2016 06-07 EAC Community Weekly Newsletter

EXECUTIVE PARTNERS

Kevin Yoo, CEO

EAC Prospectus: This is a document created to explain what EAC Community is about and how we operate. It is imperative that we all read it so that we are on the same page literally and figuratively. We will have each Investor Partner, Ground Partner, and Managing Partner sign at the end of the document to signify that they have read and understand the Prospectus. It is a document that will change from time to time as EAC evolves. We will inform each member of the Community every time a substantial change is made. We will then need new signatures when a significant change has been made to ensure that every member of the EAC Community is informed. Please let us know if the document needs further clarification and needs more information.

EAC Legal Fund: Projects going bad is something EAC will always try to minimize. We cannot, however, eliminate this. The strength, integrity, and effectiveness of EAC will be shown by how we deal with these occurrences. When these things occur, EAC will pursue all measures including legal ones to take care of the issue. We are doing that with a few of our current projects. In order to deter such bad behavior and to effectively deal with such matters, EAC will start the EAC Legal Fund. Currently EAC is taking on all the cost of pursuing any legal remedies for projects with problems. We will be charging each EAC IP 1% of all their earnings on each project they do with us. These funds will be utilized to use legal aid whenever we need to effectively handle problematic partners and projects. We will advertise the existence of this fund to alert all who partner with us that we will pursue them if they fail to abide by their agreements to the EAC Community.

John Hostetler, COO

Both Kevin and I have spoken to several new potential investors over the past two months. All of these investors came to us as referrals from our current investor community … something that we appreciate very much! We feel very lucky that we have such a supportive IP base, and we certainly hope to continue earning your trust with our performance.

This being said, it is a constant challenge to find an adequate number of new and attractive investment opportunities for both our current and these prospective IPs. We are working hard to remedy this, especially with our nearing Chicago and Philadelphia partnerships, our ongoing and growing St. Louis operation, as well as some potential opportunities with Jay Hinrichs in Portland, OR. Within a short time we believe that we will have much more frequent and regular offerings to present.

As such, I would like to explain the order in which these investments will be presented to our community going forward. Although this is the current plan, as always we will consider adjustments based on feedback from our community.
1) Preferred Investor Partners (PIPs): We will send each investment proposal first out to our PIPs and we will request a response within 24 hours in order to fund a portion or all of the investment.

2) Beginning Investment Partners: If we believe the offering is appropriate for a first-time investor, we will then send to these potential investors, but limited to an amount which we feel is appropriate for new investors (typically $10k – $25k.) These are relatively rare and should not significantly impact the opportunities available for our current IPs, especially given our planned volume increase.

3) Investment Partners (IPs): If the offering is not fully funded, we will send out to the entire investment community, with priority given on a first-come, first-serve basis.

4) On many of our recent offerings we have had to turn away investors who reply after the investment is fully funded. If and when this happens, we will give priority to those IPs for the following investment(s) until they are able to find a suitable investment.

Please let me know if you have any questions suggestions. As all of you know, we see ourselves as a community and always welcome your feedback.

MANAGING PARTNERS

Vil Nikollaj, Managing Partner

BNF – George Flint (Muirlands & Pescas)
– Both projects moving along
– Both projects actual costs inline with pro forma

Southern California Youth Alliance – John Allen (53rd St)
– Property fell out of escrow and has been relisted at $700k

PPS – Giovanni Gracias
4748 College
– Currently negotiating with new buyer
– 12 mo deadline: June 24

2672 Escala
– Working out refinancing through another lender. No updates.
– 12 mo deadline: July 6

4184 33rd St Unit 3
– Property should be near completion and will be listed. Awaiting confirmation.

Chad Urbshott, Managing Partner

Refer on Nathan’s update.

Tony Banawa, Managing Partner

Awaiting updates.

Antonio Cerqueira, Managing Partner

Update from the Philadelphia deals:

2520 and 2502 Ingersoll St. Rehab started, demo finished last Friday and now waiting for permits
2167 66th ave. Just one unit will be renovated. ABC is doing this with their turnover team so it should go fast

I noticed all the ABC partners very excited and motivated about working with us.

GROUND PARTNERS

Lou Ellis, Ground Partner from Jacksonville, North Carolina

Awaiting updates.

Steve Shaffer, Ground Partner from South Bend, Indiana

226-228 Cleveland:
Awaiting cabinets for 4 units. Second floor complete minus cabinetry, final plumbing.

1st floor drywall complete, painting complete, final electric end of week, flooring mid week next
week.

Final plumbing both floors end of next week (pending flooring on time)

Awaiting site plan on parking lot

Gutters installed on building

126 E Broadway:
Rented

Giovanni Gracias, Ground Partner from San Diego, California

Awaiting updates.

George Flint, Ground Partner from San Diego, California

1222 Muirlands:
Moving along nicely. Framing is full throttle, ruff trades right behind. Specs are finalized.

Pescas:
Dry wall is being hung. Finish trades are lining up to start work soon.

John Allen, Ground Partner from San Diego, California

4336 53rd Street:
I wanted to send out an update on the progress of the transaction of 53rd Street. I regret to inform you all that Blue Centurion Homes has backed out of the transaction. We have yet to draw up cancellation instructions but will be doing so shortly. I needed their due diligence materials before drawing up the cancellation. A few thoughts regarding this transaction:

Blue Centurion Homes is very inexperienced in apartment construction, and hired all the wrong contractors to provide bids, so the numbers they got came in sky-high. The one bid I received from them was from a high-rise, upscale multi-family housing developer, and the bid wasn’t even project-specific. It clearly stated on the bid that it was based on historical data from previous projects of similar size and scope. It’s disappointing that a buyer has backed out, but we don’t want an inexperienced developer taking this on, because we want to make sure it is a successful project. This may be a blessing in disguise.

I got a referral of a good contractor and have reached out to get a separate bid. I have yet to receive a formal number, but we received a verbal of approximately $90/foot when I delivered the plans and we discussed the project. This number is right around the number we projected, so I am confident in our numbers.

Where to go from here?

I have been investigating multiple options for exiting:

1) Re-listing it, and brokering it for a sale with bids from contractors. We can and will sell this project.

2) Pulling out a construction loan and building it out ourselves. This is an option, and will gives us a much higher return but will require holding on to the investment that much longer (9 months or more). I know this isn’t a desirable option as the investors want to cash out earlier, but this is an option that must be considered.

3) I have had preliminary discussions with investors who may be interested in cashing you out and proceeding with my company as the GC and building it out ourselves. Some options include: cashing out the entire $650k; cashing out our equity portion of the property (approximately $500k) and capitalizing the $150k in profits into an equity share in the project with a preferred return waterfall scenario.

I would love to get your input on these options, and when I am able to narrow them down I’ll be able to provide more specifics. Let me know if you have any questions.

Nathan Turner, Ground Partner from Ontario

325 Cedar:
Now that I have the collateral for Cedar I will investigate what is needed to evict the occupant since the contract has been cancelled.

3539 Judy:

Collateral docs arrived and were added to Dropbox yesterday. I also have a follow up in to the servicer to make sure the notice of default letter was sent to the borrower for Judy St.