2016 05-03 EAC Community Weekly Newsletter
EXECUTIVE PARTNERS
Kevin Yoo, CEO
I have been telling EAC Community that we will be bringing deals to you from Chicago where you could invest in equity positions. This is what we have so far.
• EAC will fund the purchase and rehab and set up the refinance.
• Because we will be using Hard Money Lender to borrow most of the money required for the project, we will be raising only around $30K for each property from our Investor Partners.
• Almost half of this amount will be returned to the IP once the project is finished because the HML will pay us the funds they held back.
• Once the property is rented, we will then obtain long-term financing and cash out the IP.
o In properties that will not appraise enough to cash out the IP, the Ground Partner will give their cashflow to the IP until all of the invested money is paid out.
• In effect, within a few months or at the longest within a few years, the principal invested will be paid back in full.
• However, for the $30K that an IP places into each project, there will be NO monthly payments until and unless the property is rented as this is not a debt investment.
• Instead, the IP will earn 15% of the cashflow paid out as long as the property is owned and rented and 15% of the equity in each property paid out at the time of each refinance or sale.
• It is difficult to project the ROI and IRR if the IP is completely cashed out in 3 to 4 months. In that case, your returns are infinite.
• If you have cash remaining in the deal, the ROI and IRR will start very low in single digits but increase monthly till it becomes infinite as your cash invested in the deal decreases with time to zero.
• Ultimately, an IP will be a partial owner of the property and its income with no money into the deal.
John Hostetler, COO
Finally we closed on the loan with B2R. I don’t want to go on and on about the experience yet again, so suffice it to say that the loan is done and we are done with B2R! All payoffs for the loans have been either been sent already or will go out today. It is great to have this behind us and we’re now on to refinancing the remaining Jacksonville and South Bend properties, as well as one in Florida.
Today I would like to join with our Managing Partner, Antonio Cerqueira, to present a three property trial run with ABC Capital, a very well established turn-key provider in Philadelphia. Kevin, Vil, and I have all visited ABC Capital over the past 3 months and were all quite impressed with their operation. At any given time they may have 80-100 projects under construction, and each of those is slated to finish within 120 days, per their business model. They have a large list of both foreign and domestic investors who gobble up their rental properties for long-term cash flow.
Our intention is to partner with ABC in acquiring a large portfolio of similar rental properties in certain appropriate B- & C-class neighborhoods, essentially cherry picked by Jay Walsh, ABC’s co-founder. We will own these properties jointly, with EAC providing the front- and back-end financing and ABC finding, rehabbing, renting and managing the properties.
The Philadelphia market is an exceptionally strong rental market, with vacancy rates under 5%. ABC Capital currently has a vacancy rate far lower than this, hovering around 1%. One thing that is unique about this opportunity for us is that our MP Antonio is actually on-site part time with ABC Capital. Antonio is yet another brilliant person with whom I have the pleasure of working at EAC.
With a Harvard PhD in microbiology in hand, Antonio left the scientific world fairly recently because, like all of us at EAC, he has a passion for real estate. Antonio is a current client of ABC Capital, having purchased a successful turn-key property from them last year. In talks with Jay Walsh about their incredible growth, Antonio offered to help them with their systems. In a matter of months Antonio has set up a sophisticated enterprise system using Podio which helps ABC track all of their purchases, construction, investors, and property management. We all saw this in action first hand and it is quite impressive. But more than this, it also gives us a level of “boots on the ground” information in Philadelphia like we have nowhere else. Antonio is an equity partner of everything we will do in Philadelphia, so it is very comforting knowing that he has first-hand knowledge of each project in which we’ll be involved.
To get things off the ground with ABC Capital, we agreed to perform a three-property test to see how each side performs. We will summarize these deals in our call today.
Olga Levin-Diaz, CFO
No updates.
MANAGING PARTNERS
Vil Nikollaj, Managing Partner
George Flint
– Toured properties on Fri 4/22. Great progress on both properties.
– Link to Pescas listing bit.ly/1SVIIz6
– List $3,800,000 – $4,100,000 or Pre-Sale $3,300,000 and buyer completes using current GC or their own. Goal would be to get 30-50% down, pay off the equity investor and carry the balance OR they get a construction loan.
John Allen
– 4336 53rd St: Due Diligence period ends 5/5 (this Thur)
– John meeting with Centurion this week
Giovanni Gracias
– 4748 College: Passed final inspection. Inspection contingency 5/3, COE 5/24. Awaiting path forward to reassign $80k junior liens prior to COE.
– 2672 Escala: Awaiting clarification on loan from Precidio Mortgage & Bridge Loan to repay Talimar & EAC. If sold on MLS, need to reassign ~$50k junior liens.
– 4184 33rd St Unit 3: $52k HML reconveyed. EAC 3rd lien position after two major bank loans. Property has projected $20k profit. Pics of rehab 22apr (http://bit.ly/21rYDIZ). 1 week rehab remaining if remaining materials arrive.
Chad Urbshott, Managing Partner
Please refer on Nathan’s update.
Tony Banawa, Managing Partner
Awaiting updates.
Willem Young, Managing Partner
We are a few weeks away from finishing Braemar… It will close in June; I just confirmed the sales price to an investor at $160k. We projected a $150k sales price so this one is going to perform better than anticipated if everything works out with the buyer. I have a backup offer at $160k as well with a local Dr. (Eli).
Loomis will close in August maybe September (much larger project); if we want to sell Old Elm i can sell for $152,500 in 3 months from close date and contract in June
GROUND PARTNERS
Lou Ellis, Ground Partner from Jacksonville, North Carolina
Wyoming – It already passed the mechanical inspection and drywalls going up right now and were only about 10 weeks into the project, maybe 3 months, really on schedule to finish at sort of the short end of our range and I talked to Mary Krumenacher, the agent who will sell this house, she was pretty pleased, she used to rehab taking 8-12 months on a project at this scope, Lou is definitely exceeding her expectation from that standpoint and I think that’s the case for most of the properties he has going right now.
2 Townhomes – they are full funded now, they are really going to be an interesting deal. They are in parkwest which is a great up and coming area
Rentals are moving along very well
Winnebago – we have good progress
Broadway – has mechanicals going on right now
Oregon triplex – should be finished in about 2 weeks
Shenandoah – is probably 30 days out to completion and likely be sold well
Steve Shaffer, Ground Partner in South Bend, Indiana
226-228 Cleveland:
Construction phase, moving ahead very well. Second floor drywall, HVAC complete.
126 E Broadway:
Scheduled for completion mid May. Pre-rented with move in upon completion
Giovanni Gracias, Ground Partner from San Diego, California
4748 College Ave:
We are in the 2nd week of escrow. The buyer conducted a home inspection and we are in the process of making some repairs at the property this week. In escrow at $552K.
2672 Escala Circle:
I have decided to refinance this property and converting it to a rental. I am working with a hard money lender that will refinance me out at 8% interest. By refinancing I will cash out of my existing hard money loan. I have a 2nd position lender that will take over EAC’s position in the deal and cash out our loan. The process will take approximately 2 weeks to complete. More details to come.
4184 33rd St:
Property is in the middle of rehab. Currently at 50% of completion.
George Flint, Ground Partner in San Diego, California
1222 Muirlands:
Passed plumbing inspection. ROW work completed. Concrete work will be finished this week and framing restarted.
Pescas:
Framing will be done this week, ran into a curve ball with the stairs. Over the next 4 to 6 weeks we are going to place effort to “pre-sale” the house, thus we will have the house on the MLS during this time period and show property on apt basis.
John Allen, Ground Partner from San Diego, California
4336 53rd Street:
– Buyer moving along with contingency period just fine
– He is reviewing architectural plans before we submit to plan check
– We will have a meeting this week to discuss the project and expectations on his end
– Contingency period expires May 5
Samuel Lord, Partner from St. Louis, Missouri
3441 Shenandoah:
Property turned over to Lou Ellis on February 27, 2016. Neighbor has called Lemonstree wanting to know what is going on and when the debris will be cleaned up in the back yard?
4759/61 Alaska:
All keys, leases and ledgers turned over to Unistream LLC on April 30, 2016
4552/54 Virginia:
All keys, leases and ledgers turned over to Unistream LLC on April 30, 2016
3501 Iowa:
All keys, leases and ledgers turned over to Unistream LLC on April 30, 2016
3116 Michigan:
Keys turned over to Unistream on April 30, 2016 as unit is rent ready.
3438/40 Ohio:
All keys, leases and ledgers turned over to Unistream LLC on April 30, 2016
Other updates:
On all rentals Lemonstree gave Unistream all information pertaining to the units,
1) Tenants names, phone numbers and any issues that we saw that needed corrected in the future.
Nathan Turner, Ground Partner from Ontario
4233 Comanche:
New purchases for 325 Cedar Cir in Adamsville AL and 3539 Judy St in Columbia SC closed last week on Thursday Apr 28. Collateral and servicing transfer will now commence and I expect both to be done before the end of May.
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