CENTERWEST BUSINESS PARKADDISON, ILLINOIS
Capital to be Raised
Up to $3,900,499*
Capital to Be Raised
Up to $3,900,499*
Targeted Equity Multiple on Exit:
Targeted Average Cash-on-Cash Return:
Anticipated Hold Period:
Offering Close Date:
December 23, 2020
* Will be determined at closing and is subject to change. See the Offering Memorandum for additional details.
** Targeted returns are shown net to investors after all fees and expenses.
Disclaimer: This offering is speculative and involves substantial risks. Consider the risks outlined in the formal offering documents, including the Offering Memorandum before investing. Risks include, but are not limited to illiquidity, lack of diversification, complete loss of capital, default risk, and capital call risk. Investments may not achieve their objective.
Fairway America, LLC is making available an ownership investment opportunity for an industrial/flex building, Centerwest, in Addison, Illinois, one of Chicago’s tightest submarkets.¹ Centerwest Business Park (the “Property”) consists of a flex industrial building totaling 116,214 rentable square feet and is conveniently located on a major freeway 15 minutes from O’Hare International Airport. Fairway believes this is an opportunity to buy a well-located property that has been mismanaged by prior owners and which is expected to provide both strong cash flow and value-add upside potential through professional management and leasing. Having completed two other deals together, Fairway and Ameritus, LLC intend to co-manage and co-execute the business strategy for acquiring, improving, operating, and disposing of the property. Opportunity highlights include:
- An internal dispute between the current manager and investors has resulted in mismanagement of the asset and opportunity to buy at a 9% discount to the seller’s original 2013 purchase price of $9.35M in 2013!
- The Property is currently only 80% leased to seven tenants in the services, science, and healthcare industries, providing new leasing opportunities by competent management
- Located immediately adjacent to an on and off ramp to Interstate 355, a heavily travelled six lane north south freeway arterial serving the area and providing excellent access to the Property
- Potential to extract additional value from excess land by adding and contracting a high visibility billboard or carving out and selling an outparcel
- Located in one of the most active industrial markets in the U.S.¹
- Employ a $1.14M capital renovation program to be used towards sprucing up the Property’s appearance and enhancing attractiveness to tenants at this location
¹CoStar November 2020 Chicago MSA Industrial Market Report and Industrial Submarket Market Report. Additional information from CoStar Market Analytics Database.
- Address: 2055 W Army Trail Road
- Site area: 8.98 acres
- Zoning: B-3, Service Business
- Year built: 1985
- Number of building: One
- Total building area: 116,214 sq. ft.
- Typical ceiling height: 9′ clear – office | 12′ clear – warehouse
- Docks: 4 shared docks
- Drive-ins: 7 drive-in doors
- Auto parking: 517 surface stalls, including 15 ADA parking spaces
- Roofing: roof is finished with mineral-surfaced cap sheet over a multi-ply, bituminous membrane
Operational Partner Information
Ameritus, LLC is a uniquely positioned real estate investment and service firm focused on leveraging knowledge and relationships of the Midwest market to help create a competitive advantage in acquiring and investing in multi-tenant office, flex and industrial properties, and multifamily assets. Founded in 1999, Ameritus is a fully integrated operating partner organized to acquire, operate, and capitalize commercial real estate for its partnerships and third-party clients. Ameritus’s fully integrated platform provides leasing, property management, construction, and financial reporting through its 20+ corporate staff members. Over their combined careers the principals of Ameritus have been involved in $5 billion+ of commercial real estate transactions and investments. To date, this is Fairway’s third offering with Ameritus.
Jeb is a Founder and Partner of Ameritus. He has grown the company from a boutique services provider to an investment sponsor for institutional and high-net-worth real estate investors. Jeb has over 27 years of commercial real estate experience and started his career with Frain Camins & Swartchild, which eventually became CBRE. With a focus on office and industrial transactions, Jeb has arranged over $1.5B of lease and investment transactions.
At Ameritus, Jeb is responsible for the acquisition, development, and implementation of the business plans of all investments, including leasing, capital projects, and operations. Jeb is the founder of Young Office Brokers Association and is a past recipient of the Frank Mahoney Award for Excellence in Brokerage given by the Association of Industrial Real Estate Brokers.
Ben is a Partner of Ameritus and has over 29 years of institutional real estate experience having held various senior level investment positions with Massachusetts Mutual Life Insurance Company, Morgan Stanley, and Equibase Capital Group, a boutique private equity firm. At Ameritus, Ben is responsible for acquisitions, investment management, and maintaining relationships with Ameritus’s equity and lending partners, leading efforts in capital markets transactions and investor relations.
Throughout his career, Ben has invested over $3.0B of capital in debt, mezzanine, and equity structures throughout the United States and in all commercial property types. Ben is a graduate of Syracuse University and earned his MBA at Northwestern University’s Kellogg Graduate School of Management. He holds the CCIM designation.
Bob is a Partner of Ameritus and has over 29 years of commercial real estate experience with a diverse background in financial analysis, asset management, leasing, property acquisitions and dispositions. He has negotiated leases in excess of $500M in value, assisted in acquisitions and dispositions of $500M in assets, and implemented marketing and leasing programs for 3 million square feet of assets.
Prior to joining Ameritus, Bob held positions with Jones Lang LaSalle, Golub & Company, Colliers International and Avison Young. At Ameritus, Bob leads a tenant representation business and is instrumental in the leasing activity of Ameritus-sponsored investments. Bob is an Illinois licensed real estate broker and is a graduate of Cornell University.
To participate in the Centerwest Business Park opportunity please click below. To request an Offering Memorandum or if you have questions, email us below.
This offering is speculative and involves substantial risks. In addition to the general risks of participating in a private real estate offering, which include illiquidity, lack of diversification, complete loss of capital, default risk, and the risk that Centerwest SPE LLC (the “Company”) may not achieve its objectives, some of the more significant risks associated with this investment include the following.
Lack of Control
The Company has been formed to acquire the property located at 2055 West Army Trail Road, Addison, Illinois (the “Property), and improve, lease, operate, and potentially sell all or portions of that Property (collectively, the “Project”). Fairway America, LLC (“Fairway”) and Ameritus, LLC or its affiliate (“Ameritus”) will act as co-managers of Centerwest SPE Manager LLC (the “Manager”) pursuant to the terms of the Manager’s limited liability company agreement (the “Manager LLC Agreement”).
Under the terms of the Manager LLC Agreement, certain decisions with respect to the Project may be made by either of the co-managers acting unilaterally, but many decisions require the agreement of both co-managers. It is possible for the co-managers to become deadlocked with respect to matters relating to the Project, in which case progress on the Project may be delayed until the deadlock is broken or, in certain situations as provided in the Manager LLC Agreement, either Fairway or Ameritus could be removed as a co-manager. In this regard, investors should not rely on either Fairway or Ameritus maintaining unilateral control over the management of the Company or the Project and should be aware that disagreements between Fairway and Ameritus could adversely affect the Project and the potential returns of the Company.
Additionally, there are numerous risks associated with investing in the Company that are not within the Company’s, Ameritus’, or Fairway’s control (or the control of any of their affiliates). Many of those risks are detailed below.
Lack of Liquidity
While Fairway, Ameritus, and the Manager anticipate that the Company will attempt to sell the Property in or around 2026, there can be no guarantee if and when the Property will be sold and, as a result, Members must be prepared to hold their investments in the Company indefinitely. The Property may be subject to matters related to legal title, zoning requirements, environmental condition, and other property-specific factors that may be identified in the course of performing due diligence on the Property, or contractual limitations that adversely affect the ability of the Company to sell the Property on favorable terms. The market price, if any, for the Property may be volatile, and the Company may be unable to sell the Property when it desires to do so or to realize what it perceives to be a fair value for the Property.
Member Financial Disclosures and Authorizations
Any Member with a percentage ownership interest in the Company of greater than 10% may be required to provide a personal financial statement, balance sheet, and a signed credit authorization form, as may be required by a lender in order for the Company to secure the loan needed to acquire or refinance the Property.
Subscriptions for Membership Units Are Irrevocable
An investor’s subscription for Units in the Company becomes irrevocable once it is accepted by the Manager, and a Member may only transfer its Units or withdraw from the Company upon approval of the Manager, in the Manager’s sole discretion, and subject to other significant legal and practical limitations. This means any potential investor must have sufficient liquidity in other investments or accounts (other than an investment in the Company) to meet the investor’s capital needs.
No Assurance of Profit or Distributions
There is no assurance that the Company’s ownership and operation of the Property and Project will be profitable or that any distributions will be made by the Company to the Members. Any return on investment to the Members will depend ultimately on the success of the Company’s ownership and operation of the Property and Project, and the performance of the Property. The marketability and value of the Property will depend on many factors beyond the control of any of the Company, the Manager, Fairway, or Ameritus. The Company may not have sufficient cash available to make distributions to the Members to enable them to pay taxes on their allocable shares of income from the Property.
A Member’s tax liability for a particular year could exceed the amount of cash distributed to the Member for that year. The expenses of the Company may exceed its income and the Members ultimately could lose the entire amount of their contributed capital in the Company.
Coronavirus and other Pandemic Related Issues
As of the date hereof, there is an outbreak of a novel and highly contagious form of coronavirus (“COVID-19”), which the World Health Organization has declared to constitute a “Public Health Emergency of International Concern.” The outbreak of COVID-19 has resulted in numerous deaths, adversely impacted global commercial activity and contributed to significant volatility in certain equity, debt, derivatives and commodities markets. The global impact of the outbreak is rapidly evolving, and many countries have reacted by instituting (or strongly encouraging) quarantines, prohibitions on travel, the closure of offices, businesses, schools, retail stores, restaurants, hotels, courts and other public venues, and other restrictive measures designed to help slow the spread of COVID-19. Businesses are also implementing similar precautionary measures. Governments are also implementing moratoriums or other restrictions on tenant evictions due to the economic fallout from COVID-19. Such measures, as well as the general uncertainty surrounding the dangers and impact of COVID-19, are creating significant disruption in supply chains and economic activity and are having a particularly adverse impact on transportation, hospitality, tourism, entertainment, and related industries. Moreover, with the continued spread of COVID-19, governments and businesses are likely to take increasingly aggressive measures to help slow its spread and mitigate its damages. For this reason, among others, as COVID-19 continues to spread, the potential impacts, including a global, regional or other economic recession, are increasingly uncertain and difficult to assess.
Any public health emergency, including any outbreak of COVID-19, SARS, H1N1/09 flu, avian flu, other coronavirus, Ebola or other existing or new epidemic diseases, or the threat thereof, could have a significant adverse impact on the Company and the Project. The extent of the impact of any public health emergency on the Company and the Project will depend on many factors, including the duration and scope of such public health emergency, the extent of any related travel advisories and restrictions implemented, the impact of such public health emergency on overall supply and demand, goods and services, investor liquidity, consumer confidence and spending levels, and levels of economic activity, the length, frequency, or magnitude of any moratoriums or other restrictions on tenant evictions applicable to the Project, and the extent of its disruption to important global, regional and local supply chains and economic markets, all of which are highly uncertain and cannot be predicted. The effects of a public health emergency may materially and adversely impact the development of the Project and its performance once stabilized, which could result in significant losses to the Company. In addition, the operations of the Manager (or others involved with the Project) may be significantly impacted, or even temporarily or permanently halted, as a result of government quarantine measures, voluntary and precautionary restrictions on travel or meetings and other factors related to a public health emergency, including its potential adverse impact on the health of their key service providers or other personnel.
Need for Additional Capital
If the Manager determines that additional funds are required by the Company for any proper purpose of the Company in order to complete the Project or operate the Property, or as a result of the occurrence of certain events or conditions, such as (i) more time than anticipated to closure or profitability, or (ii) operating expenses greater than those forecasted, then the Manager may at any time and from time to time call for additional capital contributions to the Company from the Members with no less than 15 days notice. If a Member fails to contribute the additional capital as required, the Member may be in default and subject to penalties as described in the Company’s limited liability company agreement (the “LLC Agreement”). The Company may also offer additional Units in the Company for sale to third parties. A Member’s proportional interest in the Company could be diluted if the Company issues additional Units or other ownership interests. The economic effect of such dilution would depend on the terms of the future issuance.
Borrowing by the Company
The proposed capitalization of the Property includes obtaining a senior loan of approximately $8,400,000 (the “Loan”), which constitutes approximately 67% of the costs currently anticipated to be necessary to acquire, improve, lease and operate the Property. The amount and terms of the Loan will not be finalized until closing of the acquisition of the Property, and are subject to change. The Loan is expected to be nonrecourse to the Members. It is possible that the Company will not be able to obtain the Loan on favorable terms, in which case the ability of the Company to achieve its projections will be jeopardized. Although the purpose of leverage is to provide flexibility and additional liquidity options to the Company and reduce required equity, its use is inherently risky and can instead increase the risk of loss. Breach of debt covenants or the inability to repay debt as a result of poorer than expected Property performance could result in a foreclosure. In some cases, the Manager and the Company may have no control over the circumstances giving rise to a default.
While leverage, either at the Property or Company level, can increase the ultimate potential return on the Members’ invested equity in the Company, leverage also reduces any positive cash flow the Members would otherwise have and it also may substantially increase the risk of loss of principal. Such borrowing will increase the exposure of the Property (and, therefore, the Company and the Manager) to adverse economic factors such as rising interest rates, severe economic downturns or deteriorations in the condition of the real estate investment or its market. The holder of the Loan on the Property will be entitled to a preferred cash flow before the Company receives a return on the invested equity the Members and the Manager invested in the Property. Leveraged investments are inherently more sensitive to declines in revenues and to increases in expenses. In addition, leverage presents an added element of risk if the cash receipts from the Property’s operations—expected to substantially be the lease payments made by the Property’s tenants—are insufficient to meet the principal and interest payments on the Loan encumbering the Property. Substantially all of the Company’s assets—which primarily consist of the Property—will be pledged as security under the Loan. Furthermore, because most of the Company’s assets will be subject to a security interest in favor of the Loan lender, obtaining additional financing to meet principal and interest obligations under the Loan could be difficult. If the Property cannot generate adequate cash flow to meet the principal and interest payments on its indebtedness, the Company, and therefore the Members, may suffer a partial or total loss of capital invested in the Property.
The Company’s ability to make principal and interest payments on its indebtedness will be largely dependent on the Property’s future operating performance, which is dependent on a number of factors, some of which are out of the Company’s control. These factors include prevailing economic conditions, the financial health of the Property’s existing and future tenants, lack of catastrophes affecting the Property that impair its development or operation, and the ability of the Company to re‐lease rentable space on the Property when vacancies arise. There is no assurance that the Company’s cash flow from operations will be adequate to (i) make required payments of principal and interest on its debt or (ii) fund additional capital requirements, if any, or other expenses with respect to the Property. In the event of default by the Company under the terms of the Loan, the Company would be required to repay its borrowings from other funds, which the Manager expects to be limited. If the Company ultimately cannot repay the Loan, the Members could lose their equity in the Property through foreclosure—and the Units in the Company would become worthless. In addition, there could be substantial tax liability to the Members.
As part of Fairway’s due diligence review, Fairway has obtained background checks on each of Ameritus’ principals (Jeb Scherb, Benjamin Nummy and Bob Budington), in the form of reports from Clarity Diligence Services (the “Reports”). Copies of the Reports are available to potential investors in the deal room. The Reports are not intended to be comprehensive or all‐inclusive. Mr. Scherb and Mr. Budington have been involved in a variety of known litigation matters, and Ameritus’ principals may have been involved in others. Mr. Scherb and Mr. Budington have each been issued tax liens in the past, which have since been released. While Fairway or Ameritus do not believe that any of these instances will result in liability to the Company or the Manager, or affect the ability of Mr. Scherb, Mr. Budington, Ameritus or the property manager to perform, there can be no guarantee. Each potential investor in the Company is encouraged to review the Reports and reach its own conclusion about the significance of the litigation matters or tax liens prior to making an investment decision.
Conflicts of Interest Generally
The Company, Fairway, and Ameritus are subject to various conflicts of interest arising out of the relationships among the Company, the Manager, Fairway, Ameritus, and their respective principals and affiliates, (whether as a manager, a sponsor, investor, service provider, or otherwise). Many of the agreements and arrangements between the Company, the Manager, Fairway, Ameritus, and their respective principals and affiliates, including those relating to compensation, did not result from arm’s-length negotiations. Nor will the Members have any control over negotiating these agreements and arrangements. In addition, no assurances can be made that other conflicts of interest do not exist or will not arise in the future. These conflicts of interest include, but are not limited to, the conflicts included below.
CORPORATE STRUCTURE OF INVESTMENT TRANSACTION
The Property will be owned by Centerwest SPE LLC (the “Company”). The Company will be managed by Centerwest SPE Manager LLC (the “Manager”). Investors (the “Members”) and the Manager will acquire interests in the Property by purchasing units of membership interests (
“Units”) in the Company. Collectively, the Members are expected to hold approximately 90% of the Company, with the actual percentage of their ownership interest dependent upon the total amount raised from Members and the Manager. Below is a summary of the distribution provisions set forth in the Company’s limited liability company agreement (the “LLC Agreement”). Any distributions made by the Company to the Members or the Manager are subject to the Company having available cash, as determined by the Manager. Any distributions are not guaranteed. The distribution summary below is incomplete, and potential investors should review the LLC Agreement carefully in its entirety.
Distributions by the Company of any available cash generated from ordinary operations or sale or refinance of all or any portion of the Property (a “Capital Event”) will be made to the Members and Manager as follows:
- To the Members and the Manager, pro rata based on their respective percentage ownership interests in the Company, until they each receive an amount equal to an 8% annual, cumulative (but non‐compounding) preferred return (the “Preferred Return”) on their unreturned invested equity in the Company;
- To the Members and the Manager, pro rata based on their respective percentage ownership interests in the Company, until they each receive a full return of their invested equity in the Company;
- To Ameritus to pay back 100% of the outstanding principal balance of any Cost Overrun Loan (as defined in the Manager’s limited liability company agreement);
- To the Members, 80% of their pro rata share of distributions from the Company above the Preferred Return, full return of invested equity, and Cost Overrun Loan pay back, up to a 16% XIRR (the “Tier 1 Hurdle”), with the other 20% being distributed to the Manager;
- Once the Members have achieved the Tier 1 Hurdle, to the Members, 60% of their pro rata share of the remaining distributions from the Company, with the other 40% being distributed to the Manager; and
- To the Manager, 100% of its pro rata share of distributions from the Company above the Preferred Return and full return of invested equity (the Manager is not promoted).
Please refer to the LLC Agreement and the Manager’s limited liability company agreement for additional details about the structure of this investment. All statements in this Offering Memorandum, including this summary of the investment structure, are qualified in their entirety by the actual terms of these agreements, and any inconsistencies between this Offering Memorandum and such agreements will be resolved in favor of the actual terms of these agreements.
The Manager, Ameritus, Fairway, and certain of their related entities and designees are expected to receive various fees in connection with this offering, or the acquisition and operation of the Property, including, but not limited to, the following:
- A one-time acquisition fee of 1.5% of the total purchase price of the Property (underwritten as $127,500), payable to Ameritus upon closing;
- A one-time underwriting, processing, and due diligence fee of $120,000, payable to Fairway upon closing;
- A one-time real estate marketing fee of $80,000, payable to Fairway upon closing;
- Following closing, a property management fee, in an amount not to exceed a market-based percentage of the effective gross income of the Property (estimated at 4%), payable to an affiliate of Ameritus;
- Following closing, an on-going market-based fee, payable quarterly to Verivest LLC (an affiliate of Fairway), for administration and accounting services, quarterly investor capital account maintenance, tax return and K-1 preparation, and other relevant administrative duties provided by Verivest LLC to the Company and the Manager;
- Following closing, an on-going quarterly asset management fee in the amount of 1.25% (annualized) of the total capital contributions received by the Company, payable to the Manager;
- Following closing, a construction management fee, payable to an affiliate of Ameritus as construction of capital improvements on the Project is completed, in an amount not to exceed 4% of all hard costs incurred in connection with that construction; and
- Standard and customary closing costs in amounts to be determined.
This description of the fees payable in connection with this investment is not intended to be complete, has not been finalized, and is subject to change. Neither the Manager nor the Company is obligated to update this description if any of the fees as described above change after the distribution of this Offering Memorandum. Additional fees and other amounts may be payable to the Manager, Fairway, Ameritus, or their affiliates or designees in connection with the Property, subject to the actual terms of any agreements between the relevant entities. In addition, various other fees and amounts may be paid to unaffiliated third parties at the closing of this offering, the closing of the acquisition of the Property, or from time to time thereafter. All such fees will be market based and reasonable, as determined by the Manager, Fairway, and Ameritus in their respective sole discretion.
The foregoing fees create potential conflicts of interest in that they compensate the Manager, Fairway, Ameritus and/or their affiliates at the expense of the potential cash available for distribution by the Company to the Members. Fairway or Ameritus may be incentivized to authorize these fees, or negotiate higher fees, in an effort to increase the compensation payable to the Manager, Fairway, Ameritus and/or their affiliates, even though it may be to the detriment of the Members. Additionally, it is possible that such services on behalf of the Company or the Manager can be procured by a person that is not a person affiliated with Fairway or Ameritus, and can be performed at a lower cost.
This description of risks is not intended to be comprehensive. Please consider the more complete description of risks outlined in Centerwest SPE LLC’s formal offering documents, including the Offering Memorandum, before investing.