Overview

The investment involves the acquisition of two adjacent residential lots in Los Altos, CA, then rebuild and sale of two single family homes. The Sponsor will acquire the necessary permits, rebuild and sell the new homes within 15 months.

Investors are investing in a preferred equity position, ahead of the Sponsor’s equity and behind the 1st lien debt, and will have 100% of principal and projected return paid before the Sponsor receives any return of capital or return.

Investors will receive a preferred equity return of 15% (annualized) upon sale. In addition, investors will receive 10% of net profit, payable upon sale of both properties. The projected effective IRR is 25.2% (annualized). Please check pro-forma for more details. The principals of the Project Sponsor have successfully built several homes in CA over the past decade. The Sponsor is in contract to purchase the property in late October. Accordingly, the primary objective of this investment is to (1) purchase the property, (2) complete the rebuild work upon closing of the transaction, and (2) sell the property or cash investors out within 15 months.

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Risk Mitigation

Conservative Exit & Local Expertise: The Sponsor has hired a local agent that specializes in the area and has experience with new and existing homes in Los Altos area. He will be exclusively marketing the project as it nears completion. Our underwriting uses a sales price of $900/sf sales prices, while similar home sales comparables suggest $1000/sf, leaving over $100/sf of upside cushion.

Strong Economic Conditions: San Francisco Bay Area has a very strong economy, backed by strong employment at many high tech firms. Numerous large high tech firms, including Google, Netflix and Facebook, have posted extremely strong earnings in the most recent quarter which suggest that the housing market will remain very favorable to sellers.

Favorable Transaction Structure: The investment is structured as preferred equity, meaning all payments will be senior to the equity of the Sponsor. Sale price/sqft has to go down to $725 for preferred investors to lose any initial capital. The current modeled sale price is $900/sf, while historical sale price is at $1000/sf.

Architecture: One-story homes are designed for this property, meaning it's not subject to public hearing during planning, thus allows for a relatively short holding period of 15 months. However, we are building high ceiling basements with light wells which allow us to increase livable square footage, while conforming to the FAR (Floor Area Ratio) of the subject zone.

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Risk Disclosures

Each prospective investor in this investment opportunity should read the Operating Agreement and Subscription Agreement before investing and should consult appropriate legal, tax and investment advisors. Please note that Aron Developers LLC is not serving as your fiduciary or advisor with respect to this opportunity. Below are risks associated with this investment that should be carefully reviewed prior to any investment in this opportunity:

The financial forecast contained in this deal page and any other materials delivered to you are based on numerous assumptions. Although we believe these assumptions to be reasonable, all of these assumptions are subject to uncertainty.

Market conditions could reduce the Property's sales price and actual operating expenses may be higher than projected, thus reducing the distributions to be made to investors. This could result in investors not meeting the projected returns as shown on this page.

Please note that this is not an exhaustive list of the risks associated with this investment. For a complete list of risk factors, please review the Subscription Agreement, which can be found in the Documents tab.