Innovo Development Group's vision is to be a forerunner in innovative real estate development, focused on developing and owning unique assets where they can be market leaders in design, development, capital, management, marketing, sales, and performance. They specialize in projects where their energy, expertise, and capital can deliver new opportunities and benefits in higher growth markets that create more value for their communities, customers, team, partners, and owners.
Innovo's Team is currently engaged in development opportunities in markets across the country, including multiple projects in the Midwest and Florida. Current real estate holdings under ownership and management include a combination of multifamily, industrial, and retail.
Innovo is active in the marketplace with a robust pipeline. Notably, the Sponsor is currently developing The Godfrey - a development of 97 market-rate multifamily units in Traverse City, MI, adjacent to Innovo's existing Breakwater Apartments. The Group also recently closed on two, market-rate apartment buildings in Midtown Detroit and are currently negotiating terms on the acquisition and development of several additional opportunities.
Gateway Industrial Center is a 1,441,834-square-foot industrial campus located in the Detroit industrial market, which has experienced unprecedented rent growth while maintaining one of the lowest vacancy rates in the Midwest. The Property is immediately adjacent to I-96, Southfield Freeway, and regional railway and offers tenants easy access to I-94 and I-75, making it a truly institutional asset. The Property includes two (2) existing buildings totaling 1,020,834 square feet that are 100% leased to four tenants with a weighted average rent PSF of $3.81 and a weighted average lease term of 4.3 years as of 1/1/2023. On the northeast corner of the site, a new, 421,000-square-foot manufacturing and assembly building facility is under construction. The new spec building is scheduled to be delivered by December 2022, with a prospective tenant expected to enter into a lease prior to such time and take occupancy by March 2023 at a target rent of $7.50 PSF NNN.
For real-time updates on the progress of the spec building please visit the Property website: https://www.gatewayindustrialcenter.com.
Rent Roll
Tenant | Building | SF | Lease Start | Lease Expiration | WALT (as of 1/1/2023) | Rent/SF | Lease Type |
Detroit Manufacturing Systems | North | 484,609 | 10/1/2020 | 9/30/2027 | 4.7 | $3.80 | NNN |
Detroit Manufacturing Systems | South | 56,900 | 1/1/2021 | 9/30/2027 | 4.7 | $3.78 | NNN |
Detroit Manufacturing Systems | South | 31,100 | 5/1/2021 | 9/30/2027 | 4.7 | $4.96 | NNN |
Houghton International, Inc. | South | 117,700 | 3/1/2022 | 9/30/2028 | 5.7 | $4.19 | NNN |
Lear - IMA(1)(2) | South | 154,925 | 1/1/2013 | 3/31/2024 | 1.3 | $3.56 | Gross |
Quality Team (RGP, Inc.) | South | 175,600 | 7/1/2020 | 5/31/2027 | 4.4 | $3.61 | NNN |
Parsec, Inc.(3) | Railyard | 0 | 12/1/2005 | 11/30/2026 | - | $165,240/yr. | - |
Spec Space | Spec | 421,000 | 4/1/2023 | 3/31/2028 | 5.3 | $7.50 | NNN |
Total | 1,441,834 | 4.3 | $4.89 |
(1) Tenant exercised a 12-month lease renewal commencing April 1, 2023 to March 31, 2024, with a $10.15 PSF Gross rent.
(2) "% of Lease Total" consists of only legacy space, new space is expected to be leased to a prospective tenant currently in negotiations.
(3) Parsec pays $165,240 annually for use rights to the railyard located in the southwest of the Property. The tenant's footprint is not included in the total SF
Lease Comparables
General Motors | Renaissance Global Logistics | Nations Benefits | Magna Powertrain | Mayco Plastics | Penske Logistics | Advanced Nutrients | Wayfair Inc. | Averages | Subject | |
Date Signed | Q3 2022 | Q2 2022 | Q2 2022 | Q2 2022 | Q2 2022 | Q1 2022 | Q1 2022 | Q4 2021 | ||
Year Built | 2022 | 2022 | 2022 | 2022 | 2022 | 2022 | 2022 | 2022 | 2022 | 1968 / 2020 / 2022 |
Tenant Lease Size | 711,360 SF | 741,993 SF | 50,252 SF | 190,000 SF | 332,186 SF | 159,968 SF | 50,252 SF | 83,520 SF | 289,941 SF | 65,712 SF |
Building NRSF | 711,360 SF | 741,993 SF | 133,722 SF | 359,226 SF | 332,186 SF | 364,812 SF | 133,722 SF | 133,722 SF | 363,843 SF | 1,445,834 SF |
Rental Rate | $6.75/SF | $6.85/SF | $8.10/SF | $7.43/SF | $7.35/SF | $7.50/SF | $7.28/SF | $7.35/SF | $7.33/SF | $3.74/SF |
Lease Type | NNN | NNN | NNN | NNN | NNN | NNN | NNN | NNN | NNN | NNN |
Property | Oakland Logistics Center | Wixom Commerce Center A | Wixom Commerce Center B | Shelby Commerce Center 2 | Shelby Commerce Center 3 | Livonia West Commerce Center 2 | Wixom Commerce Center B | Wixom Commerce Center B | 12601 Southfield Freeway, Detroit, MI | |
Distance from Subject | 16.9 mi | 20.6 mi | 20.6 mi | 27.8 mi | 27.8 mi | 11.7 mi | 20.6 mi | 20.6 mi | 20.7 mi |
Sales Comparables
51901 Shelby Pkwy | 2430 E Walton Blvd | 12600 Oakland Pkwy | 18450 15 Mile Rd | 25295 Guenther Dr | 39000 Amrhein Rd | Averages | Subject (Going-in) | |
Date Sold | 1/1/2022 | 1/12/2022 | 12/30/2021 | 6/10/2021 | 6/1/2021 | 4/4/2019 | ||
Year Built | 2019 | 1984 | 2016 | 1964/1988 | 1997 | 2017 | 2007 | 1968 / 2020 / 2022 |
NRSF | 110,833 SF | 125,063 SF | 2,061,528 SF | 186,443 SF | 233,900 SF | 1,009,292 SF | 621,177 SF | 1,445,834 SF |
Sale Price | $15,300,000 | $10,500,000 | $267,000,000 | $7,600,000 | $22,220,500 | $86,750,000 | $68,228,417 | $125,000,000 |
$/SF | $138/SF | $84/SF | $130/SF | $41/SF | $95/SF | $86/SF | $96/SF | $86/SF |
Cap Rate | 5.40% | 6.30% | 5.60% | 5.90% | 6.00% | 5.33% | 5.76% | 5.15% |
Address | 51901 Shelby Pkwy | 2430 E Walton Blvd | 12600 Oakland Pkwy | 18450 15 Mile Rd | 25295 Guenther Dr | 39000 Amrhein Rd | 12601 Southfield Freeway, Detroit, MI | |
Distance from Subject | 30.4 mi | 26.2 mi | 7.6 mi | 22.4 mi | 15.9 mi | 11.6 mi | 19.0 mi |
Total Capitalization
Sources of Funds | $ Amount | $/SF |
Debt(3) | $79,600,000 | $55 |
Principals of Sponsor(2) | $23,800,400 | $17 |
Sponsor Entities and Related Affiliates(2) | $14,599,600 | $10 |
New Investor Equity (Class B Interests)(1) | $7,370,000 | $5 |
Total Sources of Funds | $125,370,000 | $87 |
Uses of Funds | $ Amount | $/SF |
Valuation at Close(4) | $125,000,000 | $87 |
Closing Costs(5) | $370,000 | $0 |
Total Uses of Funds | $125,370,000 | $87 |
(1) With a $7M equity raise and $370,000 allocated to closing costs, the total Equity Raise on RM's Platform totals $7.37M.
(2) The equity categorized as "Principals of Sponsor" and "Sponsor Entities and Related Affiliates" hold Class A Interests. Refer to the PPM for additional detail.
(3) The current principal loan balance is $52,560,162 as of November 2022. With the spec building estimated to deliver prior to end of year 2022, all future funding from the existing loan, including funds allocated for TIs and LCs, are expected to be drawn down. The existing loan provides for $2,519,250 reserved for TIs and LCs. For simplicity, the loan is estimated to be fully drawn in Year 1 of the underwriting, and TIs and LCs reserves do not decrease net cash flows.
(4) Per a Broker Opinion of Value ("BOV") dated June 2022, which concluded a total value of $125M for an as-complete Property with expansion space not yet leased. This represents $87/SF, a discount compared to a $95-105/SF replacement cost estimate as of October 2022.
(5) Includes RM Technology Solution Licensing Fee of approximately $236,100.
The in-place debt terms are as follows:
- Lender: Claros Mortgage Trust, Inc. (affiliate of Mack Real Estate Credit Strategies, LP)
- Term: 3+1+1
- LTV: 63.7%
- Loan Amount(1): $79,600,000
- Interest Type(2): Floating
- Spread above LIBOR: 3.70%
- Interest-Only Period: Full Term
- Amortization: 30 years
- Prepayment Terms: 15 months spread maintenance
- Extension Requirements:
- 1st Ext.: completion of spec building, 6.25% DY, 72.5% As-Stab. LTV
- 2nd Ext.: 7.00% DY, 70% As-Stab. LTV
- Modeled Refinance: Yes
- Refinance Information: Proforma assumes proceeds based on year 3 NOI at a 7.5% debt yield
- Lender: TBD
- Term: 3 years
- Estimated Loan Amount: $119,303,359
- Interest Type: Floating
- Spread above one-month SOFR: 3.15%
- Interest-Only Period: 36 months
- Amortization: 30 years
(1) The current principal loan balance is $52,560,162. With the spec building estimated to deliver prior to end of year 2022, all future funding from the existing Mack loan, including funds allocated for TIs and LCs, is expected to be drawn down.
(2) Rate Cap was purchased on June 3, 2021, with SMBC Capital Markets, Inc., and expires on June 1, 2024. The strike rate is 2.50% based on a 30-day LIBOR.
(3) A substantial portion of the total acquisition for the Property will be paid with borrowed funds, i.e., debt. Please carefully review the Disclaimers section below for additional information concerning the Sponsors use of debt.
Innovo Development Group intends to make distributions as follows:
- To the Investors, pari passu, all excess cash flows to an 8.0% annually compounded rate of return;
- Return of Investor Capital;
- 20% Promote (80% to Investors / 20% to Promoted/Carried Interest) of excess cash flow to a 15.0% IRR;
- 35% Promote (65% to Investors / 35% to Promoted/Carried Interest) of excess cash flow thereafter.
Innovo Development Group intends to make distributions to investors after the payment of the company's liabilities (loan payments, operating expenses, and other fees as more specifically set forth in the LLC agreements, in addition to any member loans or returns due on member loan).
Distributions are expected to start in July 2023 and are projected to continue on a quarterly basis thereafter. Distributions are at the discretion of Innovo Development Group, who may decide to delay distributions for any reason, including maintenance or capital reserves.
Innovo Development Group will receive a promoted/carried interest as indicated above.
Cash Flow Summary(1) | ||||
Year 1 | Year 2 | Year 3 | ||
Effective Gross Revenue | $10,608,826 | $12,147,189 | $12,588,209 | |
Total Operating Expenses | $3,471,192 | $3,517,343 | $3,625,162 | |
Net Operating Income | $7,137,633 | $8,629,846 | $8,963,047 | |
Project-Level Cash Flows | ||||
Year 0 | Year 1 | Year 2 | Year 3 | |
Net Cash Flow | ($45,400,000) | $1,298,160 | $39,523,391 | $54,124,905 |
Investor-Level Cash Flows(2) | ||||
Year 0 | Year 1 | Year 2 | Year 3 | |
Net Cash Flow | ($7,370,000) | $200,157 | $6,023,915 | $6,312,430 |
Investor-Level Cash Flows - Hypothetical $50,000 Investment(2) | ||||
Year 0 | Year 1 | Year 2 | Year 3 | |
Net Cash Flow | ($50,000) | $1,358 | $40,868 | $42,825 |
(1) Assumes a Refinance in Year 2. The Target Average Cash-on-Cash over the hold period with a refinance is 9.7%. The Target Average Cash-on-Cash over the hold period without a refinance is 4.3%.
(2) RM Technologies, LLC and its affiliates do not provide any assurance of returns. Returns presented are net of all fees. Please carefully review the Fees and Disclaimers sections below for additional information concerning Sponsor’s use or projected returns and fees paid to Sponsor and RM Technologies, LLC.
Certain fees and compensation will be paid over the life of the transaction; please refer to Innovo Development Group's materials for details. The following fees and compensation will be paid(1)(2):
One-Time Fees: | |||
Type of Fee | Amount of Fee | Received By | Paid From |
Technology Solution Licensing Fee(2) | Flat one-time licensing fees of $15,000 plus $1,500 per each prospective investor onboarded by Sponsor through its license and use of RM Technologies’ Technology Solution | RM Technologies, LLC |
Capitalization (at Sponsor’s discretion) |
Recurring Fees: | |||
Type of Fee | Amount of Fee | Received By | Paid From |
Property Management Fee | 3% of Effective Gross Income | Third-Party Manager | Cash Flow |
Administration Solution Licensing Fee(2) | Flat quarterly licensing fee of $125 per investor serviced by Sponsor through the license and use of RM Technologies’ Administration Solution | RM Technologies, LLC | Cash Flow |
(1) Fees may be deferred to reduce impact to investor distributions.
(2) Please see the Fees and Disclaimers sections below for additional information concerning fees paid to RM Technologies, LLC.
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RM Securities, LLC, its registered representatives, affiliates, associated persons, and personnel of its affiliates who may also be associated with it, including our associated persons and personnel of our affiliates who are also be associated with RM Securities, LLC (it (“RM Securities,” “we,” “our,” or “us”) will receive fees, expense reimbursements, and other compensation (“Fees”) from the issuer of this investment offering, its sponsor, or an affiliate thereof (“Sponsor”), or otherwise in connection with Sponsor’s offering. The Fees paid to us are in addition to other fees you will pay to Sponsor or in connection with Sponsor’s investment offering. You will pay Fees to Sponsor, either directly or indirectly as an investor in the Sponsor’s offering. Sponsor will use the Fees you pay, as well as funds you invest in the relevant offering, to compensate us. The Fees paid to us will directly or indirectly be borne by you as the investor (typically, but not always, in the form of an expense of the Sponsor’s offering in which you invest) because such Fees will reduce the proceeds available for distribution to you and reduce the amount you earn over time.
For more information on the Fees paid to us, or any other Fees you will pay in connection with Sponsor’s offering, please carefully review the Sponsor’s Investment Documents. Please also carefully review RM Securities’ Form CRS, Regulation Best Interest Disclosures, and Limited Brokerage Services Agreement.
No Approval, Opinion or Representation, or Warranty by RM Securities, LLCSponsor has provided, approved, and is solely responsible in all aspects for the information on this webpage (“Page”), including Sponsor’s offering documentation, which may include without limitation the Private Placement Memorandum, Operating or Limited Partnership Agreement, Subscription Agreement, the Project Summary and all exhibits and other documents attached thereto or referenced therein (collectively, the “Investment Documents”). The Investment Documents linked on this page have been prepared and posted by Sponsor, and not by RM Securities. We did not assist in preparing, do not adopt or endorse, and we are not otherwise responsible for, the Sponsor’s Investment Documents. We make no representations or warranties as to the accuracy of information on this Page or in the Sponsor’s Investment Documents and we accept no liability therefor. No part of the information on this Page or in the Sponsor’s Investment Documents is intended to be binding on us.
Sponsor’s Information Qualified by Investment DocumentsThe information on this Page is qualified in its entirety by reference to the more complete information about the offering contained in the Sponsor’s Investment Documents. The information on this Page is not complete and subject to change at the Sponsor’s discretion at any time up to the closing date. The Sponsor’s Investment Documents and supplements thereto contain important information about the Sponsor’s offering including relevant investment objectives, the business plan, risks, charges, expenses, and other information, which you should consider carefully before investing. The information on this Page should not be used as a basis for an investor’s decision to invest.
Risk of InvestmentThis investment is speculative, highly illiquid, and involves substantial risk. There can be no assurances that all or any of Sponsor’s assumptions, expectations, estimates, goals, hypothetical illustrations, or other aspects of Sponsor’s business plans (“Assumptions”) will be true or that actual performance will bear any relation to Sponsor’s Assumptions, and no guarantee or representation is made that Sponsor’s Assumptions will be achieved. If Sponsor does not achieve its Assumptions, your investment could be materially and adversely affected. A loss of part or all of the principal value of your investment may occur. You should not invest unless you can readily bear the consequences of such loss. Sponsor’s Assumptions should not be relied upon as the primary basis for your decision to invest.
No Reliance on Forward-Looking Statements; Sponsor AssumptionsSponsor is solely responsible for statements made concerning forward-looking statements and Assumptions, which apply only as of the date made, are preliminary and subject to change, and are expressly qualified in their entirety by the disclosures and cautionary statements included in Sponsor’s Investment Documents, which you should carefully review. Neither RM Securities nor Sponsor are obligated to update or revise such forward-looking statements or Assumptions to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events. Sponsor’s forward-looking statements and Assumptions are hypothetical, not based on actual investment achievements or events, and are presented solely for purposes of providing insight into the Sponsor’s investment objectives, detailing Sponsor’s anticipated risk and reward characteristics, and establishing a benchmark for future evaluation of actual results; therefore, they are not a predictor, projection, or guarantee of future results. You should not rely on Sponsor’s forward-looking statements as a basis to invest.
Importantly, we do not adopt, endorse, or provide any assurance of returns or as to the accuracy or reasonableness of Sponsor’s Assumptions or forward-looking statements.
No Reliance on Past PerformanceAny description of past performance is not a reliable indicator of future performance and should not be relied upon as the primary basis to invest.
Sponsor’s Use of DebtA substantial portion of the total cost of the real estate asset acquired by the Sponsor with investor funds (“Property”) will be paid with borrowed funds, i.e., debt. Sponsor’s estimated rates and terms of the debt financing are subject to lender approval, and there is no assurance that the Sponsor will secure debt at the rates and terms presented on this Page or in the Sponsor’s Investment Documents, or at all. The use of borrowed money to acquire real estate is referred to as leveraging, which can amplify losses and could result in lender foreclosure. In addition, if the debt includes a variable (or “floating”) interest rate, the total amount of interest paid over the term of the debt will fluctuate and can increase. As a result, Sponsor’s use of debt can result in a loss of some or all of your investment.
Sponsor’s Offering is Not RegisteredSponsor’s securities offering will not be registered under the Securities Act of 1933, as amended (the “Securities Act”), in reliance upon the exemptions from registration pursuant to Rule 506(c) of Regulation D as promulgated under the Securities Act (“Private Placement”). In addition, the offering will not be registered under any state securities laws in reliance on exemptions from state registration. Such securities (your ownership interests) are subject to restrictions on transferability and resale and may not be transferred or resold except as permitted under applicable state and federal securities laws pursuant to registration or an available exemption. All Private Placements on the Platform are intended solely for “Accredited Investors,” as that term is defined in Rule 501(a) under the Securities Act.
No Investment AdviceNothing on this Page should be regarded as investment advice (either with respect to a particular security or regarding an overall investment strategy), a recommendation, an offer to sell, or a solicitation of or an offer to buy any security. Advice from a securities professional is strongly advised to understand and assess the risks associated with real estate or private placement investments. For additional information on RM Securities’ involvement in this offering, please carefully review the Sponsor’s Investment Documents, and RM Securities’ Form CRS, Regulation Best Interest Disclosures, and Limited Brokerage Services Agreement.
1031 Exchange RiskInternal Revenue Code Section 1031 (“Section 1031”) contains complex tax concepts and certain tax consequences may vary depending on the individual circumstances of each investor. RM Securities and its affiliates make no representation or warranty of any kind with respect to the tax consequences of your investment or that the IRS will not challenge any such treatment. You should consult with and rely on your own tax advisor about the tax aspects with respect to your particular circumstances.