Webinar on "Investing in Workforce Housing"

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Let me just start my recording here again. Welcome everyone. I'm your host Madhavi Nadechen. Welcome to Think Outside the Stocks bi weekly webinar series for passive investor education when it comes to real estate. Today we're going to talk about investing in workforce housing. A sample deal review with our GST Capital Partnership team here. Bhavin, mj, Michael and Sagar are here with us today. Before we go ahead, a little bit disclaimer on us from our side. This is provided for information and educational purpose only. If you are prospecting investors please you know do your own due diligence and own independent kind of analysis of these investments. We are not offering anything here. We kind of keep it clean and free of upsell. So education purpose only please. You're encouraged to visit with your teams if you have financial experts, CPAs, lawyers to consult with them if there is any offering or any investments that you are interested in. And also please keep it in mind that special especially because today is a sample review. The numbers are pointing time only and specific to that particular deal. So if there are any other investment future investments the number might drastically look different. So please keep that also in mind. A little bit about me. I'm as I said president of Think Outside this Talks and also wealth strategist. In my past life I worked with 17 years in IT industry mostly in project management and most of that time was spent with top five consulting companies. I live here in Austin, Texas. Pretty warm market from real estate perspective with my husband and two kids. My daughter is a senior this year so she actually will be moving out for colleges soon. And in my real estate journey I quit my corporate career in 2015 and my real estate journey really started there. And more and more information I founded about real estate and syndication as as well as the Infinity Banking system. It kind of became my passion to bring this education more to light for my investors for passive investor point of view and that's where the think outside the stocks I educate and if you want to invest I also bring in vetted investors investments as well to the investors as well as I help building the Infinity Banking system. We are not going to talk about that today but if you need more information about it or if you have heard about it, I provide education on that front too so please reach out to me after the webinar. So let's jump into the introduction for our team. Bhavin here is a principal and co founder of GSC Capital and he has over 15 years of real estate experience. Very interesting and very Diverse experience. I was speaking to Bhavin for the first time and I realized my God, not just the real estate but the business perspective that he brings to the table. It's really out of the box perspective and constantly looking for different ideas. His current portfolio, personal portfolio includes more than 300 units in Cleveland area, I mean the Ohio area mostly. And he's really passionate about creating this modern approach like a functional living spaces in Ohio in terms of multifamily and workforce housing. So he's also executive committee member and bunch of other things in Ohio apartment associations like that and also the chamber of board in the greater Akon area. So it's really that expertise that he brings to the table. Then we have here Michael, which is, I mean call him mj. I'm an MJ too. But Michael, he brings in that corporate experience to the team. So he has general management consulting, business development and international roles with Exxon Mobil and IBM, et cetera companies. So he brings that to the table. He's really a collaborative manager who drew the bottom line objectives. He's truly passionate about real estate and development especially so in his specialties it includes the real estate, multifamily housing workforce, housing mergers and acquisitions and bunch of other stuff. He is a PMP as well. So that project management perspective brings in to the table too. And Sagar here is. Sagar is financial expert as well. He wanted to stay in a little bit background. But again before we jump in a little bit about think outside the stocks and our approach, what I really like to bring into perspective for my passive investors is typically we are involved into like kind of a horizontal perspective of things. Right. We save diligently and we really analyze our investments. Really do with due diligence. We provide that analysis and we save and we invest. Right. I like to take a little bit bird's eye perspective and I would like to show that perspective where the wealth is about growing, preserving, protecting and passing it to next generation, easily tax free, etc. So that's really the perspective of think outside the stocks. And my education and how I help is better based on that. There's a little information if you want to get in touch with me. It's info at think outside the stocks or you can just Simply go to www.thinkoutsidethestocks.com. there are a bunch of freebies over there. But what really I help it is it's a twofold approach. The first fold is to create a better savings system with a guaranteed growth and protection which is a tax free growth by the way as well with Infinity Banking System. And the second fold is to bring your high growth investments with a managed kind of an approach backed by real estate. And the third and most important that I'm passionate, passionate about is the passive investor education. So get in touch with me if you need any more information around those areas. We have in two weeks. Another this is kind of a series of sample deal reviews and we will review with Moni Investor Group Vini Chopra. We will review a class B of multifamily in the next two weeks, after the next webinar. And with that I would like to pass it on to you guys, please, you know, make, you know, feel free to introduce your company yourself if I have missed out on anything. So pass it on to you. I'm just gonna stop sharing here if I can find my zoom. Sometimes it's just hide somewhere. So there you go. I've stopped sharing. So guys, please go ahead and get started.

Okay, well, thank you so much for that introduction, Madhavi. We greatly appreciate you hosting this for us and giving us an opportunity to tell our story. My name again is Bhavan Patel, founding principal here at Green Harvest Capital. We're a private equity firm which is solely focused on Northeast Ohio. This, the picture in the background is one of our properties in Shaker Heights, Ohio. And I mean this is the, this is what we call like right down the Runway for us. This is the type of asset that we'll look for. Next slide, please. So our mission at Green Harvest Capital is to provide reliable cash flow for our investors, a better living experience for our tenants, and to improve the communities in which we own properties. Our objective is to deliver up to a 20% IRR to our investors through a preferred payment and an equity payout at exit, which is the appreciation in the property. Where our focus lies primarily is 1930 to 1960 workforce housing. When we talk about workforce housing, we pretty much, we're pretty much speaking to the average Ohioan. Our thesis is based in numbers that were founded in 2018. For us, we've seen a upward trend in 1920. 20 is still blurry to say the least. We're all coming out of the pandemic together. But in 18, we saw the median household income in the state of Ohio right at $52,000. And we modeled 30% should be spent on housing, giving us a ceiling of approximately $1,200 per month. So we will look at affordable housing that is between 600 and 900 dollars per month per unit. All of our properties that we Model will have a very solid occupancy and underlying cash flows. 95% is typically what we will look at. All of our properties are located in areas which are experiencing an economic resurgence of one sort or another. You know, Amazon has played a big role because of Ohio's strategic location to the country. As we look at the Rust Belt, you know, we will see that, you know, supply chain management was such a critical part of what Ohio brought to the table. And now that, you know, companies like Amazon and other manufacturing corporations are coming back stateside, we're seeing the resurgence of workforce housing and then the resurgence of development in these cities. Next slide, please. So our strategy, you know, we. This is pretty much the way we evaluate any asset that we will look at properties typically between 35,000 and 55,000 per unit, 30 to $60 per square foot. We do an added value approach for approximately $10 per square foot, and then that's delivering about a 20% return for every $10 spent onto a property. When we look at assets, our replacement costs are typically 3 to 10 times what our acquisition costs are. You know, construction costs in our market are $100 plus per square foot. Our acquisitions, you know, 30% of that, 40% of that. We will. We have spent many years developing bilateral relationships with brokerage firms that will bring us a project before anybody else. We have, as you had mentioned earlier, you know, we definitely are team on the ground. We sit on three boards. Northern Ohio Apartment Association, 250,000 units from the lake down to Columbus. The Ohio Apartment association, and also the Akron Chamber Board, allowing us to network with business leaders, owners of apartment complexes, and get to a project prior to it hitting the market and us having to face competition from New York, Chicago or la. Often when we were looking at an asset, again, the occupancy levels are very high. We do renovations at turnover. We'll experience between 25 and 30% turnover on an asset, giving us the ability to go in and spend an average of about $10,000 or $10 per square foot in improvement. You know, we look at our improvements in three particular phases. We do exterior improvements. We'll look at the roof foundation, electrical, plumbing, H Vac. We will look at interior refreshes from a lobby standpoint or a unit standpoint. LVT flooring, opening up the kitchen, painting the property. And then we really focus on the technology play. We will typically build out a mesh network over the asset, giving us the ability to add many Internet of things devices. We improve the quality of life for our tenants by Bringing technologies like LED lighting, nest thermostats, smart home technologies into their home, allowing them to control their unit using their iPhones. So very much technology focus in our improvements. And that gives a level of amenity to workforce housing which is typically not seen in our market. Next slide, please.

So, Bhavind, if you take a pause here, let's go back a little bit. Sorry, sorry, Sagar. So just for the audience, what are we looking at here? I know you must have invested in a lot of syndicated projects here. What happens is when the syndicated projects come in and if the deal just gets really oversubscribed really quickly, you get maybe about a week max time to decide before you jump in if you want to invest into it. Right. So today we are just trying to give that kind of a sample deal so that you kind of can get your feet wet before you also start swimming into it. Right. And in terms of the GSC difference, I mean, look at those units that they're purchasing. It's really kind of they have created their own niche in there where people are not looking at, you know, this kind of value or opportunities. They're kind of staying in the class B's maybe, but they have created their own niche there and especially getting this off market deals as well as bringing that modern perspective to that. Right. So I think, you know, when I talk to you guys for the first time, I really thought that that's the way that you kind of stand out from the competition. So it's really, you know, for our audience, that's really important to look at.

No, thank you for mentioning. That's a terrific point. Class C workforce housing, especially the age of construction that we will look at the 1930s, the 1940s, 50s, 60s product often isn't very much pursued by larger owners or other outside groups. And primarily it comes down to fundamentals. Understanding the construction style of the buildings are critical. We have a model, we say, hey, out of the five things, foundation, electrical, H vac, plumbing. Right. You know, in the roof, if three out of five are wrong, we usually do not move ahead with that transaction. We have a pretty, you know, deep understanding of integral workings of these systems, whether it be electrical, what kind of breaker panels are being used in a unit. You know, what do our vendor partners, such as our plumbers frown upon? You know, galvanized piping to fuses to other structural changes, you know, asbestos, lead paint. And we work with our vendor partners every part of our, every vertical which touches our business. You know, the three of us have our fingerprint on that, we take pride in walking every apartment. We are very diligent in our approach of understanding the risks that are in front of us and then creating a step by step program and a plan to deal with each. So I appreciate you saying that. You're correct in saying that 1930 to 1960 isn't often pursued by many groups, but because of our on the ground training that we have, we've been in this market for 16 years. We started GHC approximately three years ago, and we really look to leverage that boots on the ground approach to doing our acquisitions and improvements.

Thank you for mentioning that, Marvin.

Absolutely. So when we refer to Northeast Ohio, this is the region that we are primarily focused on. It gives us an hour to an hour and a half travel time between each of these locations. We can get to it. We can send our plumbers, our electricians, our maintenance people, our leasing officials, and be able to impact each property on a daily basis. Well, our market, currently we have properties near Cleveland in the Shaker Heights area. We call that our north region. We have evaluated many properties in our east region with Youngstown, they're. There's a lot of development with electric vehicles and other positive investments that are being made by General Motors and other national brands into the Youngstown Lordstown area. We'll look at that and we see opportunity there. Canton, Ohio, with the Football hall of Fame has definitely seen a resurgence and continues to grow as a market. We have intimate knowledge. We have properties in North Canton, Canton, Louisville, Ohio. We're very well positioned in Akron, Ohio. We love Akron as a small town. It's quaint, it's on the rise. Has multiple healthcare systems from Akron Children's to Cleveland Clinic to Summa Hospital Systems. Thousands and thousands of employees that are in the medical systems. And also many global brands such as Goodyear, Firestone, Bridgestone are all located in this small town, which we take a lot of pride in owning and operating in that area. And we see this area growing over the next five to 10 years.

So that's another thing I like about you guys. I mean, so statistically driven, typically, you know, looking back like 10 years or something when you actually have seen decline, but now you see an upside that people are kind of moving back to Ohio. So that's. That's another kind of a difference that you bring in. Really like that about you too.

Absolutely. We're very proud to own and operate in Ohio. Next slide, please. Okay, hand it off to Michael Smith here.

Awesome. So I definitely have the easiest name in the group. Everyone. So it's terrific to meet everyone. And Madhvi, thank you so much for this opportunity. We really appreciate it. It's been great getting to know you and look forward to hosting you in Cleveland sometime soon.

Absolutely. We look forward to it as well.

Yeah. So just a continuation of what Bhavan was talking about. I call this kind of the hall of Fame corridor because B mentioned the Football hall of Fame. In Cleveland we have the Rock and Roll hall of Fame. So Northeast Ohio is and where GHC is focused is in this area of hall of Fame Mecca. But Bob had mentioned Green Harvest has been around about three years. B actually started to acquire assets when he was in college and these are the legacy assets that Green Harvest was really founded on and proved out our thesis on. So you can see some of these assets were smaller than what we're buying today. We'll talk a little bit later on what we've acquired recently and what we're about to acquire. 20 assets to 36 assets. But it or apartments. But it really enabled us to realize and to prove out that we could lower expenses while improving the top line, improving NOI and truly proving out the thesis that Green Harvest was built on. One other thing I wanted to mention was really the demand for workforce housing. Right. We like to say workforce housing does good in good times, it often does better in bad times. And we saw that really over the past year with our occupancies through Covid staying extremely strong.

Can you in one statement define the workforce housing? If you know our audience don't know what workforce housing is?

It's, you know, as B talked about before, right. It's that median household income state of Ohio is in the low 50s, right. So it's individuals that that would fit into that bucket. And we think the top rent in that area is about $1,200 a month. So for example, at many of our properties we have nurses, we have schoolteachers, we have people that work at the Amazon distribution center. All of these people are kind of in that category. And we don't do subsidized housing. That's not something that we have a lot of experience in. So we don't look for Section 8 or HUD. It's typically people in this workforce space. We wanted to share with you a couple of acquisitions that we actually did in 2020. We acquired Shaker Crossing and Twin Oaks Crossing. During that time, Twin Oaks Crossing was delayed because of COVID We were very close to acquiring Twin Oaks in March and it was pushed out about three months or four months because of COVID But thankfully the seller hung in there with us and we were able to bring it back to life. But just to give the audience an idea of the numbers. So in Shaker, we bought Shakerdale at $45,000 a door. We acquired Mayfair Norwood at 56,000 a door and Twin Oaks at 49,000 a door. Just to kind of give you a feel for those. So total in 2020, we were able to acquire 183 units. Bhavan had talked a little bit about what we do from a capex standpoint, but Bea and I were walking units today on an opportunity that we have. And we walk through 50 apartments today on a new deal. And you know, we're constantly, when we go into a new property, we look to see how we can put our personal touches onto it, right. How we can open up the kitchen if the wall is not a load bearing wall. So we typically are looking to put about 7,000 to $10,000 per unit into the properties that we buy. And we break that into three buckets. Interior upgrades, exterior upgrades and green initiatives. After the capex is put in, every deal is different. But a year, a two year, three years down the, down the line, we look to recapitalize that property and exit our investor. At that time we look what. Actually there's a couple pictures maybe. Cyrus, go ahead and flip to the next slide.

These are more pictures on here.

MJ. So when you're looking at that, you know, about 40,000, 50,000 per door. What's the approximate market rent that you're looking at for these properties?

So market rents are typically in the 7 to 8, 700 to $800 per month.

Yeah, and that's very interesting point. I mean, if you have invested before in multifamily, you could see even about like 100k per door. You would have some range between like 800, 900 as an average rent. Right. So it's interesting to see that, you know, these are the lower per unit cost and it's still staying in the similar range, a little bit lower than a typical range that we see. So that's kind of an interesting point here.

You know what we see, Madhvi in a typical property is there's about a 25 to 30% turnover in a given year. Bea had mentioned in the introduction, we really look to build communities in these properties. We're not looking to push people out. So I want to emphasize that however, when a unit does naturally turn over, we look to go in and to upgrade it and to put Our capex to put our special touches into it. So these are more pictures of the Shaker Crossing asset on a beautiful fall day. Two story walk up buildings, terrific brick, lots of charm. Very much a walkable neighborhood. And that is actually something that we look at during an acquisition. We really think about what's going on in the neighborhood, what type of investment is occurring in the neighborhood. So for this particular asset, there are hospitals nearby, Cleveland Clinic is nearby. A brand new Amazon distribution center was built two miles away, just to the north. Walkable to this property is $100 million investment by the Ratner family, Forest City family called the Van Aken district and things like that. All boats are rising in this neighborhood and so we recognize that and we're able to quickly acquire it in an off market deal.

The pictures look great by the way.

Thank you.

Yeah, one of the things we do when we're in due diligence is we immediately set up a drone video which is amazing technology. But we have many investors that are all around the country that have never been to Cleveland. Probably many people on this call have not been to Cleveland. And it's a great way, you know, to see the property and to see the neighborhood. So go ahead and to the next slide please. Sagar. I want to show another one, another asset that we acquired called Twin Oaks. So believe it or not, this is 78 units. It's in Akron's Highland Square neighborhood, also a very walkable, established neighborhood. I call it the Shaker Heights of Akron. It's, it's very similar. This property is going to be 100 years old this year. And it, it just has so much charm. You can see the courtyards that there are actually three buildings. Two of them have these types of courtyards. Very established, very kind of. There's actually a mix. I mean it's a trendy neighborhood, but there's a mix of students, artists, all the way up to retirees that want to be in a walkable neighborhood that can walk to coffee shops. I mentioned Amazon distribution center. They seem to be going up everywhere. There's another one going up very close to this particular asset. So that's something that we definitely look at when we first consider a property.

So what if there's like a galvanized pipes, for example, such older properties, what happens? Are you accounting for that cost? You know, can you give our listeners a little bit more idea today?

We absolutely do. And it's something that we quickly realized that we needed a plumber on, on staff and we, and we look to really turn that weakness into a strength. We understand that with these older properties, that is something that we're going to have to deal with. So it's something we look at during due diligence, we analyze it, we send out. Today at the property we looked at, we actually sent out our plumber to video all the main drains on the site during due diligence so that we understand what's going on with the property and that we can start to gauge what we're going to need to put into the property.

So you actually have like a snake down the drain and a video camera?

Yep.

That's interesting. That's very, very interesting.

Yeah. So this property as well is walkable to, you know, many things in Akron's Highland Square. Akron also is going through a resurgence and there are investments going in downtown that this neighborhood is benefiting from. The LeBron James, I promise school is very close to this particular asset. But maybe some people have heard about LeBron's investment into Akron and into this neighborhood. So those are things that we look at as we're looking for a new property.

So we have tickling in. Please put your questions in Q and A just for easy kind of access. And we'll take the questions one by one as well. I see some chat window questions as well. We will definitely take that up.

Perfect. So with that, I'm going to turn it over to Sagar to talk about a typical deal.

Thanks everyone. So to give a quick background on myself, Sagar Parikh, born and raised in Cleveland, Ohio, went to Ohio State University, have worked on Wall street my entire 11 plus year career. As Madhavi said, I do live in New York City along with my wife and my 15 month old. But I'm a born and raised Clevelander, Cleveland Brown, season ticket holder. So even though I'm not in the Cleveland marketplace, a ton of love for Northeast Ohio. My background, as I noted, has been on Wall street doing public equities. But it's given me a strong background in financials, strategy and brand. And that's the strength that I bring to the GHC team for us, before I go into our sample deal review and Masvi started with this, but I want to point it out. You know, we think of real estate as one part of someone's asset allocation. Right. So if you think about your personal asset allocation, you should not be 100% in private real estate, you probably shouldn't be 50%, but you also shouldn't be 100% in equities. Right. And you know, we look at real estate especially private real estate as a piece of your potential portfolio. Right. And we think that, you know, someone like ours can add good passive, you know, a product like ours can add good passive income along with some equity upside and diversification versus equities and bonds. I know Bob and Mike gave a good overview of who GHC is and who we are as Green Harvest Capital. But I just want to kind of sum it up. You should look at us as niche, very focused on Northeast Ohio and we're operators first. And I think that's very important to note. We are very focused on Northeast Ohio. We know the market, we've built this business from the ground up, relationship driven. And you know, as we've noted, we tested out the model on a smaller number of units and now what we're doing is we're taking what has been tested and succeeded at a smaller level and we're doing that at a bigger scale now. And you know, it really goes down to we are operators first. And you will see many multifamily and private equity shops out there who are financial individuals first and operators second. But we are operators first. With that, let me go into a sample deal review. So Project Panther is a deal that we're closing here in the early part of April, should be closing any day now. It's a strong multifamily investment opportunity in Euclid, Ohio, which is in the northern part of Northeast Ohio. You know, what we offer investors here is about a 17 and a half percent base IRR, which is a 9% preferred equity return plus equity payout at exit. And then in our bull case, we see up to about a 22.5% IRR for our, for, for our investors, minimum about a $50,000 investment. And then typically our deals about our deals are about an estimated three year holding period.

Thanks for that quick introduction. I'm just going to interject here. So again, you know, looking at this deal, this is a sample deal, even if it's open, it's completely full, it's completely subscribed. So we're not offering anything right now. But what's another point to note that this is a three year hold period. So typically, you know, you see the IRRs in the five years, kind of a turnaround cycle, but you know, they have a little bit different model. Again, that's how they stand out, a little bit different as well. So it's a three year hold period. And with that, you know, the IRR projections that Sagar just shared, that's the three year projection. So keep that Also in mind.

Yeah. And I'll definitely go more into our investor returns later on in the slide deck.

Absolutely.

So just I'll be pretty quick on the beginning slides because I know I want to make sure that we hit with investors how a firm like ours thinks about an investment case. But Project Panther, again, it's a 94 unit property that we're under contract. It's a closed deal. As Mahavi noted, from an investment perspective, we're closing on the asset any day now. 3.25 million. Beautiful class C property. You'll see pictures in a little bit, about $35,000 per unit. I think that's very important to point out. We're buying assets here at $35,000 per unit. New construction can cost upwards of $150,000 per unit. So just I think it's very important to keep in mind, you know, we are buying older properties. I think that's been pointed out a couple of times on this call. But again, that's built into the prices that we're paying. Right. And so a lot of the due diligence that we're doing, you know, a lot of the work in terms of galvanized piping, I've heard a few times, in terms of working with our insurance providers, we do all of that. But keep in mind, the cost of these lower properties is partially built into the fact that we're paying lower values here. Right. $35,000 a unit compared to a new construction project, you know, that could be upwards of 150,000 a unit. This particular property, again, was built in the 1940s. Very strong character and in a really good resurgent area of northeast Ohio. You know, what we really liked about this property is that we will provide local ownership and property management. When we look at properties, there's a ton of different variables that we look at, and I'll go into a couple of those later on. But one of the key variables that we liked about this property, Project Panther, was that current ownership is based out of New York. They're financial people first and they're not operators at all. And the current property management firm is more than two and a half hours away, so there's no local presence. And, you know, we, again, as I noted, our local ownership and we have a local property management firm. So we can go in there and we can have a renewed focus on tenants. We can look at their expenses and their operational structure and figure out where we can cut the meat or. Sorry, where we can cut the fat. My apologies. And, you know, we can deliver that noi upside. And you know, as Bob noted and Mike noted, we, we do have big capex plans. So you know, this particular project, we're buying it at about $35,000 a unit. We have about a million dollars in capex that we have slated from our lender. And we're going to go in there and we're going to do exterior improvements, we're going to do green initiatives, we're going to do interior refreshes and that's going to do two things. It's going to give us top line upside is we're giving a better value to the tenant and we can get a return for that better value. And then we're also spending money on decreasing the expenses from an operational side. And so you can expand the top line, you can decrease the middle and you can expand your net operating income. And so there's really good opportunities in assets like this which to be honest have been kind of forgotten. And there's a lot of investment groups that don't look at them right. Big institutional firms typically don't want to look at them small. Mom and pops, there's a lot of headaches and we are that group that are solely focused on this asset size and this type of assets and we know to deal with those headaches and expand the income line. You know, as I noted, you know, one of the big items about us is we're not a typical syndication. So we're not gonna, you know, we're not gonna take your money, we're not gonna put you in for five to 10 years and we're not gonna flip the asset at the end of five to ten years. You know, we have a three year hold. And you know, one key differentiator about us is we love Northeast Ohio. We believe in Northeast Ohio, we believe in the renaissance. And so we want to own these properties long term. So you know, at the end of our three year period, we don't sell the properties. So we don't look at these as flips. We're actually getting the properties recapitalized and we use the proceeds from that recapitalization to take out our investors. So again, we are in this for the long term. We truly mean it when we say we care about the community or care about the tenants. And so it's a balancing act. Right. We want to make money for our investors, but we also truly care about the community. So I think we are a little bit different in that sense. Asset pictures Project Panther beautiful asset again 1940s build I've been told it looks like a college campus. And I don't disagree. Very strong exterior, very big courtyard interiors need a lot of work. But that's where we're going to come in. We have a million dollar capex program. We're going to upgrade those interiors and we're going to add value. We're going to give the people that live in these assets the value that they deserve and the product that they deserve. And it really excites us. You know, as I also noted, you know, and Mike kind of talked about this, but, you know, our due diligence on properties is very important. Right. We get the opportunity. Probably one deal comes across our desk every day, or, sorry, every week. But you know, just because a deal comes across doesn't mean it can work for us. You know, we look for prop. We look for assets that are in parts of Northeast Ohio that are going through a renaissance. So a lot of Northeast Ohio, like a lot of the United States, you know, had a lot of malls that were doing really well in the 1990s and the early 2000s. Well, those malls ended up going bankrupt, or half of them are empty. And as those malls went empty and bankrupt, they brought down the areas around them. And so we're focusing on areas that were really good in the 1990s. Have gone through some issues recently, but now two things. One, the city and two employers in the region are focused on redeveloping. And so what we really love about this Euclid asset is there's major employers in the region that are focused on improving the area. Key ones being Amazon Lincoln Electric, which is a large industrial company, and Cleveland Clinic, which is the number two ranked hospital in the world. And along with that, the city of Euclid is very focused on improving the area. They've built a brand new police station, city hall, public library, a brand new high school, all within walking distance of this property. They're spending $30 million on improving the waterfront. The city of Euclid is right on Lake Erie. So we're focused on, again, areas of Northeast Ohio that were booming and economic strongholds that went down because of malls going under and the change from brick and mortar to E commerce. But now where employers are focused on respending and redeveloping these regions, along with a city that really cares about its city that really cares about its citizens as well. And this Euclid asset, Project Panther, really hits those on the nail. I already noted this, But Lincoln Electric, $7.5 to $10 billion market cap company, $3 billion annual revenues. They're based in Euclid, Ohio and they're expanding. They just expanded one of their trade centers in the city over the last couple years. Amazon took the place of an old mall that used to be in Euclid. $175 million investment. 850,000 square foot distribution center employing 2,000 people. You know, we've written an article that's on our website about the Amazon effect. We're true believers in the Amazon effect. If you look at all of our projects, one item you'll notice is that there's a new Amazon distribution center within 2 miles of all of our projects. And that's because we're really big believers in this Amazon effect, which is when Amazon comes in and takes the site of an old mall, there's typically a two to three year lag in terms of economic development from when Amazon comes in. The center opens in the area redeveloping as the area redevelops. You get population growth, you get wage growth and you get less turnover. And you know, again, we're trying to buy assets that are in the beginning part of that renaissance. Again, I mentioned the city of Euclid. Very strong believer in their city. They're spending a lot of money, something we look for as well. Project Panther, again, this is a sample deal review. Just want to show, you know, the site right in the middle lake area up on top. Now, less than one mile away from Amazon, the Lincoln Electric Center. Really close to golf courses, city parks. There's commercial development, Aldi grocery stores, a plaza right by the police station, library, high school. So like we really like the surrounding area. Right to the left of it you can see Cleveland Clinic. You know, again, one of the top hospital systems in the, in the world has, you know, has a branch in Euclid as well. So these are all items that we look for. These are all decisions we make as we're deciding to go forward on a property. All of our projects, we have a year, one business plan, right? There's, then there's three components of it. Branding, marketing, which, you know, the point of the branding and marketing is helping us enhance the community atmosphere and decrease tenant turnover. Second, expense reduction. As I noted, a lot of these properties have bloated, have bloated operational expenses. And honestly, property management that does, that doesn't really know what they're doing or is not as focused on the property. And you know, we go in there and we have the opportunity to reduce expenses. And then a Capex program again that can be focused on exterior, interior and green improvements. From a branding, marketing standpoint, we're going to develop a new name, we're going to develop a new logo, we're going to have a new website that, you know, that tenants can go to. From an expense reduction standpoint, we're going to look at gas contracts, we're going to look at water contracts, we're going to look at the payroll and the expense and the gna side and say, hey, where is there a lot of fat? That is just inefficiencies that we can cut. And on the capex side, you know, these are just a few pictures, but we're going in there and we're gutting these, you know, we're some pretty much gutting these units. We're putting in new floors, we're putting in stainless steel appliances. Such a basic, basic thing. But for example, none of the properties we've bought have ever had stainless steel appliances. They're all white colored appliances, which, you know, stainless steel appliances cost $200 more in terms of the package and they can add a lot of aesthetic appeal. So we're spending that extra $200 and we're getting the stainless steel packages over the white appliances because again, the tenants that live here, they've never had that. And we're trying to give them a product that they deserve, right? You know, putting in wood block countertops, quartz countertops, you know, really lightening, brightening up these units.

I really like that about it. Sorry to interject again, but I really like that community aspect that you're bringing into these communities, right? These people, I the range of median income that you're talking about, these are the kind of people. I mean, housing is a need, it's not a want, right? And these are the people who maybe have poor credit score, the income range is really low, maybe never be able to purchase that American dream, the American home. So you providing them that better place, safer place to stay in and just like a top of the line upgrades where they can, you know, come and stay, that kind of would impact that turnover, that they wouldn't just want to move from this kind of communities. Right. So I think that's really important that the kind of upgrades that you're trying to bring in, you know, for the, the kind of people that you're providing this, right. So does that kind of tip over that balance a little bit on how much they can afford or you can still keep that rent in that affordable range? That, that's, you know, just a question.

Comes to mind that's very important. I Mean, again, one of our mantras is we don't kick people out, right? We do these upgrades as organic turnover happens. And listen, we're not pricing for the last dollar. I think one of the key items I've noticed is we're all about balance and you know, we're putting $10,000 in and you know, per unit in terms of upgrades. And we're not necessarily going for market rents everywhere, right, Mahavi? Because if we do market rents, you know, we do displace people, right? And that's not again, you know, maybe rents organically can move to that level over time. But for example, at our Shaker Heights property, you know, the rents for a two bedroom were about 750 or sorry, $800. We put $10,000 in per unit and we've increased those rents to about $1,000. The market rent in that region is about 1150. So we're still below, we're giving a brand new unit below market rents. But again for us it's listen, we want to stair step a proper way to get to market rents over time, but it's a good balance, a fine balance of getting that top line but also giving people the product.

And I think it's kind of leading where you're going next slide. But does that still keep that investor return that you're projecting in that range even being under the market rent, for example?

Absolutely. And we build that all into our model. So on this slide, which is the financial snapshot slide, one key thing I'll note is we run detailed bear based and bull scenarios and we do that before we go into contract and we do that after we run due diligence and we're always tweaking it, right? And listen, we can be those landlords that do max out on rents and yeah, maybe we can get higher IRRs than what we're projecting. But again, we're trying to do a good balance here, right? Because Monavi, there is a balance, right. If we go in and we upgrade a unit and we try to get market rents, we're going to have more turnover, right. And that higher turnover decreases our ability to feel comfortable paying our preferred payments to our investors. Right.

Or.

It can potentially lead to other issues. Right. So again, we have a very balanced plan on how we do this.

I like that. That's another differential with other sponsor teams.

So moving to the next slide and I'll start wrapping my portion up. Project Panther from a limited partner standpoint, again, this is a sample deal review and we are a little bit different. So I want to make sure I go into it accredited and or sophisticated investors. From an SEC standpoint, minimum investment for this deal was 50,000. Max was about 1.05 million. The largest check we had on this was about 250,000. The average check was about 100,050 to 100,000. And you know, estimated hold is about a three year holding period. We as the sponsors co invest in every deal. So Bob and Mike and myself invest at least the minimum in every single deal. Sometimes it's more than the minimum per person, but you know, that's at least the floor that we're putting in. And where we're different is we're not charging fees right away. So you know, we don't have a large acquisition fee at closing that we charge. We don't have yearly management fees that we charge. You know, we are invested with you as the investor through the term of the deal. And where we make our money is at the end of the term when we take you out as the investor, we will own the property outright. And that's where, you know, we've done a great job of improving the asset over that three year term. And we take our investors out, we will then benefit longer term by owning that asset. But unlike other syndications, we're not charging an acquisition fee, we're not taking management fees up front. Preferred an equity return, you know, up to 22, up to 20% is what we typically say. This deal is about 17.5% base IRR that can go up to 22.5% in the bull case, about a 57.5% cash on cash return. So around 19% return over a three year holding period. When we hit our target numbers, you will get paid a 9% prep semi annually. So the way I explain it to our investors is think about it as a 9% floor. So on a yearly basis you're going to get a floor of about 9%. And then at the end of the three year term, if and when we hit our numbers, you should look at it about as a 19% annual cash on cash return and you know, 57% over the entire time frame. The model here that you see is very quickly, the way to think about it is in year zero, you know, this is based on a hypothetical $150,000 investment. Hypothetically in year zero you give 150,000. In year one, two and three, you're getting a 9% annual or semiannual preferred payment on that 150,000. At the end of the year three, you're getting your 150,000 initial investment back and then you're getting an additional equity value, about 46,000. So the value that we've created from purchase price to what we get the property reappraised and recapitalized at, at the end of the period, we take that new value, you subtract the purchase price, the loan, the closing costs, etc. Multiplied by your equity ownership, which is determined by a grid that we have. And we pay you out for that extra appreciation that we've created for you. And that when you put it all together, gets you to your 9% prep with a target IRR of 17.5%. And then you as an equity investor can benefit on the upside as well. So if we crush it and we do better than our expectations, you know, your upside is endless. Now realistically it's not endless because we're not going to ever deliver a 50% IRR. But again, there is upside that you can benefit in. And last point I'll point out is you as the equity investor, you can also benefit from items like depreciation. So we don't build that into our numbers. So the numbers that you see here doesn't build in any benefit from depreciation or cost segregation studies. I think one of the individuals on this chat or on this call was this cost segregation expert. You know, we don't always know if cost segregation is going to lead to a benefit or not, so we don't build it into our numbers. But you know, we do look into it. And if a cost seg can give us a really good opportunity for accelerated depreciation, we will do it. And that will give our investors, you know, additional benefit on top of what we've, what we've talked about here. But we like to under promise and over deliver. So we're not gonna on day one give our investors everything that we're looking to do. And listen, we think it's a great deal at a 9% prep and a 17.5% target IRR. And if we can deliver our investors a better return, so be it. They'll benefit and we'll all benefit because we all co invest in the deals. I'll skip the sources and uses slide and as I know there's a couple Q&As and I know we're getting pretty late into this, so I'll turn it over to you.

So before I start with other Q and A, the scenario that you just explained, I noticed that you have like a bear base and bulk case scenario was that the base case scenario in terms of the Project Panther projections here.

Yeah. So this is our base case scenario, madi. So I think typically what we'll and it changes, you know, before due diligence. What I've always seen is we have a bear case when we're doing a deal. Once we go into due diligence, the bear case, you know, kind of like the base case becomes the bear case after due diligence happens. Because I am pretty conservative. I've been on Wall street my entire career and I've just learned to be conservative and on how I model and how I think and in terms of under promise and over deliver, typically the base case that we have going into due diligence becomes the bear case after due diligence. And we typically roll out. You know, again, as I noted, we're always tweaking our numbers. So, you know, we're always tweaking our numbers and typically it goes up and it doesn't go down.

Thank you so much for sharing that. So I'm just going to read out question. We have a question from Anant here first. Do you see investors to invest in your wholesome property purchase exit like syndication or individual units of these four property locations that you have the property management on? So I think that's the answer. It's a syndication process. Do you want to elaborate more on that answer, any of you? And I'm just going to mean by launch a poll here which is going to kind of get that interest level if you are interested in investing in this workforce, housing kind of environment. So pick your option. Any of you guys want to address that question? It's in the chat window.

Sagar.

Yeah. Do you guys want to. Do you guys want to touch on that question?

Yeah.

So if I understand it, you know, the gentleman's asking if, if we silo the dealers is investment spread out over multiple investments.

Madhvi, could you. Could you just re ask the question real quick?

Do you see investors to invest in your wholesome property purchase like syndication or individual units?

For this individual.

We silo every project. So, you know, our capital raises are per acquisition. And so you're only investing in one project at a time. And the definition defined time for that project is given within the pitch deck and the investment dossier.

And that individual project is a syndication model though, right?

Yeah, it's a GPLP structure.

Yep.

Yep.

We have more questions here. Aaron asks for GSC, given the properties that you target are 60 to 90 years old, how are you changing the culture at an asset that is undoubtedly set in a way and housing individuals, residents that are set in the property, current ways, is that a fast process?

I think it's a lot of what Sagar talked about in terms of what we're looking to do the first 12 months of acquiring a property. It's a combination of the brand strategy, it's the Capex strategy. It's us really being in the weeds, understanding the tenant base, understanding what the needs are of the property. So it is a journey. Right. It's not super easy. But it's funny, at one of our properties, we actually have a tenant that's been there for 50 years, that's 5, 0. And the first thing we, you know, we sought her out and we said, what would you like to see changed in the property? And she said to us, clean the property, clean the hallways. And we said, we can do that.

So more safer and more better place for them to live in. Because, you know, there's no, you know, not. The new buildings are not getting created as at the same rate that they need the housing. Right. Everybody needs a place to see and lighting, Bob.

And talk about lighting. I mean, that's.

Yeah. I mean, again, safety is something you feel. It's not something on a wall or can't be described. Right. So, you know, the approach we'll take is we'll do an LED upgrade package to the entire property. Exterior, interior, we'll put cameras up. You know, we'll make sure the buildings are secured and communicate with our attendancy, you know, on just our process and how we would like to improve the quality of their lives. And it takes time. I mean, Aaron asked a good question. You know, culture is something that takes time. And it starts with us. So, you know, we're not going into these properties asking for, you know, $100 to $200 more from every tenant. We are going in and the first thing we do is we improve the property.

And at this point, I mean, when I was talking to you, to you, Bhavin, the first time we chatted, what was really interesting is how involved you are at the city level. Right. The initiative that's going around. So can you talk to. To little bit to that context that how do you keep in touch with what's going in the cities that you're investing?

Absolutely. Like I'd mentioned earlier, we sit on different boards throughout Northeast Ohio and Central Ohio, which helps us gives us line of sight on projects that are down the pipeline. We understand each city is different, and understanding the mayor's office is very critical to the way we look at investment. Project Panther, for example, initially we spoke with the mayor and the deputy mayor via zoom call in Covid times and we really got to understand what their objectives were for the next five to 10 years for their city. They brought Amazon to their city. They invested $123 million into their high school and middle school. They reinvested into their police department, their fire department. There's ice rink, golf courses, parks, all in walking distance for this property. Lots of basketball tournaments are held at the schools in Euclid, Ohio. So we can understand that the city is marching forward over the next decade to improving the community, the lives of their residents. Our thesis aligns with theirs as we improve our property. It walks in step with step with the city's vision of improving their community. And we feel very positive about that. We will engage the building department and say, hey, you know, what are your pain points? What would you like to see? Right. How would you like to, for us to report as a landlord to you? And you know, they're often surprised that we will go in and do that. But we believe in order to be a long term holder of real estate in our market, it's very important to understand the motivations of the local government and the communities.

Oh, thanks for sharing that. I mean, that's really important aspect of it, how you are kind of, you know, well rounded in terms of your, you know, your involvement into the markets that you are. So it's, it's like you're full in, you know, in all these projects. It's not just, you know, from the perspective of that just turn over and move on turnover, kind of move on, taking it as a business perspective. So I really love that involvement all of you have in these markets. We have a question from Anand, which, by the way, great observation. When you were showing your kind of the financial model, Sagar, you had the projections of property taxes for all the three years exactly the same. So is that true? That's the question. Very sharp, eyes on it. Do you want to just address that question?

Yeah, it's a really good question. You know, we build in tax increases in all our models. So what I didn't show you in that was what the taxes were beforehand. So what we typically do is we look at what taxes are and what we project them to be. So for projections we say, all right, this is our purchase price and we take 85% of that value multiplied by the tax rate. The difference on why we can take 85 cents on the dollar is because there's Some personal property and assets that the counties allow you to withdraw for. Now, typically what we've seen is that we settle with these counties and these school boards, they typically don't come back to us for additional tax increases for a two to four year timeframe. And so, you know, once we've set that tax increase, let's say in year one, you know, there will be consistent taxes for the life of this term. Now, post, three years, four years, five years, yes, there's always some variability and even with that, there always is some risk of, you know, school levies, tax levies, you know, increases of 1% here. We've even seen increase, you know, decreases of half a percent there. But it's hard for us to project, you know, whether taxes are going to go down half a percent or they're going to go up 1%. So again, we set that rate or we set what we believe that level will go to in year one. We streamline it for year two and three. And again we all build cushion. And so if you look at all of our properties shake, you know, all of our deals, Shaker, Akron and Euclid. What Euclid, we hope. But for the, you know, first few deals, you know, the tax, the real estate taxes that we set in our model ended up being and what we ended up settling with the county when we're over projecting. And so we actually ended up having some cost savings from lower real estate taxes. But no, great question.

Thank you so much for that.

Sorry, go ahead.

You were saying? I'm just wrapping up to the next question.

I saw the next question as well. And you know, to this individual, again, this was a sample deal review. So, you know, Project Plant Panther is a closed asset and we're closing on the asset here in the next couple of days. You know, we're not looking for investors. The deal is closed from an investor standpoint. But you know, Green Harvest Capital, again, we have a very strong pipeline and you know, when we have a deal opportunity, you know, MADVI will be reaching out, you know, to individuals that, you know, have shown interest.

Yeah. And then one thing you have to keep in mind that these are 506B offering. I take SAC regulations very, very seriously and so does GSC. That's something the value that we match on. So if you are interested, this is the time to start connecting. So just reach out to me. I posted my email address in the chat window there. Reach out to me if I don't know you and let's start having that discussion, that relationship. So when I have this investment you could participate in. So one way to do it is go and think outside the stocks and sign up for that investment form. So that kind of starts that trail from SEC perspective that yes, we have kind of established that contact, you attended this. So that's kind of an. So we need to have at least 2, 3 level of different contacts and you know, one is definitely jumping on a call even if it's like an intro call. That's kind of a starting point for that. So I understand where you're coming from, your investment perspective. So if you haven't done that already, just go ahead and sign up that, you know, investor interest form and I will keep an eye on. It's a very good sign that you're already asking for the investments because these are like I said before, it's kind of an out of place the box approach to the investment. What the team is doing multiple levels, right? Right from their structuring, their exits, the type of assets, the niche that they are, they have created for themselves as well as providing that thorough level of due diligence and focus on so much on communities. Right. So really strong value guys. I mean, you know gsc, that's where that, that value system kind of comes in picture as well. So that's essentially, you know, what we are looking at. So if you, if you are interested in being interested, that's great to know. Please sign up for those investor forms. And I think I have another question here. You mentioned that post three to five years, you keep on as an operator for four or five properties, do you foresee an investor for longer term returns?

It's a really good question and we work with all of our investors. So to this anonymous, you know, attendee that's asked the question, you know, each of our investors has a different focus. You know, some people want passive income, some people want the equity upside, some people just want to park their money for a few years. You know what we tell our investors is we are a group that will be willing to work with each of our investors. And so at the end of the three year term, say you invest with us in a deal that has three year, that's a three year term. Well at six months, you know, six months before the end of that close, you know, we will, we will approach you, the investor and we'll give you a few options. Option one could be a full return of your proceeds. Option two could be to roll your assets into a new deal. Option three could be to maintain in the current deal and get a smaller Preferred return. So, you know, we are a group that is willing to work with our investors. And the reason I don't have a perfect answer is because each of our investors just has a very different investment reason to be with us. And we do try to do it on an investor by investor basis. Post the initial term.

Thank you so much. And if you have more questions, this is your chance now to post more questions. We're kind of wrapping it up. I know we are 10 minutes over, so I really appreciate all of you hanging with us till the end of it. And 10 minutes over, you must be getting back to your dinners and you know, your family. So please ask questions, ask away. If you have, you know, more, more questions just to understand how, you know, GSC work or individuals are per se. But if not, we will just try to wrap up any, any parting words, you know, from, from your team.

No, we thank you for the opportunity, Madhvi. This was a terrific way to get to know you and your audience and, and share our story. So thank you very much.

Oh, thank you so much. It's such a pleasure to have you guys over again. Thank you so much for being here. And I see a question popping up. Yeah, Anand just says that. Thank you. Thank you for answering the questions. So do you have this post investment opportunity for external investors in terms of like when the three years wrap up? Is that what you mean, Anant? Yes. So yeah. So like Sagar said, you want to add on to it. He just, he's just asking that do you have the post investment opportunities for external.

Typically, you know, the, the opportunity to stay in a deal post transition usually is for the people that are already in that project on und. That's the best way I can say it. You know, we, we try to bring a deal to market every 90 to 180 days like that. That's our pipeline. That's what we do. We have three projects we're working on currently. So you know that that's kind of our objective.

Yeah. And at that point, if you're kind of, you know, coming in after that three years period, you also have to note that your returns are going to be drastically lower because at this point the equipment, there's some cash out event has happened which the investors got paid for and then you're looking at maybe like maybe about 7% or 6% or even lower at least initially. And it kind of can creep up from there. But that's something that you have to keep it in mind. It's not going to be that 17 to 20% IRRs again in that fourth year. That kind of the upside in the value add has already happened and taken care of. So that's something to note. But again, thank you so much all of you and thanks everyone for being here. Hanging till end. Hope you have a great weekend and hope this added some little bit more value and different perspective, a completely, you know, different perspective to how GHC approaches. Very, very glad to have you. Very proud to have you here. Thank you so much for for being here.

Great. Thank you very much.

Thank you. Have a great.

Thank you.

Bye.