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This document describes the basic models used in Community or “Crowdsource” funding for Real Estate investments, presented by Luxury Simplified Group, Charleston, SC.
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Synopsis This document describes the basic models used in Community or “Crowdsource” funding for Real Estate investments. It has been written to provide the layman with a simple and clear introduction to the process and how the various parties interact throughout the process. It is meant as introduction only and as such is not exhaustive. We would be pleased to speak with anyone considering this option and to discuss real examples of how investments have performed and strategy has been modified in light of changing economic circumstances.
L u x u r y S i m p l i f i e d , 9 5 B r o a d S t , C h a r l e s t o n , S C , 2 9 4 0 1
Community or “Crowd-source” Investment Structures
Community or “Crowdsource” Investment Structures. “A qualified group of contractors, brokers and financial analysts based at 95 Broad St, Charleston SC. Our experience in infill development on the historic Charleston Peninsula has set us apart, developed strong community relationships and a strong investment pipeline. “
Track Record An effective Real Estate investment strategy has enabled us to contribute to and benefit from the development boom that that has engulfed Charleston over the past three years. A total infrastructure and capital investment north of $1 Billion on the Peninsula alone. As one of the largest historical renovation and redevelopment firms in Charleston, we have amassed a land bank of approximately 50 building opportunities within the rapidly developing Downtown corridor South of Highway 17.
To date some $30 million has been invested to produce a market beating return. Land on the Peninsula has become a premium asset during this timeframe and is a valuable commodity now that the construction market has returned in full force.
In addition, an influx of job creation, primarily in the technology sector, growing student populations and a large teaching hospital complex have driven demand for housing. Our goal is to help meet this demand.
Our investment strategy for the Charleston marketplace has evolved over the last few years and as market
conditions have changed.
From buying distressed residential property for the rental market in Mount Pleasant and the Barrier Islands to buying vacant land and renovation opportunities in developing downtown neighborhoods then to developing our own downtown PUD and Event Space opportunities. At each stage we have examined returns on a bi-annual basis and reformatted strategy to suit market conditions.
Figure 1 - Company offices at recently renovated 95 Broad Street, Charleston SC. Built circa 1770.
The map above shows properties we have “touched” in the recent past. Either to renovate, restore, rent. Buy/Sell are not included and, as such, many remain within our current portfolio. Some represent work under contract to third parties, some our within our own property portfolio as shown in the key.
Community or “Crowdsource” Funding Mechanisms The purpose of this White Paper is to provide a quick overview of Community Funding mechanisms, as they exist today. It concludes by considering how this is targeted at investment opportunities in the downtown Charleston Real Estate marketplace.
Online SyndicatesThree parties are involved. The Investor who supplies the funds, Syndicator who most often uses a web based portal to reach their investor pool. They promote the offer and manage release of funds, overseeing the deal throughout the lifecycle, but at a cost. A local Contractor(s) who undertakes the build-‐out and/or management phase but without a direct connection to the Investor. The Contractor works with the Syndicator on a fee or more often, significant portion of the deal equity, basis. Syndicators like Reality Mogul, iFunding and RealCrowd typify this model.
Placement Agents Placement Agents are similar to a Marriage Bureau. They play matchmaker between the investor pool and potential investors. They act as Broker Dealer of record in the transaction and must be SEC registered. Basic Due Diligence (DD) is required as part of their function both around the deal and the Operator/Contractor or offering entity. The advantage for the Operator/Contractor is that after they have completed the necessary DD then payment ongoing is dependent upon delivery of funds. A transaction fee is also levied though this has only marginal effect on an inherently robust offering.
The offering itself can be more flexible, for example on a debt or equity basis or as a revolving development fund. Fundrise is an example of this model. Turnstone Securities are another of the newer entrants bringing a similar offer targeted at their existing highly networked investor base.
Vertical IntegrationVertical Integrators are similar to Syndicators but also add additional value. The typical model is vertical integration of the financial management platform with the investment being delivered via independent contractors on site. Prodigy Network is an example of this business model from the standpoint of a financial platform, its one of the more successful and dynamic on the market. Care needs to be taken during DD process though as the Integrator has opportunity to increase margins at the various pinch points in the process so should be viewed end to end and not on the basis of any particular stage.
Lead Generation & White LabelThese are probably the most common new entrants in the marketplace. They connect investors directly with developers. They often have little or no execution capabilities beyond that and a low barrier to entry. Be careful is our steer. In recent history, the SEC has placed some focus on these operations due to poor legal adherence and business practices.
White Label has is not being discussed in detail in this document as it is an offer that can basically mirror any of the three above and is targeted at the investment community as an operating platform for them to enter this space or wishing to expand an on-‐line presence.
Our Position We have structured an offer that is a union of the Placement Agent and a Vertical Integrator. The investor has a vertically integrated offer inclusive of both the financial and delivery sides of the deal. We can spot, purchase, develop, lease and sell under the same corporate structure. In addition, the proven track record of Luxury Simplified’s existing investment portfolio in the downtown Charleston SC market will provide investors with the confidence they require to participate in this innovative approach to property investment.
So How Does this work in Reality? In essence: Turnstone Securities are our funding partner in this exercise. They provide due diligence audit for the investor and oversee finances. They reach out to the potential investor pool, control the release of funds and investor reporting. Luxury Simplified secure development opportunities pre-‐funding, design, build and manage properties in downtown Charleston. They oversee ongoing community and City relations.
Trust and transparency Great real estate investments do not have to be complicated. Our job is to demystify the intricacies of profitable property investment. Here’s how we do it….. . We will identify AND often secure the investment opportunities before funds are released by Turnstone Securities. In fact, Luxury Simplified has secured a considerable land bank of opportunities in downtown Charleston over the past 24 months. The power of Social Media is such that you can track the development in real time and watch it develop.
Trust from our investors is paramount. By partnering with Turnstone Securities, Investors will receive the highest level of commitment and the utmost financial transparency throughout the project. In fact, our investors receive their returns before any other party. Financial reports will be provided regularly throughout the project, highlighting key targets and milestones. We encourage our investors to visit Charleston, at various stages of the project, or monitor the progress on social mediums (e.g., Luxury Simplified YouTube channel, Pintrest, or private Facebook groups). We are a vertically integrated real estate company with no hidden fees or other charges at any point from land acquisition to rental management or final sale.
Escrow Release & Closing Once the funding targets are reached, Turnstone Securities will release funds from escrow to begin the construction process. Acquisition and planning phases will already be substantially complete by that point, minimizing delay.
Construction We are one of the largest residential construction and historic renovation companies in the Charleston market place. We know our business well. Planning a renovation or new-‐build residential project takes between 3 and 6 months from initial discovery, project planning and design, BAR (Board of Architectural Review) and permitting. The actual build-‐out phase takes a further 4 to 6 months.
To mitigate risk, the entire construction process is overseen by Turnstone Securities and is treated in a similar fashion to a commercial construction loan. Funds are released as the buildu out progresses.
Cash Flow Distribution Once construction is complete, our Real Estate arm will rent and manage the property. Charleston has a high demand region for rental properties fuelled by the City’s large food and beverage, college and hospital communities. Cash flow from rental income is distributed to investors twice per year by Turnstone Securities. Once the projected cash flow objectives have been achieved, the investment will be sold and equity returned to the investors.
In Closing Luxury Simplified is a company with in-‐depth experience in the Charleston, SC property investment arena. In fact, we have invested our own funds to build a sound and lucrative property portfolio. Our investors can rest assured that their funds are being managed by professionals, dedicated to generating a healthy rate of return. Invest in something you know, can touch and feel with the certainty of all the information you need at your fingertips.
Disclaimer This presentation has been prepared by LS Group (“LSG”) for the exclusive use of recipient (together with its subsidiaries and affiliates, the “Recipient”) using publicly available information. LSG has not independently verified the information contained herein, nor does LSG make any representation or warranty, either express or implied, as to the accuracy, completeness or reliability of the information contained in this presentation. Any estimates or projections as to events that may occur in the future are based upon the best judgment of LSG from publicly available information as of the date of this presentation. Nothing contained herein is, or shall be relied upon as, a promise or representation as to the past or future. LSG expressly disclaims any and all liability relating or resulting from the use of this presentation.
This presentation has been prepared solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. All securities are offered through LSG partner, Turnstone Securities LLC, member FINRA | SIPC. The Recipient should not construe the contents of this presentation as legal, tax, accounting or investment advice or a recommendation. The Recipient should consult its own counsel, tax and financial advisors as to legal and related matters concerning any transaction described herein. This presentation does not purport to be all-‐inclusive or to contain all of the information which the Recipient may require. No investment, divestment or other financial decisions or actions should be based solely on the information in this presentation.
This presentation has been prepared on a confidential basis solely for the use and benefit of the Recipient. Distribution of this presentation to any person other than the Recipient and those persons retained to advise the Recipient is unauthorized. This material must not be copied, reproduced, distributed or passed to others at any time without the prior written consent of LSG.