Wednesday, February 8th, 2012

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Out of state Income Property | Smoky Mountain Resort | Developer Guarantee Leaseback

Developer Guaranteed Income of 15%

As many are aware, we love to explore out of the box for income real estate opportunity.  During a trip to Sterling Springs Resort in the Gaitlinburg area of Tennessee at the beginning of the year, I noticed a glaring problem with availability.  The resort is 5 star and one of the most beautiful settings I have seen.  My question was why there were only 33 cabins available on a property that had nearly 350 acres.  I met the developer one afternoon and got to talking.  The problem was simple.  He did not have access to construction financing since the markets collapsed.

As I questioned him about the structure of the resort, he mentioned that each lot had a payoff of $75,000 to the bank.  I began to look at the idea of bringing real estate investors to the table to build out this resort, but I was mostly interested in land + construction, and my initial goal was to achieve a 20% discount all-in from a current market value standpoint.  Once all was said and done, our immediate equity position was a surprising 44% based on our price of $149,000 and a recent appraised value by a local lender of $225,000.

Fast forward to May of this year.  The developer worked with the bank with the note on the land and we were able to restructure the debt down to a payoff of $35,000.  We also designed a cost/energy efficient cabin that would give the resort a new look.  Our new cabins would be spherical in shape and offer unobstructed views of the Smoky Mountains.  All cabins would come turn-key with furnishings as a typical hotel unit would come.  To see entire executive summary and offering memorandum, CLICK HERE.  Each investor will have full rights to use their own cabin at any time.

Some caveats we have worked into the deal:

  • Offered turnkey for $149,000.  Current appraisal as of July 17, 2010 of $225,000.  Will provide upon request.
  • Includes Developer Guarantee in contract of $24,000 in NET Income per year for the first 3 years which equates to a 15.10% Capitalization Rate.
  • 100% Passive.  Managed by on-site management company.
  • Sales are not publicly marketed until 2011.  Price increases by phases at 12-15% per phase.  Each phase consisting of 10 cabins.

Some amenities currently on site:

  • Athletic Field (currently set-up for soccer)
  • Full sized pool with cabanas, sun deck, volleyball
  • WAHOO ZIPLINE :  Biggest attraction.  Attracts 100,000 visitors annually.  Largest zipline tour in the country.
  • 4,000 Square Foot entertaining clubhouse overlooking the Smokies.
  • Snack Bar
  • This resort is 8 miles to Gaitlinburg and 6 miles to Pigeon Forge.  Pigeon Forge is the home to Dollywood, one of the largest theme parks in the country.

Amenities to be completed after first 10 private sales:

  • 6,000 square foot spa complete with full spa services, fitness center, etc.

If you have an appetite for a tremendous out of state opportunity contact us for more details.

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