolio as a Private Real Estate Investment Trust (Private REIT).  In five years, convert the Private REIT to a Publicly Traded Real Estate Investment Trust (Public REIT).  And provide the initial private equity Subscribers the option for  the return-on and of their investment, plus  the option for retained shares in the Public REIT; or  Dispose of the portfolio assets in approximately 5 years and distribute principal and profits equivalent to a ±210% cash-on-cash return or higher.U.S. Real Estate Opportunity Fund Home Table of Links Next Slide Previous Slide Page 4
  4. 4. FUND SYNOPSIS Released: 02/2012 REIT Description  A REIT is a fairly unique entity in the world of tax law  Investors can achieve a variety of business/tax goals that cannot easily be achieved with any other entity  REITs can be combined with other types of entities  More Private and Public REITs are being formed today than ever before  REITs offer Private Equity Funds and Private Investors an opportunity to take advantage of unique planning opportunities  Private REITs provide many operational and return advantages  Private REITs are not publicly traded  Private REITs formed with pass through entities can avoid income tax  Private REITs provide diversification in assets, investment types and tax strategiesU.S. Real Estate Opportunity Fund Home Table of Links Next Slide Previous Slide Page 5
  5. 5. FUND SYNOPSIS Released: 02/2012 Dividends and Gains  Private REITs are formed with pass through entities  Approximately 95% of the net annual income is distributed to Shareholders  The Western Region Fund will operate under these guidelines Investment and Returns  ±210% Cash-On-Cash Return  ±15.5% Internal Rate of Return Exit Strategies  Merger with other regional funds  Place an Initial Public Offering (IPO)  Cash distribution to Shareholders  Shareholders may option for Public REIT shares  Disposition by REIT acquisition  Disposition by market sale  Option to extend the operational termU.S. Real Estate Opportunity Fund Home Table of Links Next Slide Previous Slide Page 6
  6. 6. FUND SYNOPSIS Released: 02/2012 The Market  Most all major agencies are reporting recovery trends  Historical bell curves illustrate value step-up  Typical Acquisition and diversification  Office sector  Retail sector  Industrial sector  Preparation for acquisitions have commenced in  Seattle  Portland  San Francisco  Los Angeles  Las Vegas  San DiegoU.S. Real Estate Opportunity Fund Home Table of Links Next Slide Previous Slide Page 7
  7. 7. THE GLOBAL MARKET Released: 02/2012 Key Global Highlights  Economic risks in Europe while U.S. trends more favorable and Asia performs well  Capital markets robust  Major cities considered ‘safe haven’  Debt financing constrained  Capital appreciation is slowing as yields flatten  Office leasing markets show mixed pictures  Overall global leasing volumes are likely to be stable  Vacancies continue to edge downward  The global office index grew in 2011  Technology, energy and commodity sectors are driving demand  International retailer demand remains robust  Warehousing momentum slow in Europe and Asia, but rebounding in U.S.  Hotel transactions hold steady  U.S. apartment market is high performerU.S. Real Estate Opportunity Fund Home Table of Links Next Slide Previous Slide Page 8
  8. 8. THE GLOBAL MARKET Released: 02/2012 GDP Projections 2012 in Major Economies – Recent Movements Australia China France Germany India Japan UK USA Oct 2011 3.2% 8.1% 0.4% 1.0% 7.5% 2.7% 0.9% 1.4% January (Latest) 3.1% 7.9% -0.7% 0.2% 6.7% 2.9% 0.3% 2.0% Change (bsp) -10 -20 -110 -80 -80 +20 -60 +60 Source: IHS Global Insight, January 2012U.S. Real Estate Opportunity Fund Home Table of Links Next Slide Previous Slide Page 9
  9. 9. THE GLOBAL MARKET Released: 02/2012 Global Real Estate Health Monitor Economy Real Estate Investment Markets Real Estate Occupier Markets OECD National National Leading Investment Capital Value Rental Net Vacancy Supply Country City GDP Indicator Volumes Change Prime Yield Yield Gap Change Absorption Rate Pipeline Germany Frankfurt 0.2% -5.5% 35% 2.1% 4.8% 297 0.0% 0.9% 13.9% 3.6% Hong Kong Hong Kong 3.8% na 31% 20.7% 3.4% 188 10.2% 3.3% 4.2% 3.1% UK London 0.3% -5.6% 6% 7.4% 4.0% 202 7.4% 0.9% 5.8% 3.8% Russia Moscow 3.7% 1.3% 118% 49.0% 9.0% 50 41.2% 3.8% 16.0% 14.8% US New York 2.0% -0.2% 63% 27.6% 4.3% 243 7.6% 0.5% 10.4% 0.9% France Paris -0.7% -6.6% 37% 10.7% 4.8% 158 10.7% 1.3% 6.9% 3.3% Brazil Sao Paulo 3.2% -7.6% 48% 12.7% 10.0% na 18.6% 5.0% 10.5% 35.9% China Shanghai 7.9% 12.0% 3% 19.1% 5.9% 233 17.5% 23.8% 12.5% 35.5% Singapore Singapore 2.0% na 25% 10.5% 3.8% 222 4.8% 10.1% 7.7% 21.3% Australia Sydney 3.1% 0.4% -5% 8.3% 6.9% 307 15.2% 2.0% 8.7% 2.2% Japan Tokyo 2.9% -2.2% -21% -2.1% 3.6% 261 -2.1% 3.8% 3.6% 14.0% Real Estate data end Q4 2011U.S. Real Estate Opportunity Fund Home Table of Links Next Slide Previous Slide Page 10
  10. 10. THE GLOBAL MARKET Released: 02/2012 Prime Offices – Rental Clock, Q4 2011U.S. Real Estate Opportunity Fund Home Table of Links Next Slide Previous Slide Page 11
  11. 11. THE GLOBAL MARKET Released: 02/2012U.S. Real Estate Opportunity Fund Home Table of Links Next Slide Previous Slide Page 12
  12. 12. THE GLOBAL MARKET Released: 02/2012U.S. Real Estate Opportunity Fund Home Table of Links Next Slide Previous Slide Page 13
  13. 13. THE U.S. MARKET Released: 02/2012U.S. Real Estate Opportunity Fund Home Table of Links Next Slide Previous Slide Page 14
  14. 14. THE U.S. MARKET Released: 02/2012U.S. Real Estate Opportunity Fund Home Table of Links Next Slide Previous Slide Page 15
  15. 15. THE U.S. MARKET Released: 02/2012U.S. Real Estate Opportunity Fund Home Table of Links Next Slide Previous Slide Page 16
  16. 16. THE U.S. MARKET Released: 02/2012U.S. Real Estate Opportunity Fund Home Table of Links Next Slide Previous Slide Page 17
  17. 17. THE U.S. MARKET Released: 02/2012U.S. Real Estate Opportunity Fund Home Table of Links Next Slide Previous Slide Page 18
  18. 18. THE U.S. MARKET Released: 02/2012 U.S. Market – Economy Clock, Q4 2011U.S. Real Estate Opportunity Fund Home Table of Links Next Slide Previous Slide Page 19
  19. 19. U.S. WESTERN REGION Released: 02/2012 Target Cities ● Seattle Seattle Portland San Francisco Washington Portland ● Oregon San Francisco ● Nevada California ● Las Vegas Los Angeles ● San Diego ● Los Angeles Las Vegas San DiegoU.S. Real Estate Opportunity Fund Home Table of Links Next Slide Previous Slide Page 20
  20. 20. U.S. WESTERN REGION Released: 02/2012 Seattle – Leasing activity rebounds, led by Class A deals Key Indicators, Q4 2011 Property ClockU.S. Real Estate Opportunity Fund Home Table of Links Next Slide Previous Slide Page 21
  21. 21. U.S. WESTERN REGION Released: 02/2012 Portland – Driven by logistics and high tech Key Indicators, Q4 2011 Property Clock Vacancy Leasing Activity Rents Employment Unemployment New Construction Personal IncomeU.S. Real Estate Opportunity Fund Home Table of Links Next Slide Previous Slide Page 22
  22. 22. U.S. WESTERN REGION Released: 02/2012 San Francisco – Tech demand produces highest rent and net absorption growth Key Indicators, Q4 2011 Property Clock Vacancy Leasing Activity Rents Employment Unemployment New Construction Personal IncomeU.S. Real Estate Opportunity Fund Home Table of Links Next Slide Previous Slide Page 23
  23. 23. U.S. WESTERN REGION Released: 02/2012 Los Angeles – Recovery mixed across submarkets Key Indicators, Q4 2011 Property ClockU.S. Real Estate Opportunity Fund Home Table of Links Next Slide Previous Slide Page 24
  24. 24. U.S. WESTERN REGION Released: 02/2012 Las Vegas – A quiet come back Key Indicators, Q4 2011 Property Clock Visitor Volume Gaming Revenues Population Peaking Falling market market Employment Rising Bottoming Unemployment market market New Construction Las Vegas Personal IncomeU.S. Real Estate Opportunity Fund Home Table of Links Next Slide Previous Slide Page 25
  25. 25. U.S. WESTERN REGION Released: 02/2012 San Diego – driven by high-tech, biopharma, retail and healthcare Key Indicators, Q4 2011 Property ClockU.S. Real Estate Opportunity Fund Home Table of Links Next Slide Previous Slide Page 26
  26. 26. TYPICAL ACQUISITION Released: 02/2012 Potential AcquisitionU.S. Real Estate Opportunity Fund Home Table of Links Next Slide Previous Slide Page 27
  27. 27. TYPICAL ACQUISITION Released: 02/2012 Concluded Acquisition Characteristics  ±$10,000,000.00 Market Value  65% to 75% Occupancy  Performing Leases  Well maintained – less then 1% of value for capital improvements  Market value equivalent to an ±8.0% capitalization of in place income  Submarket illustrates positive demand and growth trends  The asset is projected to reach ±90% occupancy in by the fifth year  The projected income curve illustrates ±10% annual appreciationU.S. Real Estate Opportunity Fund Home Table of Links Next Slide Previous Slide Page 28
  28. 28. FINANCIAL PERFORMANCE FORECAST Released: 02/2012 ● $458 Million ● $315 MillionU.S. Real Estate Opportunity Fund Home Table of Links Next Slide Previous Slide Page 29
  29. 29. FINANCIAL PERFORMANCE FORECAST Released: 02/2012 Performance Based of the following Assumptions  Fund Deployed at over 5 quarter (20% of fund per quarter).  Mortgage Debt is equivalent 70% loan-to-value and 6.5% fixed interest amortized over 25 years.  Asset Income is based on net leases with net operating income equivalent to an ±8.0% capitalization rate.  Asset disposition is based on an ±8.0% capitalization of the forecasted income stream.  Renovation/Capital Improvements are equivalent to ±1.0% of the acquisition price or less.  Operational expenses are typical for the asset sector and location.  All net income/gains are first applied to the return-of equity/principal and then to the return-on investment. Cash-On-Cash Return: ±210% Internal Rate of Return: ±15.5%U.S. Real Estate Opportunity Fund Home Table of Links Next Slide Previous Slide Page 30
  30. 30. STRUCTURE AND MANAGEMENT Released: 02/2012 Equity Source MagnuM Opes WRF, LLC Retire mortgage 70% Mortgage LenderU.S. Real Estate Opportunity Fund Home Table of Links Next Slide Previous Slide Page 31
  31. 31. STRUCTURE AND MANAGEMENT Released: 02/2012 The General Manager: MagnuM Opes Corporation  Core Competencies include, but are not limited to:  Fund, Portfolio & Asset Management  Investment & Real Estate Consulting  Real Estate Development & ConstructionU.S. Real Estate Opportunity Fund Home Table of Links Next Slide Previous Slide Page 32
  32. 32. STRUCTURE AND MANAGEMENT Released: 02/2012 The General Manager: MagnuM Opes Corporation Historical Performance  20 consecutive years of history and cohesive leadership.  20 consecutive years of proven returns consistently out-performing the NAREIT, NCREIF Office and NCREIF Industrial indexes. MOC NAREIT NCREIF-O NCREIF-IU.S. Real Estate Opportunity Fund Home Table of Links Next Slide Previous Slide Page 33
  33. 33. STRUCTURE AND MANAGEMENT Released: 02/2012 Key Management Michael A. Panciro , Chief Executive Officer Background: Mr. Panciro is one of the founding Officers of MagnuM Opes Corporation. Prior to the formation of the company, he served as the Chief Operations Officer for Chenco International Investment Corp. He is an experienced entrepreneur with managerial strengths in fund management, real estate operations and development, business structuring and strategic planning. Education: Designations & Awards: B.A. Sciences – University of Pennsylvania Certified Commercial Investment Manager (CCIM) Real Estate Management – Harvard University Urban Land Institute (ULI) – Real Estate Finance Board Certified Instructor – Lincoln Graduate Center Senior Asset Manager (SAM) Business Law Master Senior Appraiser (MSA) Real Estate & Asset Management National Association of Industrial and Office Real Estate Analyses and Valuation Properties (NAIOP) – Development AwardsU.S. Real Estate Opportunity Fund Home Table of Links Next Slide Previous Slide Page 34
  34. 34. STRUCTURE AND MANAGEMENT Released: 02/2012 Key Management Maranda S.J. Chen, Chief Financial Officer Background: Ms. Chen is one of the founding Officers of MagnuM Opes Corporation. Prior to the formation of the company, she served as the Vice President of Chenco International Investment Corp. Ms. Chen still retains her Cofounder and Directorship with Chenco International Investment Corp., but is a full time Manager and Chief Financial Officer of MagnuM Opes Corporation. Education: Designations & Awards: B.A. Marketing – Fu-Jen University, Taipei, Taiwan Certified Commercial Investment Manager (CCIM) M.B.A. Real Estate – Eastern Michigan University National Association of Industrial and Office Properties (NAIOP) – Development AwardsU.S. Real Estate Opportunity Fund Home Table of Links Next Slide Previous Slide Page 35
  35. 35. STRUCTURE AND MANAGEMENT Released: 02/2012 Key Management Sherry Wang, Managing Director of Real Estate Background: Ms. Wang is a member of the Board of Directors for MagnuM Opes Corporation and has taken an active role as Managing Director of Real Estate. Her prior experience includes debt finance and new resort development for Sands Corp., Las Vegas; investment banking and acquisitions advisory at Citigroup Inc., New York; and retail real estate strategy and execution at Gap Inc., San Francisco. Education: Designations & Awards: B.A. Economics – Northwestern University Urban Land Institute – San Francisco, California M.B.A. Real Estate, Finance – Wharton Corporate Officer for Wharton Women in Business Business School, University of Pennsylvania Northwestern University Alumni Admissions CommitteeU.S. Real Estate Opportunity Fund Home Table of Links Next Slide Previous Slide Page 36
  36. 36. STRUCTURE AND MANAGEMENT Released: 02/2012 Key Management Anthony R. Castrignano, Managing Director of Finance Background: Mr. Castrignano serves as the Managing Director of Finance for MagnuM Opes Corporation. Prior to his appointment, he was the Broker/Owner of Sky Mesa Capital, a mortgage and real estate brokerage firm. Mr. Castrignano is an experienced entrepreneur with managerial strengths in mortgage finance and real estate consulting. Education: Licenses: B.A. – Lycoming College, Pennsylvania Nevada Real Estate Broker California Real Estate Broker Mortgage BrokerU.S. Real Estate Opportunity Fund Home Table of Links Next Slide Previous Slide Page 37
  37. 37. STRUCTURE AND MANAGEMENT Released: 02/2012 Key Management Dean Willmore, Managing Director of Acquisitions Background: Mr. Willmore has conducted more than $168 million in real estate transactions for MagnuM Opes Corporation. Prior to accepting his position with the firm, he was Senior Director of Commerce | Cushman Wakefield and Senior Vice President of Prudential CRES. Mr. Willmore is the founder of IPG, “Industrial Property Group” which was purchased by Prudential CRES. Education: Designations & Licenses: B.A. Business – University of Arizona Society of Industrial and Office Realtors (SIOR) Nevada Real Estate BrokerU.S. Real Estate Opportunity Fund Home Table of Links Next Slide Previous Slide Page 38
  38. 38. Released: 02/2012 Relationships, Partners and AssociatesU.S. Real Estate Opportunity Fund Home Table of Links Next Slide Previous Slide Page 39

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