Cash Flowing 3-Asset Northern NJ Office Lease Up

gross ann. return*
19 mo.
term remaining
Cash Flowing to Investors
Current Ann. Return 8.0%
Accrued Ann. Return 8.0%
Gross Ann. Return* 16.0%

Investment Details

Current Ann. Return 8.0%
Accrued Ann. Return + 8.0%
Gross Ann. Return* 16.0%
Term Remaining 19 of 36 mo.
Min. Investment $5,000
Investment Size $6,000,000
Underlying Security Preferred Equity

Investment Summary

This is an opportunity to invest in the acquisition and repositioning of a 3-property office portfolio located 30 miles outside of New York City in the Morristown, New Jersey sub-market. All the properties are currently cash flowing with a blended occupancy rate of 91.8%. The sponsor, Lincoln Equities Group (“LEG”), has owned and managed more than 5 million square feet of Class A commercial office space in the New Jersey market during its 30 year history.

Key Deal Points

Highly Experienced New Jersey Office Owner

A key risk in the deal is the ability for the sponsor, LEG to reposition the individual properties through their leasing efforts. LEG has owned and managed Class A commercial real estate in the New Jersey market for over 30 years and currently operates more than 5 million square feet of office and commercial properties. In the last 10 years alone, LEG has completed more than 175 leasing transactions for more than 2.5 million square feet of space including over 500,000 SF in the Morristown submarket. This strong track record and along with the companies' specific experience in the market supports their ability to add value over the term of the investment.

Opportunity to Add Value with Clear Business Plan

LEG plans to manage the building with a focus on renewing existing tenants and expanding them within the buildings. The property has not been actively managed, which was expressed during tenant interviews. Several brokers representing tenants in the area have already expressed interest in the properties and prior to the sale approached LEG directly based on the knowledge that they would be the future owners and were proactive, experienced landlords.

At the same time, LEG plans to negotiate early lease buyouts from those tenants not utilizing their space and use these buyout payments to fund leasing costs for new tenants. LEG's budget has sufficiently accounted for the potential future costs of capital expenditures and tenant improvement (TI) allowance which has been funded upfront through equity and is being held in reserve by the senior lender exclusively for these purposes.

Strong Existing Cash Flow to Cover Current Payments

The combined Year 1 NOI for the portfolio yields a Debt Service Coverage Ratio ("DSCR") on the aggregate senior loan + Fundrise investment of 2.07x, and Year 1 Cash Flow after taking into account potential leasing costs and capital improvements still yields a comfortable DSCR of 1.59x.

Attractive "Bulk Rate" Purchase Price

LEG believes the premium in the acquisition cap rate (9.27% on 2014 NOI) - due to perceived leasing risk for this deal as compared to comparable sales - was significantly overstated and only achievable because of the off-market nature of the purchase and their ability to close quickly with a significant amount of cash. The $194 per square foot purchase price is well below replacement cost and less than what similar buildings in the area have sold at recently.

High Quality Tenancy and Strong Market Demand

The existing tenants include large national and multi-national corporations with extremely strong credit: Morgan Stanley (A-), Verizon Wireless (BBB+), LG Electronics (BBB-), and Simon Property Group.

Projected Return Calculator

Gross Annual Return* 16.0%
Term 36 mo.
Total Return*

Fundrise Rating

The Fundrise Rating is a letter rating ranging from A to E that provides investors with the ability to easily compare investments across the Fundrise platform. The Fundrise rating measures the relative risk-adjusted return of an investment. Learn more
Category Assessment Points
Capital Senior to Fundrise 70-79% 4
Capital Junior to Fundrise 10-19% 4
Location Secondary 2
Occupancy Occupied 1
Development Phase Value-Add 2
Sponsor’s Track Record $250 million or more 1
Overall 14 C3

The information contained in the Fundrise Rating is for informational purposes only. It is impersonal and not individualized for any specific investor's financial situation and is not investment advice. These ratings are not intended to be, nor should you interpret them to be, a prediction of how a particular investment will actually perform. You should always carefully consider investments in any security and be comfortable with your understanding of the investment. You may also consider consulting investment professionals.

Risk-Adjusted Return

Capital Structure

Type Source % of Total Amount
Equity Sponsor and LPs 13.5% $11,407,900
Preferred Equity Fundrise Investment 7.1% $6,000,000
Senior Debt 79.5% $67,390,000
Total 100.0% $84,797,900

Property Summary

The Morristown Portfolio consists of three office buildings totaling 411,737 SF in Morristown, NJ: 100 Southgate Parkway, Morristown, NJ (“Southgate”) roughly 151,404 SF; 1200 Mt. Kemble Avenue, Morristown, NJ (“Kemble”) roughly 106,000 SF; and 60 Columbia Road, Morristown, NJ (“Columbia”) roughly 154,333 SF.

Address 100 Southgate Pkwy, 1200 Mt Kemble Ave, 60 Columbia Rd
City & State Northern NJ
Neighborhood Morristown
Product Type Office / 3 Occupied Buildings
Project Phase Value-Add / Lease Up

Market Summary

Morris County is situated in the northeastern section of New Jersey and consists of 40 municipalities including Chester, Florham Park, Hanover Township, Madison, Mendham, Morristown (the County seat), and Parsippany.  The County is known for its high quality of life, well-educated work force, and its large concentrations of major corporate headquarters.  These corporations are able to draw employees from a great distance due to the region’s highway infrastructure and Morris County’s central location.

About the Sponsor

Lincoln Equities Group LLC (LEG), established in 1980, is one of the Northeast’s leading full-service real estate companies. LEG has built a sterling reputation over more than 30 years in the market due to the quality of its professionals, ability to outperform in all market cycles and strong relationships with tenants and the real estate community. The company owns, operates, develops and manages commercial and residential properties throughout the tri-state area and Europe for its own account as well as for third-party owners.

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Fee Schedule

Gross ann. return* 16.0%
Servicing and administration fee -0.3%
Net ann. return to investors 15.7%

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