2016 01-12 EAC Community Weekly Newsletter

EXECUTIVE PARTNERS

Kevin Yoo, CEO

No updates.

John Hostetler, COO

With the turn of a new year here EAC has big plans for 2016 and beyond! There is still a bit of housekeeping we are working through with two properties in South Bend and Florida, but aside from those two our projects have gone exceedingly well.

Jacksonville – Our final three appraisals are scheduled for this week for the B2R loan and we should close prior to the end of the month. We have already begun the process for the remaining homes in Jacksonville, (as well as the South Bend properties.) Lou Ellis estimates that he will have all of our current projects finished byMarch 1st, including the remaining duplexes.

South Bend – As mentioned, we will be moving forward on the South Bend properties in conjunction with the final Jacksonville properties. Depending on the lender we end up with, we may include all of them combined into one loan or separate based on the market.

St. Louis – Progress on our triplex on Oregon Ave has been slower than hoped, but it is moving forward. Lou arrives Saturday to check on progress and make final plans for settling in town. Lou will also use his time to break ground on both the 8100 S Broadway and 2835 Winnebago 4-plexes, starting with brand new roofs on each.

As for future financing, we are in talks with several lenders who have entered the blanket loan space and are now offering 30-year fixed products for portfolios. Although rates on these loans are a bit higher than the 10-year balloon loans offered by B2R, the 30-year fixed has advantages aside from the obvious long-term fixed rate. The most crucial of these for us is the ability to sell individual properties within the loan without incurring penalties, enabling us to remain flexible if either an opportunity or a problem with a property arises. Each of the lenders also have their nuances in terms of fees, documentation requirements, impounds, and ability to close timely, all of which we are weighing prior to making a decision.

Long overdue, I have hired a bookkeeper / accountant who will start late this week to take over handling the books for our growing company. Silvia Covarrubias will be helping us 2-3 days per week, and she has a broad background in various roles over the past 12 years with local companies. Impressively, Silvia is currently completing her Master’s degree in Accounting AND sitting for the CPA exams, having passed the first of four sections. I expect her to be an enormous help by wrenching the accounting duties away from my “cold, dead hands.” (With my accounting background, I have been reluctant to hire out something I can do myself.)

Olga Levin-Diaz, CFO

No Updates.

MANAGING PARTNERS

Vil Nikollaj, Managing Partner

2420 Upas:
Creating summary for Bigger Pockets on Upas and Magnolia.

3152/3154 Oregon:
John and Lou will summarize.

Other updates:
Catching up on performance tracking tools, processes and Podio.

Chad Urbshott, Managing Partner

Awaiting updates.

GROUND PARTNERS

Lou Ellis, Ground Partner from Jacksonville, North Carolina

Awaiting updates.

Steven Shaffer, Ground Partner from Southbend, Indiana

226-228 Cleveland:
Project moving forward with no difficulties. Weather has not played a factor in slowing down as of yet.

201 Cleveland:
Duplex is on the market, with punch list being completed.

2016 Berkley:
Unit moving forward with tenant move in scheduled for February 1, 2017.

126 E Broadway:
Unit moving forward and schedules set.

Andrew Davis, Ground Partner from Orlando, Florida

Awaiting updates.

Giovanni Gracias, Ground Partner from San Diego, California

4748 College Ave:
The final changes requested by the inspector were submitted for approval to do the city. We were not able to get it approved over the counter but should get it finalized this week. This is the last hold up before we move to finishing and putting it on the market.

2672 Escala Circle:
We received 2 offers over the weekend. First offer is at $529k and the other $535k. Both are in process of getting pre-qualified with our preferred lender. If both pass then we will send them a multiple counter offer.

12081 Calle de Medio:
We are still in escrow. Buyer has requested additional work the the HVAC system and I have Bill Howe coming to service tonight. Once we clear the service we should be pushing to close.

George Flint, Ground Partner from San Diego, California

Awaiting updates.

John Allen, Ground Partner from San Diego, California

4336 53rd Street:
– We are awaiting response from the City regarding our second submittal of grading plan check
– Our structural engineer is completing the soldier piles and tie backs, so once that has been complete, we will submit to building plan check
– Most importantly, I met with a potential buyer yesterday at the property, and he expressed interest in submitting an offer. I didn’t push him for an offer but he seemed very interested. I will follow up with him this week
– Another potential buyer expressed serious interest to Matt Weaver on Friday, and asked a number of questions regarding the affordability of units and changing the unit layout slightly, but said the numbers work for them. I expect an offer from them, I just don’t know what price to expect.

Other updates:
– I have another investment opportunity for those interested in continuing with some multi-family housing development projects. It is a property in La Mesa that can sustain 24 units. It is in a semi-blighted area, across from a trailer park, but in an otherwise decent and high-demand area. We have designed a project and brought it to the City to discuss with them, and they are behind the project completely. I have already submitted an LOI and we have come to terms, I just need to submit my formal offer, which I will draft this week. I am seeking investment capital in the $1.5-2 million range. I have sent a project package to John, Kevin and Olga detailing the project, and can provide more information to interested investors.

Samuel Lord, Ground Partner from St. Louis, Missouri

3441 Shenandoah:
Drywall commenced last week as did wall repair. Furnace and AC Coil installed and electrician connected systems. HVAC will be back to get building heated.

Flooring ordered. Door and base trim to begin install and initial painting beginning after drywall complete. Getting measurements on some items that do need replace and/or repair for install.

4759/61 Alaska:
Finished empty unit paint and clean up. Installed some new lighting fixtures. Showing to potential tenants.
During rain storms noticed we did have some gutter issues on front and on back of building. Having local contractor looking at this and other property that do need gutters. Down spouts are not large enough to carry amount of rain water from the gutter system.

4552/54 Virginia:
Tenant moved in late December without notice in 4552B.
Will make some minor changes in bathroom (replace 90 year old sink in bath). Will paint out completely (trim is garish brown), make minor repairs to some windows and doors where pet damage occurred, replace carpets and install a few cabinets in kitchen.

This building has had gutter issues (parts missing) and having contractor bid this and Alaska to install new gutter and down spouts.

3501 Iowa:
Rented 2nd floor 1 bed apartment. Found some electrical issues that are being addressed.
Failed section 9 inspection as there was some water coming into first floor. Believe we have found the problem but also uncovered an attached walk-in freezer covered on back of building. Water is getting through to the basement here so we are taking bids to remove deck/freezer and replacing.

This is not an option on the replacement. Water is coming in around the item and the structure is rotted and the deck above and steps are supported. Must also install basement door at bottom steps. We do not know what is in the freezer or what we will find upon removing it. This will have to be done within the next week as City and inspectors have never seen something like this and allotted us more time to make proper repairs.

3116 Michigan:
Tenants have requested a lot of updates and repairs. Some have been valid and others they just want (new door on kitchen). We are working with them on some of the repairs as they were our responsibility and poor workmanship by contractor.

Mold seems to be an issue in the home. The tenants have a lot of antiques and purchase a lot and store in basement. When we took home to renovate last year we did not find mold in the home. We have since tried various remedies to alleviate to include a 24 hour running of a ozone generator which kills all mold. We believe the tenants may have brought in spores in bags/boxes/antiques that had been stored in another basement previously in which they complained of the same issues.

During the rain storms, there was limited leaking of roof and in basement. Roof issues are being addressed this week and are very minor considering the amounts of rain we had. Basement issues are only where stone is present (also this is where mold seems to grow so do not think it may be mold). We are asking for bids to seal any remaining stone with mortar as we had to do at the Iowa building.

3438/40 Ohio:
During storms part of drop ceiling fell in front 2nd floor. The building has shifted as the roof has shown signs as well as the front of the building inside (there is now a small gap on front). We are having contractors in this morning to frame a ceiling out and will cover with drywall. In-lieu of tape and mud, we will trim out the joints and paint. If building continues to shift this will alleviate need to make repairs.

Will work with contractor and advise cost to do each room as the center room is showing same signs. The damage occurred on the pier side of the home where a vast majority of the brick work had been done.

Other updates:
Going into a first winter on many of these homes with the amounts of rain we have had has been a challenge but other than Iowa, we find the issues considerably normal.

We have found a source for cheaper entry doors which we will plan on using in the near future. All entry doors on the back of the Virginia property have been cut to fit crooked jambs or are rotting (basement). As the home has shifted they are leaving large gaps around the doors and making some impossible to open. Traditional weather stripping cannot fill those gaps. Goal is to install new jambs/door and level properly and ensuring the trim molds are put on properly and sealed.

All of the doors on Alaska and Virginia are original entry doors (90 years old) and have been refabricated many times to try to keep viable but they are beyond their expectancy for security and use. Will work with EAC on a plan to change out so the burden is not taken in a lump sum.

Nathan Turner, Ground Partner from Ontario

4233 Comanche:
Happy New Year everyone!

I contacted the realtor today and she confirmed for me that the borrower will be moving out by Jan 15 after I had agreed to pay $500 cash for keys. I asked if we needed to wait until the 15th to list and the answer was yes so we’ll need to hang on a bit longer until we can list the property. Sue (the realtor) will give me her best estimate on listing price as soon as she is able to get in the house and do a visual.