Cortland Med Center Webinar

You know, it may not allow me to share the screen, but perhaps it's better this way. It's fate. Perhaps I can confirm with you, if you'd like, via text message of the suit and tie combination that I. If that means anything, I believe you.

Can you really see me?

I can see you. The beard looks impeccable. Perhaps Zoom didn't want to show off my baby face and wanted to really display your incredible beard. So I think that's why it is how it is.

It's all right if this is the worst that comes from this webinar, but, well, I think we're letting people in, so. Good evening, everybody. 6:30, we want to start on the dot, but we'll. We'll kick this thing off here just a few minutes so everyone has a chance to get logged in before we get too far along. While we wait, though, a little housekeeping. Craig and I encourage you to submit your questions throughout the webinar, and we'll do our best to address them at the end of the presentation. And if. If we haven't addressed any of them after our hour together, we'll make sure to reach out to you directly to answer your question, but looks like we have people still rolling in, which is great to see.

I will also make a. Just a quick claim just here on Lone Stars end with how actually excited we are to be working with you and Steve, of course, on our first deal together.

Thank you, sir.

Yeah, we've been sending you deal flow for seemingly years now, and we've been courting you, you gentlemen, and you've been tracking us for a very long period of time. And we were close, I think, on a couple of opportunities before it didn't work out, but we finally landed on this one together. And I think this is an impeccable deal for many reasons, which, of course, we'll break down on this webinar here today, of course. But we just can't extend how grateful and excited we are and humbled we are nonetheless, too, to be working with people at the caliber of you. And Steve, of course, getting a yes from you guys just speaks to the quality of deal this is. So we're very grateful to start a relationship here together and with your investors. And, you know, we take outside capital very seriously. We treat it like it's our dollars as we are putting, of course, our money in here, but our reputation and our partnerships and relationships are everything. So we couldn't be more thrilled to be starting that all here together for this specific deal.

Appreciate that, Craig. Appreciate that. Yeah. And that beautiful voice you hear There is Craig McGrother from Lone Star Capital. He oversees business development at Lone Star and he'll be co hosting, so to Speak with me tonight. As you can see, though, Steve is not with us, he is in Colorado prepping for his daughter's wedding. So send your prayers, send your thoughts to him. I'm sure he'll tag, he'll jump in and watch from a distance for a couple minutes, but he's, he's out celebrating with his family. But as Craig said, we've partnered with Lone Star on this deal because they are the best in class in Texas and have an incredible amount of experience with this type of investment that we're going to be presenting to you tonight. And since many of you don't know Lone Star as well as you know Skyline Point, we'll spend some time giving you an overview of their team, their capabilities and their experience. And for those who don't know me yet, my name is Jake Preer and I oversee the client engagement and operations at Skyline Point County Capital. And with that, I say just get in. We've got some people still strolling in, but let's be punctual. Let's get into it. All right, let's start off with the slide that all of our lawyers say we have to, to show you. I'm not going to stay on this too long because we'll send you the webinar after. So if you actually want to read it, you can watch it after. And I will get right to it. Craig, take it away.

Yeah. So we're very thrilled to work on our first deal together, as I alluded to, to start here. But a bit about Lone Star Capital. We are in business since 2018. We have over half a billion dollars of assets under management. We've had two deals that we've gone full cycle on, which we'll go through those briefly in this presentation. And if anyone would like to do a deeper dive into us, I don't know if I have access and permission, but, Jake, if you'd like to throw in the chat there, just about our track record, everyone can kind of audit us at www.lscr or sorry, ww w lse dd.com just lse dd.com to do due diligence on us for everyone there to, to audit, check our testimonials and whatnot. If you've gone through the brutal gatekeeping process, though, of getting to and getting past Jake and Steve to get a yes, obviously, you know, we have been vetted of course, but feel free to do your due diligence. But as I mentioned, half a billion dollars of assets under management. We're vertically integrated with construction management and property management in house. We're looking for deals only in Texas, as Jake said, and we're only in Houston, Dallas and San Antonio. Our flagship market is in fact in Houston, which this deal sits in, which should make everyone excited. And we definitely have a couple niches, but the main niche we have is the affordable structuring as we'll get into. This deal really is an example of that. This deal is a bread and butter of Lone Star way. Then you those levels of sophistication here that we've worked through twofold, which we will break down on this deal.

Love it. All right, do you want to cover your team or do you want to move?

Sure. Yeah. No, I think this is just kind of important to contextualize. So you can see we have some younger team members. I am 30 years old. Yes, I do have a baby face still. But there are some more senior people here on the team with a little bit more experience than myself here. Although I'm closing in on a decade in the real estate business. You've got Ken Prakowski, who is a co founder alongside Rod Beardsley. A bit about Kent and as to the sophistication here, Kent was a tax attorney prior to joining and forming Lonesar Capital. He worked for MetLife. He's also worked for, you know, one of the big four consulting companies. On top of that, he also worked for the irs. At one point he went to NYU Law. He is probably technically a genius from an IQ perspective. So he allows us to kind of have these interesting angles and investment opportunities that the typical sponsor would not be able to get. You've got Rob Beardsley there, who is kind of a real estate savant from two people who are from the real estate background and industry. So he found this company when he was about the ripe age of 21. And then you've got Rob's mom there, Ina Beardsley, who we're so grateful to have her on as a CEO. She comes from the background of managing multifamily operations and properties just like this as well, with about 20 years of real estate experience to really bolster up the team and to add a little bit more experience and, you know, really is great for operations and being very efficient. And then here are some more members of the team, Brad and Dasha. I'll just highlight them briefly. Brad is our director of acquisitions. He does the underwriting he does, you know, all broker outreach and structuring of the underwriting now as Rob oversees that as well. And then Dasha is absolutely amazing. That is Rob's sister and Ina's daughter of course. She's our director of acquisitions and she'll be helping Jake and Steve and my and every investor along the way through the process. With a lot of the ongoing operations and questions, just some more team members, we can kind of skim past that.

Yeah. And then as for the SBC team, most of you know our managing partner Steve Navity, but most of you won't know our latest team member, Ruchik Shahan. Ruchik heads up our acquisition team and brings a wealth of real estate and finance knowledge to our group.

So as I mentioned, we've gone full cycle on two deals and of course you're also going to notice Houston here. So this is one of our case studies that we sold, acquired in 2019 and sold in I believe it was 2021. This is a 160 unit property, verandas at Bear Creek that we acquired. It was a bigger lift than the property we're going to talk about today. But as you can see we had a very healthy return of a gross IRR 35.9% if you want to go to the next slide as that would be Cranbrook Forest which we also had a very healthy exit on as well. Of course not a 30 but a 20 IRR as well. That deal was a massive, massive lift from a re tenanting process. So we've worked with all sorts of ranges of pennants, we've worked with class A properties and stuff like this would be C and everything in between, which makes us very qualified to take on the project that we're going to be talking about today.

Yeah. And we've got a handful of testimonials here. We won't go through all of them. Save some time but feel free to read through them when we send them over. Did you want to go through this? The capital?

Yeah, just real briefly so you'll see the bulk and the, the really the lion's share of our portfolio, as I alluded to before, is in Houston, even within Houston as well. We've got now this will be our 11th property in the tax exemption structuring. So basically when you see Houston extra proper, more than a coin flips chance that it's in a similar structure as the one that we're going to be talking about here today, which should just go to the fact that this is our kind of Expertise and our niche here. Of course, we're like everyone else, we like to buy normal value add deals, core plus deals. But if we can kind of have a hybrid, best of both worlds where we can get a value add like return on a core plus like business plan that is always in our opinion very optimal and the most optimal way to invest.

All right, let's jump right into the investment overview. Craig, I'll let you take this one as well.

Yeah. So we are really excited to be talking about today Cortland Med center, which is a 344 unit property in the medical center of the Houston market. We are acquiring this deal for 145 a door which for those who don't know pricing and whatnot, that is a very attractive going in number 145 a unit with $7 million being put in from the past seller. Cortland is a first in class operator. So we are getting this deal for a very good price there, which of course location and purchase price, the two components you can never change to a deal. But everything else can be varying. You'll see that is not a typo for a $50 million deal. We have a very modest $500,000 capex budget which we'll get into how the value add is being done very briefly here. Projecting very healthy returns that actually are probably going up here soon due to the fact that is only looking better. We'll get into that in a bit. The total capitalization going to be roughly about $56 million there with an average cash on cash return about 6.6% along the way in the hold period. But we're really excited about this deal and there's kind of a story within the story here. So we begin tracking this deal in September of 2023. We had made four different offers at various times, but us and the seller were really not able to kind of come to terms here, unfortunately. And we kind of been hanging around the hoop, as we kind of like to call it. It's one of our. But we were hanging around the hoop just trying to buy this deal because we saw the value of it. But unfortunately the seller's expectations, with market pricing and interest rates being where they were, made it really just not a possibility for us, unfortunately. So we kind of disregarded it. We came back to it, you know. But we did become in the running again because this deal was actually awarded to another buyer at the time who didn't have any presence in Houston, but they really were excited to buy a deal. Well, that buyer actually was in contract for about $53 million. So as I said, purchase price is so crucial along way. And of course you can see here we're buying this deal for $50 million. So that initial cap rate there at the 53 million dollar evaluation was about 5.25. And now of course we're at 50 million which is about a 5.75 cap rate pre tax exemption. Well, I say this all because, you know, why did that buyer not follow through? It's not because the property isn't great, the location isn't great, because this property actually has something that's known as a baby restructure, which is additional complexity that this deal has that unfortunately most people can't work through. But Kent Pichikovsky, background with law, was able to navigate that process, find the right attorneys to work with it, and of course put his time in it as well to unwind that and dissolve that at closing, which is very key and crucial for us in this deal here. So we were working very hard here to, to get the deal done and then you know, of course we weren't awarded it. They were awarded it and they came back to us and we've actually closed a deal from this seller in the exact same structure. So.