Opportunity during a pandemic?
The ongoing pandemic has certainly brought many challenges. The security and viability of your investments is one of them.
Yet, COVID-19 has created a number of opportunities for strong growth investments by repositioning certain commercial real estate asset classes such as hospitality and retail.
Redevelopment of hotels to multifamily housing and conversion of retail to self-storage are a few examples of this strategy.
Because of the pandemic, some hotels are under-performing. The ones that were not working well before COVID have been especially hard hit. As a result, we’re seeing a unique opportunity to acquire those assets at a distressed price and to capitalize on the potential of converting them into affordable housing, an asset class in high demand.
The key element here is to acquire these hotels at well below-reconstruction cost. The conversion from hotel to multifamily is substantially cheaper than building a new multifamily complex from the ground up.
The process is straightforward
- Acquire
- Convert
- Lease
- Refinance
- Hold for cashflow
Why is this considered socially responsible investing?
A major plus to this strategy is that it’s a socially responsible investing opportunity. From our perspective, it’s taking dysfunctional hotels and it’s driving them to a higher and better use — multi-family housing. Many towns and cities are lacking affordable or workforce housing. By converting weak or empty hotels to multi-family units, we are meeting a great social need.
Case Study: Winston-Salem, NC
- Target IRR= 21.45%
- 88-unit Residence Inn hotel built in 1986, recently renovated in 2012/2013
- 49,500 rentable square feet across 11 buildings
- Positives include: attractive all-in redevelopment cost, high demand, limited supply
- Full kitchens already installed in all the units
- Rents to be offered below market average
- Property highlights include:
- Proximity to Wake Forest University and Wake Forest Baptist Medical Center
- Zoning allows for conversion to multifamily use by right
- Apartment-like amenities including a pool, fitness center, lounge area, and tennis courts
- Tempo Growth Fund has invested $1 million into the equity
- Tempo Opportunity Fund has invested $700,000 into the mezzanine debt
- Capital Stack:
- Senior debt — $3 million
- Mezzanine debt — $1.4 million
- Equity — $1.5 million
- Total — 5.9 million
- Projected sale price upon full stabilization — $7.59 million
- Target Profit on Sale — $2.05 million applicable to the Equity investment, generating 21.45% IRR on a 5 year hold. If sold early, IRR could be substantially higher.
Why people invest with us
Experience – Past success is a great predictor of future performance
I’ve been a fund manager since 2009. We have a family of funds with strong track records and that’s the value that we bring. We have a great network of sponsors and operators.
Diversification – Maximize number of assets and sponsors, minimize investments in a single asset
Our funds offer a single access point to a diversified portfolio of assets. When you make an investment in one of the funds, you get instant diversification which spreads the risks. And in this post COVID world, diversification is critical. As you never know, when we have another black Swan event like COVID, that can destabilize some sectors or regions of the country.
Best Access Point – Access to deals that are not available to the public and elevated access through our negotiation improved terms into public deals
Many of our deals are not available to public. We have our relationships with sponsors and operators and our job is to find the best people, find the best deals, negotiate the best terms and invest.
Business philosophy – Our investors come first
Our investors are our most important and most valuable asset. We pride ourselves on white glove service.
Transparency – Reputable third party legal, administration and onboarding
We run all our funds with full transparency. We use reputable SEC counsel, as well as third party, real estate administration onboarding.
Communication – Online portal, quarterly statements & investor update Zoom calls, and annual meetings
More About Tempo Growth Fund LLC
Now is a great time to consider investing in the post-COVID opportunities offered at Tempo Growth Fund LLC.
The Tempo Growth Fund LLC is ideally set up for the post-COVID environment producing distressed and discounted opportunities. The Fund also provides ample opportunity to diversify.
Capital Goals: The fund is raising a total of $25 million. The fund is growth focused and closed ended. We’re raising money in 2020 and allowed two extensions in 2021. By the end of 2021, the fund will close if we haven’t raised $25 million before that point. The fund’s target return to investors is 12-18% annually on average, most of which comes on the back end.
Time Horizon & Structure: The fund’s time horizon is five to seven years, it’s IRA friendly, and we do not use leverage at the fund level. It simultaneously creates safety for investors and IRA investors. The fund will invest in distressed and discounted commercial debt as well as value-add equity projects such as self storage, multi-family projects, hotel conversion to affordable housing, office conversions to housing, and other opportunistic investments with strong risk-adjusted ROI.
Finally, the fund has a very attractive to investors waterfall
- Investors received 8% annual cumulative preferred return
- 100% return of capital
- Performance split is 80/20 to Class A units and 70/30 to Class B units
Again, we have a fundraising period of 12 months with two extensions of six months provided.
Want to Learn More? Reach out to us at Team@TempoFunding.com or by phone at 917-806-5029 if you want to learn more about investing with us. You can also schedule a time to chat via Zoom
Also, be sure to check out my latest podcast episode:
076: The Difference Between Investing in a Fund Versus Syndication With Matt Burk
Warmest wishes in this Holiday Season….
Mike Zlotnik
CEO, TF Management Group LLC
This newsletter and its contents are not an attempt to sell securities, nor to sell anything at all, nor provide legal, nor tax accounting, nor any other advice. The presenter is a private lending and real estate fund management business, and the information represented herein are purely for educational purposes and represents the opinions of the presented. Prior to making any investment or legal decision you should seek professional opinions from a licensed attorney, and a financial advisor.
TF Management Group LLC (TFMG) is an investment fund management company that specializes in both short-term debt financing for real estate “fix and flip” projects, and long-term “value-add” equity deals.
