Compound is the easy way to build your real estate collection. Our team identifies and manages beautiful condominiums in the world's best cities so that you don't have to deal with ownership hassles or headaches.
The Miami condominium market is experiencing a price correction after a 5-year construction boom, with lower prices, less sales volume, and greater discounts. As a result, Compound Projects has identified opportunities to acquire condominium units at compelling valuations.
We are offering shares in a 1-bedroom, 1.5 bathroom condominium in the Reach at Brickell City Centre, a 43-story residential condominium building located in the heart of the Brickell neighborhood of Miami.
Purchase Price: $445,000
Price/Sq. Ft: $506
Total Capitalization*: $480,000
* Includes closing costs and operating reserves.
* As of 10/11/2019, from Miami MLS
** Does not include closing costs and reserves
What are the returns?
At Compound, we’re realists. That means we don’t make up numbers. What we do, put very simply, is find condominiums that we can buy at prices that make sense.
How do we determine if a purchase price makes sense? Well, first of all, we’ve done this before. Our team is made up of people who have a few decades of professional real estate experience (each!). Together, we take a hard look at supply (new units coming to market) and demand (new household formation and market occupancy). We look at what other similar units have sold for (comparable sales) and we look at current market conditions (average rents, market occupancy rates, and operating expenses.)
Then, we compare the price we believe the unit is worth against the asking price--and we negotiate to acquire a property at a price that we think is attractive from a value perspective.
What about traditional real estate metrics such as cap rate or cash on cash?
Condos do not sell on the basis of their ability to generate income. Instead, their value is largely based upon supply and demand. Think of condominiums more like a commodity--like oil or gold--that have both a real-world value and an economic value that makes them a store of wealth. When the market thinks they are rare, their value increases. Neither oil nor gold throws off any current income, and yet, they are very valuable assets to own.
What's the IRR?
Investors love to talk about IRR (or internal rate of return). But guess what? There are really only a few facts that can be known with certainty in real estate investment: where the property is located, how big it is, and what you pay for it. Everything else, from future rents to projected returns, are little more than fantasy--right up there with unicorns and UFOs.
And Now for the Truth (The Market is King)
You know how magicians swear never to reveal the secrets of their tricks? We’re about to become the rogue magician of the real estate investment industry.
That’s because you will have a hard time finding a real estate firm willing to admit that their ingenuity is actually a very tiny component of their success. Rather, real estate returns are mostly a matter of being in the right market at the right time.
The equities world has already faced this reality, which is why more capital is being passively managed than ever before. But in real estate, every investor is a self-proclaimed genius. (They are always the best managers who can find the best “off-market” details and blah blah blah.) We are happy to admit it: the markets we invest in will determine the majority of our returns. We will seek to buy at the best values possible in order to enhance those returns, but at the end of the day, you are investing in a market and, drum roll please, the market is king.
Reach at Brickell City Centre is a 43-story residential condominium building located in the heart of the Brickell neighborhood of Miami. The building, designed by Arquitectonica, and completed in 2016, sits in the middle of the Brickell City Centre development project. Brickell City Centre includes two residential towers, two-mid rise office buildings, the East Miami hotel, as well as a world class indoor shopping center with 109 retail stores and restaurants including Saks Fifth Avenue, Chanel, Chopard, and Emporio Armani.
Common deck with tropical gardens, outdoor fitness areas, children’s play area and barbecue grills
Brickell, also known as Miami's business district, is home to a large number of international banks such as HSBC, Espirito Santo Bank, and Banco Santander among other Fortune 500 companies. Brickell is considered to be one of South Florida’s most prestigious neighborhoods and is a favored place to live for young professionals.
At the heart of Brickell, located along South Miami Avenue, is Brickell City Centre. Brickell City Centre, a $1+ billion mixed-use development project developed by Swire Properties, spans over 9 acres and includes two residential towers (Reach and Rise), two office towers and a 5-star hotel (EAST Miami Hotel) all built atop a 500,000 square foot indoor shopping center.
Population is growing by 2% annually, with more than 260 people moving to the region every day, supporting the creation of more than 111,000 jobs over the past year.
More than 50,000 apartments have been constructed in South Florida since 2011, with another 10,800 units being built this year, according to a recent Marcus & Millichap report. Rental inventory grew by 4,800 units in Miami-Dade County, the highest amount in the region.
Despite the new supply, annual apartment absorption surpassed inventory growth to elevate occupancy. Year over year, apartment occupancy in downtown Miami and South Beach has increased from 95.4% in 3Q 2018 to 96.6% in 3Q 2019.
Rents are starting to rise in Miami after a flood of inventory from new apartments and condos that are now being rented out and apartments are being absorbed.
Source: Comprehensive Housing Market Analysis: Miami-Miami Beach-Kendall, Florida U.S. Department of Housing and Urban Development, Office of Policy Development and Research As of March 1, 2019
The smallest investment amount that Compound: Reach is accepting.
Crowd IPA (Interests Purchase Agreement) is a simple agreement to acquire membership
units of a limited liability company.
Crowd IPA (Interests Purchase Agreement) is a simple agreement to acquire membership units of a limited liability company.
The price of each membership unit.
$49,000 – $245,000
needs to raise
before the deadline.
The maximum amount
is willing to raise is
Compound: Reach needs to reach their minimum funding goal before the deadline
If they don’t, all investments will be refunded.
Compound is a real estate asset management company based in New York City and led by an experienced team of professional real estate investors. Compound allows investors to buy equity shares of condominiums in major cities.
You are investing in a single condominium unit, the ownership of which has been divided into 100,000 equity shares. For example, if you buy 10,000 shares, you would own 10% of that condominium’s stock.
The condominium is owned by Compound Projects, LLC. When you invest in a condominium, you become a shareholder in a sub-company (a Series) of Compound Projects, LLC that owns a specific condominium.
Technically, you own membership interests in a Series of Compound Projects, LLC. Each Series intends to elect to be taxed as a real estate investment trust (“REIT”). Each REIT owns one single condominium apartment.
Compound manages the property. We may engage local staff to assist in the management of the property.
Feel free to walk by but we can’t allow all of our shareholders access to the units.
We intend to manage the property as traditional apartment rentals, rented out to market-rate tenants through 12-month leases. The expected hold period for the property is 3-5 years at which point we intend to sell the property and distribute the sale proceeds to investors.
Compound does not charge any asset management fees. We also do not take a piece of the profits.
At the end of every year, investors will receive an annual 1099-Div.
Each Series of Compound Projects, LLC will elect to be taxed as a real estate investment trust (REIT). Unless your investment is held in a qualified tax-exempt account, your dividends will generally have tax implications. Dividends will typically come in three forms – (i) return of capital dividends (which are generally not taxed and instead reduce your tax basis for future capital gain consideration), (ii) capital gain dividends (which are generally taxable at long-term capital gain rates), or dividends from current or accumulated earnings or profits (which are generally taxed at ordinary income rates). This allows for depreciation to be passed through to investors up to an amount equal to the net income (can reduce taxable income to zero, but won’t result in a pass-through loss). However, because each investor’s tax considerations are different, we recommend that you consult with your tax advisor.
If we have not raised the full amount required to purchase a property, Compound may provide an acquisition loan for the balance. The loan will not pay any interest and is expected to be repaid through subsequent equity offerings. In the event it is not repaid within 18 months, it will convert into equity under the same terms of this offering.
The total capitalization includes operating and capital reserves, closing costs, and offering costs.
We intend to make semi-annual dividend payments based on cash available (after reserves.)
No additional cash outlays or capital calls are required. In the rare event that shortfalls exceed the reserves, then Compound can lend money to the project to fund the shortfall.
To be clear, your investment would be in a Series of Compound Projects, LLC. This investment does not represent an investment in Compound Asset Management ("Compound"), the Manager of Compound Projects. If Compound goes bankrupt then Compound will assist in making an orderly transition of the management of Compound Projects, or may elect to sell the property and distribute the proceeds to shareholders.
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