Summary

The Civitas Greenville Equity Fund is a value-add acquisition of a Class B multi-tenant office building at 6500 Greenville Avenue in Dallas, Texas (the "Property"). The Fund is offering $3.4 million in equity to qualified investors. That equity will replace financing provided by Civitas that went toward the purchase of the Property in a joint venture with a Civitas affiliate on December 31, 2019. The Fund is currently renovating and rebranding the Property to allow for base rental increases on renewals and new leases. Renovations are estimated to be completed in 24 months from acquisition, and the target hold period of the Property is 48 months. The exit strategy is a sale or refinancing of the Property.

Why investing in an office project like Greenville when working from home is the new normal?

Despite the rapid rise in remote work accelerated by the global pandemic, the Property has experienced minimal disruption due to two factors that most stressed office spaces do not possess:

  • The rent at the Property is well below the market and submarket average – its affordability has led to 100% rental revenue collection, resulting in consistent cash flows amid the pandemic. Of the 35 tenants at the Property, only 3 tenants inquired about some form of rent relief.
  • Over half the tenants have businesses that cannot be efficiently performed from home. Tenants whose business revolves around non-profits, insurance, dermatology, and other medical professions use their space to meet and serve clients.

Since taking over ownership, Civitas has been able to reduce expenses and sign renewal leases at market rates with minimal tenant improvements resulting in higher cash flow and an annualized Year-to-Date cash-on-cash of 12.3%

Civitas Capital Group invests in a broad spectrum of property types, including multifamily apartments, offices, hotels, and mixed-use developments across the U.S. with a focus in Texas. Founded in 2009, Civitas now has a cumulative AUM of over $1.7 billion, has deployed capital in more than 60 real estate and lodging investments, and serves more than 1,400 investors worldwide. Learn more about Civitas Capital Group.

Investment Thesis

OFFICE ACQUISITION MARKET* 

The national office market continues to experience methodical growth, which reflects continuing, record-length economic expansion cycle. The technology industry is expected to continue to dominate office demand.

CBRE research projects Dallas as one of the top-three markets for 2020 job growth, which is supported by a raised rent of $27.31/SF from the previous year, despite a moderately increased vacancy rate.

ATTRACTIVE ACQUISITION BASIS 

The Project was acquired for $14.15MM or $123.55/SF, approximately 27% below replacement costs. The all-in cost to acquire and renovate the building is anticipated to be $15.5MM, which equates to a basis of $136/SF.

BELOW-MARKET RENTS DRIVE UPSIDE 

At acquisition, the Property was 88% occupied with average rents of $19.77/SF, 14% below underwritten rents and 29% below the submarket average. The underwritten rents start at $22.25/SF and increase by 3%-4% over the investment period–still below the submarket’s current average.

As submarket rental rates rise, the Property is expected to garner continued market penetration by offering affordable rent in a desirable market. As of March 12, 2020, projected rents have been achieved on both new leases and renewals since the Property’s acquisition. 

STRONG TENANT BASIS 

The Property has a diverse rent roll consisting of 35 tenants. The weighted average tenancy is 13 years.

VALUE-ENHANCING RENOVATION PROGRAM 

The Seller began renovating the Property, which was built in 1981, in 2016 through 2019. The Sponsor plans to continue the renovation over the next 24 months and re-position the Property to drive higher rents and create more value.


* Sources: Newmark Knight Frank Research 4Q 2019 National Office Market, CBRE 2020 Outlook, CoStar Dallas Office Market

Fund COVID-19 Update

Despite tremendous challenges presented by COVID-19, work continues apace on the Property. Updates include:

  • General Contractor work is progressing largely on schedule;
  • The 5th-floor and deli demolitions are complete;
  • The first spec suite will be completed at 1,500SF; and
  • Round 2 bids for the exterior renovation plans are underway.

The Property is 82.4 percent leased as of 7/31/2020. Renewal activity has been strong. In fact, renewal rates are currently being executed at the asking rate with minimum tenant improvements. New leasing activity has picked up recently – new tenant prospects have expressed interest in more than 10,000 SF at the Property combined. The leasing team projects pent up leasing demand from smaller prospects to manifest itself in the later half of the year.

The Property has been cash flowing slightly better than expected by reducing operating expenses, spending less money on tenant improvements than anticipated and maintaining consistent revenue income. Civitas made its second quarterly distribution at the end of Q2 and is on track to make another distribution at the end of Q3. The current annualized YTD (through 7/31/2020) CoC is 12.3%.  


Updates

CF
Civitas Greenville Equity Fund
August 28, 2020

Video: The Intersection of Technology and Real Estate Investing

Civitas co-founder and CEO Dan Healy sat down with Youngro Lee, CEO of NextSeed, to discuss the strategy behind embracing technology to more efficiently reach investors that are well-aligned with the types of commercial real estate offerings that Civitas specializes in.

In addition to a conversation about the strategic collaboration with NextSeed, Dan also highlights this cash-flowing investment opportunity, the Civitas Greenville Equity Fund, and discusses in detail specific topics like timeline, tenant mix, distributions, and more.

Watch the view below.
-Civitas Capital Group



Key Fund Terms

Fund
Civitas Greenville Equity Fund, LP

Type of Fund
Regulation D 506(c)

Offered By
Offered by NextSeed Securities, LLC

Offering Min

$0

Offering Max

$3,416,223

Min Individual Investment

$25,000

Type of Securities Funds - Limited Partnership Interests
JV Partnership

Civitas Greenville Equity Fund, LP ($3.4 MM)

Sponsor Equity ($1.2 MM)

Total ($4.6 MM)

Sponsor

Lilium Investments

Total Capitalization

$15.5 MM

Guarantees

An affiliate of the Sponsor will be responsible for customary non-recourse carve-outs and indemnities

JV Partnership Cash Flow Distribution
  1. 100% to the Fund and Sponsor pro rata until each receives an 8% IRR on invested capital;
  2. 20% to the Sponsor and 80% to the Fund and the Sponsor pro rata until the Fund receives a 12.0% IRR;
  3. 25% to the Sponsor and 75% to the Fund and the Sponsor pro rata, until the Fund receives a 16% IRR;
  4. 30% to the Sponsor and 70% to the Fund and the Sponsor pro rata
Fund Cash Flow Distributions
  1. 100% to Fund investors until each receives a full return on its capital contribution; then
  2. 100% to Fund investors until each receives an 8.0% IRR on invested capital; 
  3. 100% to Civitas until Civitas receives 30% of previously distributed profits;
  4. Thereafter, 70% to Fund investors and 30% to Civitas
Civitas Management Fee

3.0% annual management fee on invested capital

Targeted Return to LP

CLICK HERE to view in Data Room (See 'Financial Summary' for Issuer’s targeted returns)

Cash on Cash (4-year average)

CLICK HERE to view in Data Room (See 'Financial Summary' for Issuer’s targeted returns)

Exit Strategy
  1. Sale of Property
  2. Refinance

Property Description


Product Type7-story, class B, multi-tenant office

Address6500 Greenville Avenue, Dallas, TX

Built1981

Rentable SF114,525

Average Rent$19.77 per square foot

# of Tenants35

Occupancy82.4%

Amenities

Including deli, hair salon/barber, multiple conference rooms, on-site security, and structured parking. Competitive with some Class A buildings in the same submarket.

ParkingSurface parking with an adjacent two-level parking garage with controlled access on 2.3 acres of land. 402 total parking spaces provide an overall parking ratio of 3.5 per 1,000, which is slightly better than the average office ratio.


Value-Add Program

The Sponsor anticipates spending approximately $637,000 on interior and exterior renovations at the Property that will immediately enhance the quality and finish of Property.

If needed, we have access to additional funding of $357,000 from the senior lender to cover any capital expenditure cost overruns.

Interior renovations will include:

  • Updated 5th-floor restroom
  • Updated flooring, lighting, and painting in the common areas
  • New furniture and lighting in the Lobby
  • New and replacement conference rooms
  • New audio visual for both conference rooms
  • Rebalance HVAC
  • White-boxed two vacant suites
  • Space planning and marketing

Exterior renovations will include:

  • Exterior painting
  • Updated entrance awning/canopy and walkway

Location Analysis

The Property is centrally located amid key transportation routes, attractions, and businesses.

  • Great access to U.S. Highway 75, on which more than 258,000 vehicles drive per day, and Northwest Highway, which has a daily traffic volume of 56,000 vehicles.
  • Three-minute walk to the Park Lane DART (Dallas Area Rapid Transit) light rail station, which provides more than 93 miles of track in North Texas, including routes to the CBD, State Farm/City Line, and DFW Airport
  • 10-minute walking distance to The Hill Shopping Center that includes 30+ retailers and 25+ murals and artwork from local artists, and an 11-minute walk to Dallas’ premier shopping mall, North Park Center, that includes tenants such as Gucci, Tiffany, and Louis Vuitton
  • A short driving distance to an abundance of retail and restaurants such as Preston Hollow Village ,The shops at Park Lane, Central Forest Shopping Center, Preston Royal Village, and Preston Forest Village

Bank of America is financing $126MM for the revitalization of The Village, Dallas’ famous 16-apartment community that is home to more than 10,000 residents; located less than a mile from 6500 Greenville, The Village serves as a major demand driver for the Property.


Civitas Real Estate Portfolio in Dallas

  1. EL FENIX  |  Restaurant

  2. KMPG PLAZA  |  Office

  3. SIMPSON PLACE  |  Senior Living

  4. HARVEST LOFTS  |  Multifamily

  5. CANVAS HOTEL DALLAS  |  Hotel

  6. OAKS TRINITY  |  Multifamily

  7. ZANG TRIANGLE  |  Multifamily

  8. VICTOR PROSPER  |  Multifamily

  9. ALTA YORKTOWN  |  Multifamily

  10. RESIDENCE INN BY MARRIOTT DALLAS AT THE CANYON  |  Hotel

  11. LAKEWEST ASSISTED LIVING  |  Senior Living

  12. ALTA STRAND  |  Multifamily

  13. ALEXAN SKYLINE  |  Multifamily

  14. 28TWENTYEIGHT  |  Multifamily

  15. 3700M  |  Multifamily

  16. ALTA MAPLE STATION  |  Multifamily

  17. ENCORE  |  Call Center

  18. ALOFT AND ELEMENT DUAL-BRANDED HOTEL BY MARRIOTT  |  Hotel

  19. THE TRADITION AT LOVERS LANE  |  Senior Living

  20. AC & RESIDENCE INN BY MARRIOTT DALLAS NORTH  |  Hotel

  21. RED BIRD MALL  |  Retail


Dallas Metro Area Market Snapshot

JOB AND POPULATION GROWTH

Home to 7.7 MILLION PEOPLE, with an average household income of $72,501 ($64,212 U.S. avg), Dallas-Fort Worth is the largest metropolitan area in Texas and the fourth largest in the United States.

  • >2,800 NEW RESIDENTS moved to DFW per week in 2019
  • >2.6 MILLION NEW RESIDENTS are expected by 2030
  • #1 METRO IN NEW RESIDENTS growth in the U.S. responsible for more than one-third of Texas' population growth in 2019

LOW UNEMPLOYMENT

In the current expansion, the metro area has averaged over 100,000 new jobs each year, with an annualized growth near 3%. DFW's unemployment rate is only 3.0%, below the national average of 3.5% (U.S. Bureau of Labor Statistics, as of November 2019).

PRO BUSINESS

Thanks to its low cost of conducting business and access to a highly skilled labor force, DFW became a magnet for company relocation:

  • Toyota Motors (4,100 jobs)
  • Uber (3,000 jobs)
  • McKesson Corp (1,500 jobs)
  • CoreMark (8,400 jobs)

Sources: (i) bisnow, (ii) csnews, (iii) CoStar, January 2020

Every major North American market is accessible from Dallas by air in FOUR HOURS OR LESS

24 FORTUNE 500 COMPANIES

Including Exxon Mobil, McKesson, AT&T, Energy Transfer, and American Airlines (Dallas Morning News, as of May 2019)

SPORTS AND ENTERTAINMENT

Some of America's most popular professional sports teams call the Dallas region home, including the Dallas Cowboys in the NFL, the Dallas Mavericks in the NBA, the Dallas Wings in the WNBA, and the Texas Rangers in the MLB.


Significant Economic Activity Boosting Office Market

OFFICE ACQUISITION MARKET 

  • The U.S. office market is projected to experience moderate increases in vacancy due to weaker market fundamentals. Regardless, the strong economic underpinnings have fostered a healthy office market in Dallas.
  • Annually, the Dallas market has absorbed - 1.9 million SF. Construction activity remains robust, with 5.7 million SF delivered last year and 7.2 million SF currently under construction. Even with current levels of development, vacancies should remain stable due to a significant portion of new space being pre-leased.
  • The Central Expressway submarket is usually heavily traded, and volume has picked up in the past 12 months, with about $178 million in sales. A significant portion of recent volume was due to the sale of the 1.35 million SF City place Tower, the largest asset in the submarket.
  • Owing to the submarket's relatively high-quality stock, national and institutional investors are fairly active.

RENTS AND VACANCY

  • Despite the increase in speculative supply, over the last 12 months rent growth has been positive at 1.3%, with 4&5 star assets leading the charge at 2.3%, well above the national average of 1.1%.
  • Rents on 4- and 5- Star properties are between $26-$30/Sf as higher end properties are often able to take advantage of transportation and locational advantages while coming in at a discount to towers in Uptown and Preston Center. Average asking rents on 4- and 5-Star buildings in Central Expressway are about 35% below 4- and 5-Star assets in Uptown and 20% below those in Preston Center. The rent gap between submarkets leaves significant room for the Property's rent growth post renovation.
  • At 15.0%, the vacancy rate may appear high for many metros, but we have to keep in mind that the region averaged between 17 and 15 percent vacancy since 2010. As companies re-evaluate space or possibly hold off on moves, the market is anticipated to experience a slowdown. For the first time in a decade, the metroplex has experienced two consecutive quarters of negative net absorption, totaling 1.2 million SF.'
  • The Property's submarket has currently no projects under construction over 30,000 SF.

CLASS A OFFICE VS. CLASS B OFFICE* IN DFW

  • Class B vs. Class A occupancy gap continues to widen. DFW Class B has achieved an average occupancy of 85% from 2010-2019.
  • DFW's Class A rents are 13%, or $2.63/SF above Class B rents. Civitas is underwriting to an average base rental increase of $2-$3/SF.
  • Class B 5-year historical rent growth has averaged 2.7%. 2020 Class B rent growth projections is 1%.



* Class A Building: Newer build, well located, professionally managed, high quality standard finishes, larger tenant spaces, heavily amenitized. Class B Building: Slightly older, good quality management, standard finishes and adequate systems, lower income tenants, a few amenities.



 

Process Calendar

December 2019– Acquisition

March 2020 – Renovation Commencement

Q1 2021 – Renovation Completion

Q1 2024 – Property Disposition Sale or Refinance

The renovation program will yield higher rents relative to previous years, yet still offer an affordable option in a desirable market to tenants.


Timeline is approximate and may change without notice. Actual results may vary.



Civitas Greenville Equity Fund Leadership

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Tillie Borchers
DIRECTOR, ASSET MANAGEMENT

Ms. Borchers is a Director of Asset Management at Civitas Capital Group and is responsible for managing project and investment performance across all divisions of the company, as well as originating and underwriting investments for the GrowSouth Fund. Prior to joining Civitas, Ms. Borchers was a Senior Vice President at Bank of the Ozarks managing a portfolio of construction and land development loans. Ms. Borchers received her undergraduate degree in finance from the University of Florida with a Certificate in Latin American Studies and holds a Master of Business Administration from Columbia Business School.

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Rootvik Patel
VICE PRESIDENT, INVESTMENTS

Mr. Patel is responsible for sourcing,  underwriting,  and evaluating prospective investments and  providing detailed analysis for consideration by the Civitas Investment Committee. Prior to joining Civitas, Mr. Patel was an Investment Manager with Headington Companies where he managed over $300 million in real estate assets in hospitality, multifamily, and healthcare. Mr. Patel holds a bachelor’s degree in finance from the University of Texas at Austin and an MBA from Southern Methodist University.

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Jonathan Kern
PRESIDENT & CHIEF INVESTMENT OFFICER

Mr. Kern has more than 30 years of experience creating and managing multiple investment teams across asset classes, including real estate, private equity, and growth capital. In this newly established role, he directs the development, execution, and performance of the company’s investment strategies. Mr. Kern guides the entire lifecycle of Civitas’ commercial real estate and lodging investments, ensuring that every aspect of our investment function is aligned with the firm’s core values and purpose. Mr. Kern holds a bachelor’s degree in economics from Harvard University and an MBA from the University of Pennsylvania.

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Rafael Anchia
MANAGING DIRECTOR & CO-FOUNDER

Mr. Anchia is responsible for new market development, public policy, and public-private partnerships. Mr. Anchia has worked as a corporate attorney with top U.S.-based international law firms, and serves as a State Representative in the Texas Legislature, where he is Chairman of the International Trade and Intergovernmental Affairs Committee. He also serves as an appointee of President Barack H. Obama to the Advisory Committee for Trade Policy and Negotiations, which advises the United States Trade Representative on issues related to international investment and trade.

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Dan Healy
FOUNDER & CEO

Mr. Healy founded Civitas Capital Group in 2009. Since that time, he has overseen the origination, structuring, and management of more than $1.7 billion of investments in real estate, lodging, and alternative credit. Prior to founding Civitas, Mr. Healy had more than 15 years of investment management and consulting experience with Royalton Real Estate Capital, LLC and Highland Capital Management, LP. Mr. Healy holds a bachelor’s degree in government and politics from the University of Texas at Dallas and an MBA from Southern Methodist University.


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Issuer Statement

The information contained on this campaign page (the "Campaign Information") is furnished solely by the Issuer to prospective investors in the investment opportunity described herein. All Campaign Information is intended to be a summary of the terms and information contained in the Disclosure Statement and the Purchase Agreement, and is fully qualified by reference to those documents. In the event any Campaign Information conflicts with the terms of the Disclosure Statement or Purchase Agreement, the terms of those documents will control. The Issuer has provided the Campaign Information for inclusion on the website located at www.nextseed.com, and in no way will the Campaign Information be deemed to have been created or provided by NextSeed Securities, LLC, NextSeed Services, LLC, or their affiliates.