STARBOARD MESA RIDGE DST

Markets at Mesa Ridge, 6805-7045 Mesa Ridge Parkway, Fountain, CO

TOTAL OFFERING PRICE: $11,700,000

Equity Offering Amount : $5,600,000

  • LOAN: $6,100,000 & 5.30% Fixed
  • PROJECTED DISTRIBUTIONS: 6.18% - 7.70% Annualized
  • Offering Loan to Value (LTV): 52.14%
  • Minimum Investment[1031]: $100,000

Starboard Mesa Ridge DST intends to acquire Buildings B & D at Markets at Mesa Ridge Shopping Center in Fountain, Colorado (“Mesa Ridge”) for $11,700,000 June 10, 2016. Starboard Realty Advisors (“Starboard”), the sponsor/manager, is offering up to $5,600,000 of equity interests.

6805-7045 Mesa Ridge Parkway, Fountain, CO

Starboard offers multi-tenant neighborhood centers with a diversification of regional and national tenants. Neighborhood centers provide customers with life’s essentials such as food and personal services which are typically difficult to purchase on the
internet.

INVESTMENT HIGHLIGHTS

Starboard Mesa Ridge DST intends to acquire Buildings B & D at Markets at Mesa Ridge Shopping Center in Fountain, Colorado (“Mesa Ridge”) for $11,700,000 June 10, 2016. Starboard Realty Advisors (“Starboard”), the sponsor/manager, is offering up to $5,600,000 of equity interests. The offering may qualify as a 1031 exchange replacement property. Mesa Ridge is anchored by Safeway Grocery Store* (NAP); in-line tenants include Pizza Hut, ENT Federal Credit Union, Subway The UPS Store, Fantastic Sam’s, Wells Fargo ATM, and Little Caesars just to name a few. Other co-tenants (not part of the offering) in the center include Carl’s Jr., Chic-Fil-A, Jersey Mikes, Starbucks, Taco Bell, and Sonic. Starboard acquires anchored multi-tenant neighborhood centers for diversification of income and rent growth opportunities. Starboard Mesa Ridge MT, LLC will master lease the property from Starboard Mesa Ridge DST.

INVESTMENT OPPORTUNITY

  • Invest in a 100% leased property with annual tenant rent growth
  • Invest in a community with a growing population & jobs
  • Professionally managed by experienced sponsor principals & local professional 3rd party property managers
  • Markets at Mesa Ridge benefits from its location in the city of Fountain’s retail corridor & is a prominent grocery anchored center in trade area
  • Annual rent increases in 15 of 17 tenant leases representing 88+% of tenants

PROPERTY DESCRIPTION

  • Anchored shopping center* in Fountain, Colorado
  • 29,428 Square Feet
  • 2 Buildings
  • 4 Parcels on 10.03 Acres
  • 17 tenant spaces
  • 100% occupied
  • Built in 2001
  • Triple Net Leases
  • 52% Credit & National Chain tenants including Pizza Hut, Fantastic Sam’s, The UPS Store, Wells Fargo, & Safeway (for common area maintenance expenses)
  • Mesa Ridge parcels B&D have historical occupancy of from 2011– 2015 of 89%
  • Safeway responsible for the maintenance of common area of its own parcel

* SAFEWAY GROCERY STORE BUILDING & LAND ARE OWNED BY SAFEWAY & ARE NOT-A-PART OF THIS PURCHASE.

LOCATION DEMOGRAPHICS

Estimated number of employees within three and five mile radius of the property are 5,028(1) and 10,227(1) respectively, with approximately 626(1)and 1,076(1) businesses within three and five mile radius of the property, respectively. Population within three miles of the property, there is 45,466(1) with an estimated 2015 average household income of $67,641(1). The five mile radius demographics are 76,037(1) people with an average household income $68,193(1). The three and five mile radius demographics are projected to grow by 1.4%(1) annually over the next five years. The city of Fountain is part of the greater Fountain Valley population of 100,000+(2) and the Colorado Springs
MSA region population of 646,000+(2). Along Fountain city boarder is the state’s largest employer, Fort Carson2. Fort Carson alone supports approximately 77,000(2) personnel, family members and associates.

TRAFFIC COUNT

Traffic count at the intersection of Mesa Ridge Parkway and Fountain Mesa Road is approximately 18,000(1) vehicles per day.

MASTER TENANT BUSINESS PLAN*

  • Invest strategically for investors to generate cash flow & asset value appreciation, while maintaining a risk mitigating investment philosophy
  • Make monthly rent payments to Starboard Mesa Ridge DST
  • Maximize tenant rents through renewals & lease up
  • Competitively bid & reduce operating costs
  • Maximize net operating income
  • Upgrade the center monument sign to add more tenant spaces
  • Position the property for sale at the appropriate time.
  • Hold Period of 7-10 Years

*There are no guarantees that the business plan will be achieved.

ABOUT TENANTS

ENT FEDERAL CREDIT UNION

Ent Credit Union, established in 1957, is the leading financial institution in Southern Colorado with $4.3 billion in assets, 27 service centers and more than 260,000 member. Membership is open to businesses or individuals living or working in Denver, El Paso, Pueblo and Teller counties, as well as select communities in Weld, Adams and Arapahoe counties.

SUBWAY

Subway RE is a franchisee of Doctor’s Associates Inc., a Florida corporation, operating under the name Subway (“Subway”). Subway began in 1965 and is the world’s largest submarine sandwich chain with more than 44,000 locations and more than 21,000 franchisees around the world.

PIZZA HUT (Subsidiary of YUM! Brands)

Pizza Hut was founded by brothers Dan and Frank Carney in 1958 in Wichita, Kansas. In 1997, Pepsi packaged all their restaurant holdings which included Pizza Hut, KFC and Taco Bell and spun them off as Yum! Brands. As of 2016, are currently over 11,000 Pizza Hut locations operating under Yum! Brands in 94
countries worldwide. The Pizza Hut corporate office is located in Louisville, Kentucky.

YUM! BRANDS

YUM!, together with its subsidiaries, has over 42,000 restaurants in more than 130 countries and territories. Primarily through the three concepts of KFC, Pizza Hut and Taco Bell (the “Concepts”), YUM! develops, operates, franchises and licenses a worldwide system of restaurants which prepare, package and sell a menu of competitively priced food items. As of year-end 2015, YUM! and its
subsidiaries employed approximately 505,000 people and with a net sales of $11.15 billion.

FANTASTIC SAMS

Fantastic Sams is a wholly-owned subsidiary of Dessange Group North America, Inc., a Delaware corporation (“Dessange”). Dessange acquired Fantastic Sams in 2011. Fantastic Sams is a leading hair salon franchisor in the United States, offering a wide range of hair care services to the entire family at affordable prices. Today, Fantastic is one of the world’s largest full-service hair care salons,
with 1,100 locations throughout North America.

BIRDIE, INC.

Brad Cleveland is the guarantor under the Birdie Retail Lease. Birdie has operated a small chain of fast casual BBQ restaurants in Colorado since
2004 using oak-smoke d meats, BBQ sauces made in-house daily and counter-side service of Oklahoma-Style BBQ.

LITTLE CAESAR’S

The Retail Tenant under one of the Retail Leases is Colorado Pizza Investments,
Inc., a Colorado corporation (“CIP”) and is guaranteed by Michael Scruggs, Sr. CPI is a franchisee of Little Caesar’s Enterprises, Inc., a Michigan corporation (“Little Caesar’s”). Little Caesar’s began as a single store in 1959 and
is currently the largest carry out pizza chain in the world. Little Caesar’s is the fastest growing pizza chain in the United States with locations in all 50 states and 18 countries and territories worldwide.

PAPA MURPHY’S HOLDINGS, INC.

Papa Murphy’s was founded in 1981 and is a franchisor and operator of the largest Take ‘N’ Bake pizza chain the United States with a total of 1,496 stores and 541 franchise owners as of December 28, 2015. Papa Murphy’s franchisors
operate in 38 States, Canada and the MiddleEast. As of March 7, 2016, Papa Murphy’s had 2,1001 employees, with 2015 year-end net sales of $120.21 million. 

ABOUT STARBOARD

Starboard offers multi-tenant neighborhood centers with a diversification of regional and national tenants. Neighborhood centers provide customers with life’s essentials such as food and personal services which are typically difficult to purchase on the internet. Typical neighborhood center tenants have annual rent increases which facilitates the growth of net operating income and property cash flows. When interest rates increase and inflation returns, commercial real estate with rent growth has proven to be a good hedge to rising interest and capitalization rates and its negative impact on real estate values.

Starboard has a unique investment strategy for DST’s to respond to investor objectives and the changing real estate cycle fundamentals that will impact investor returns in the future. Historically, a ½ of 1% increase in the 10 Year Treasury Bill will generally cause a 1% increase in cap rates. Since 2008, real estate values have increased largely through cap rate compression, while many asset classes were not performing well. Going forward, value will be created through property performance, revenue growth and increasing the net operating income (“NOI”). It is likely that NOI growth will be needed to offset the rising cap rates resulting from higher interest rates.

Starboard’s DST strategy is to acquire multi-tenant retail shopping centers in primary and secondary markets which historically have three to ten year lease terms and annual rent increases in the tenant leases. The DST will not own the anchor because it usually represents 40-60% of the centers’ income. When an anchor owns its own store, it is more committed to the location and will invest more capital in the store than if it was leased. This acquisition strategy is preferred by Starboard to single or portfolio net lease properties because as market rents increase during the current real estate cycle, tenants can be renewed or replaced at the higher rents.