52 houses in 52 weeks project booklet
DESCRIPTION
A description of Arkad's 2013 house buying project. Powered by Arkad Captial Management, LP and its investment funds.TRANSCRIPT
52 Houses in 52 Weeks Project
Arkad Group’s
Our goal is to promote home ownership in Garden State by offering remodeled & energy efficient housing. The 52H52W is a local real estate investment initiative designed to locate, acquire, fund, retrofit/renovate, and resell a mix of 52 single and multifamily distressed properties in neighborhoods around NJ over one-year period.
GIVING 52 NEW JERSEY NEIGHBORHOODS A FACELIFT
52 HOUSES IN 52 WEEKS!
Our goal is to locate, purchase and renovate 52 distressed residential
assets over a period of 12 months. Properties will be acquired
throughout various neighborhoods within New Jersey.
With the help of the local community, we plan to promote home
ownership and to revitalize neighborhoods by taking 52 run down
houses and turning them into beautifully upgraded and energy
efficient homes. The need to reposition under water properties to
suitable buyers has created great opportunities in New Jersey. Many
homes available as REO, Short Sales and estate sales, suffer from
neglect and are not desirable in the current market place. These
assets are usually sold at a discount to investors with enough liquidity
to close quickly and with minimum of contingencies. Quality
rehabilitation of these properties tends to have a tremendous impact
on value that is quantifiable and consistent.
COMMUNITY IMPACT
Our initiative sets out to resolve two basic needs of a growing
demographic of consumers with a demand for QUALITY HOMES. By
substantially improving each house, we turn local eyesores into a
comfortable, appealing places in which to raise a family.
AFTER SANDY
As we were putting the finishing touches on our marketing, an event
occurred in our beloved state that has literally changed our
landscape and lives forever. The destructive force of Hurricane Sandy
impacted so many communities that it was hard to fathom a
recovery. But it has become clear that New Jersey, although shaken,
could never be broken. Buyers are still actively seeking the home of
their dreams and our resolve is stronger than when we first decided to
start the 52 Houses in 52 weeks project. Needless to say, our passion
for the project burns brighter than ever.
.
The Project
Why New Jersey
NEW JERSEY IS POULAR! Constant migration has always been a benefit to New Jersey. It’s close proximity to New York and Pennsylvania provides a steady flow of qualified homebuyers to preferred markets in many sections in the state. New Jersey appeals to a broad range of homebuyers. On one hand, communities with high-ranking school systems attract young professionals seeking more value in where they choose to live. Other areas benefit from buyers migrating to nearby towns for the same reason: higher standards and more affordable choices. This coupled with the addition of low interest rates makes real estate ownership a viable option for those who want a great deal. On the other hand we have the sheer number of distressed homes and municipalities, which need to liquidate assets. This creates unique investment opportunities for those who understand the intricacies of the markets. WE HAVE A TRACK RECORD IN NJ Over the past 5 years, New Brunswick based Arkad Group Investments Inc. has been successfully buying houses and turning profits at a time when many investors were cool to the market place. Being active investors in the Garden State has afforded us distinctive advantages both in terms of valuations and liquidations. We believe knowing where to buy is only half of the equation and maximizing value and profits is what seems to set us apart. Arkad understands the opportunities in New Jersey and will continue to manage and profit from them.
the marketplace
M=maarket
DEMAND IN NEW JERSEY
New Jersey’s proximity to Metro New York keeps buyer’s demand high for both the
purchase and rental markets. Jeff Otteau of Otteau Valuation Group noted in February
2012 the sales pace in New Jersey was already better than the last 4 years, even
exceeding the 2010 surge of the homebuyer tax credits.
Rates are ridiculously low and buyers are aware of the
SUPPLY IN NEW JERSEY
RealtyTrac recently reported foreclosure activity in New Jersey was up compared with a
year earlier, as lenders resume their efforts to evict homeowners in default; One in every
1,566 homes in the state received a foreclosure filing in July.
With that being said, some areas in central NJ are showing a strong demand for housing.
There are some communities in Middlesex County showing an average of 42 Days on the
Market! Many reports from respected industry pundits like Jeffrey Otteau show that
demand is exceeding availability in some markets.
With foreclosures continuing to flood
marketplaces and home prices
down nationally about 35% over the
past five years (and down more
than 50% in the hardest hit areas),
investors believe housing is a
promising place to park cash. Even
the Oracle of Omaha, billionaire
Warren Buffett, told CNBC that
distressed single-family homes were
one of the best investment
opportunities around, asserting,
“…It’s a leveraged way of owning a
very cheap asset now and I think
that’s probably as an attractive an
investment as you can make.”
Management team
Arkad Group Corp. “Arkad” is a privately owned, fully integrated real estate
investment company whose primary focus is on value added and opportunistic
real estate investment strategies. Specifically we specialize in the analysis,
acquisition, renovation, management & disposition of distressed residential &
commercial real estate in micro-markets located throughout NJ/NY.
Arkad is proficient at purchasing & generating profits by acquiring distressed
residential & commercial assets including: REO (Bank Owned Assets), pre-
foreclosure (short sales), NPN’s (both by units and bulk), free & clear acquisitions
and sheriff sales, all with great success. By following disciplined acquisition
methods and superior management Arkad has been able to syndicate offerings
in order to secure investment capital from private investors. Arkad’s model
targets assets with the intent to redevelop and sell or to hold and lease.
Formed in 2007 after a merger between NJ Innovative Investors, Inc & NJ Home
Remedy, LLC, Arkad was created to commemorate the new partnership and
the new plan for success. Resources were fused together to create an efficient
and profitable, one stop shop, real estate investment company. Over time
additional services were added as needed such as debt mitigation services, a
credit repair company, a collections company, and a real estate brokerage. All
of the Arkad companies, employees & principals share the same moral values,
drive and vision. Arkad brings vitality back into communities by taking a property
from A to Z in the most efficient way possible while reaping the rewards for them
and their investors.
Arkad’s methods and structure allows for convenience for sellers to sell, buyers to
buy, and investors to invest.
Arkad has also formed key partnerships and joint ventures in a move to reach
more diverse sectors such as multifamily (7-55 Units) & Distressed development
acquisitions.
Arkad Group Corp. headquarters is located in progressive downtown New
Brunswick, New Jersey and the company has additional locations in Jersey City,
Newark and Union.
Being a local
company, Arkad has
amassed local
knowledge and
resources that give
them strategic
advantages over
other local investors.
This makes them
uniquely equipped
to complete the
Our plan
ACQUISITIONS PLAN
52 properties will be purchased in 2 major phases throughout the 12-month period. The desired mix is as follows:
• 35 Single Family & 17 Multi-family properties that meet our criteria and LTVs.
• Short Sales, Probate, Sheriff sales, Equity and REO by bulk and one offs.
• A pipeline of deals is already being established for the project.
RENOVATIONS PLAN
• We have 4 contractor teams in place throughout the tri-state area.
• Each contractor team can handle up to 8 concurrent projects at any given time.
• For 52H52W project there will be no need for more than 10 concurrent renovation projects at any given
time.
• Renovation budgets avg. $45,000 per asset assuring quality renovated homes.
EXIT STRATEGIES
• Most assets will be re-sold to conventional & FHA buyers.
• Flexibility allows for Rent to own scenarios.
• MULTIs can be sold as normal or re-mortgaged upon performance.
Arkad has taken the necessary steps required to bolster its operations in anticipation of the 52H52W Project. We
have the management, contractors and infrastructure in place to successfully complete the project on time
and within projected costs.
The first step with any venture, large or small, is establishing a detailed plan. What follows is Arkad’s operational
outline for the 52 houses in 52 weeks project. Over the last 6 months we have been strengthening our infrastructure
on all fronts. Additionally, strategic partnerships have been established with reputable companies such as
Highland Port Development, Viridian Construction Management and Don Kennedy Investments ensuring all
project requirements and challenges are handled effectively.
Renovations & retrofits
Arkad’s philosophy is a superior product is what creates the greatest
value. Our properties often receive multiple purchase offers near and
sometimes over the market average by presenting consumers with
value added real estate at competitive pricing.
Arkad maintains a roster of experienced and fully licensed contractors
throughout the tri-state area ready for action. Each contractor can
handle up to 8 major renovations at any given time. Whether its
moderate repairs or top to bottom new construction, our contractors get
it done in style.
Rest assured our projects simply stand out in the market place, which
always translates into faster sale, faster escrows and happy buyers.
Our renovation packages include:
• Central HVAC Install or servicing
• Roofing & Siding
• Complete kitchen & Bath remodels
• Premium bamboo flooring
• Soft close cabinets
• Decorative Moldings
• Granite counter tops
• Stainless steel appliances
• Professional Landscaping
• Windows & Doors
• Enhanced lighting
• Energy conscious designs
Luxury Upgrades
• Technological package - WiFi, Security
• Tank-less water heaters
• Premium finishings
Average Budget - $43,000 per property.
Average renovation period – 4 - 6 Weeks
Our funding plan
Arkad Distressed Real Estate Fund I, LP
“The 52 Houses Fund”
This fund actively secures investment capital for the acquisition of assets purchased at distressed values. The
goal is to acquire 52 residential assets at an average of 1 per week for a period of 12 months. This fund is being
offered to a mix of accredited, sophisticated and non-accredited investors.
www.52housesin52weeksproject.com
Target Assets
Purchase Targets and Goals:
• REO – 45% or 23 Homes
• Short Sales – 30% or 15 Homes
• Auctions – 10% or 5 Homes
• Probate – 10% or 5 Homes
• Direct Sales – 5% or 2 Homes
Asset Models
• Single Family homes in need of rehab - 75%
• Value added Addition Projects – 5%
• Discounted Quick Flips (No rehab) – 15%
• Hold - Multi-Family (2-5 Units) – 5%
Projections
Target Purchase Volume - Homes 52
Fund Investor Maturity Term 24 Months
Fund Size $5,200,000
Annual Fund Management Fee 2.0% $208,000 deducted on a monthly basis as a percentage of invested capital
Flat Preferred Return to Investors over 24 months 8.0% $832,000 8% per annum
Estimated Profit Split to Investors upon Maturity 20.0% $608,200 Profit share after completion of project
ROI & TOTAL Estimated NET Profits to Investors 27.7% $1,440,200 TOTAL estimated returns to investors
Project Time Period 12 Months Property Purchased and Renovated with 52 Weeks
Average Holding Period Per Unit - Months 4 6 wks of reno, 4 wks on Market, 6 wks Close
Arkad Distressed Real Estate Fund l, LLC (52H52W Project) Pro Forma
Key Assumptions
The figures below represent estimated expenses based on prior performance and market data metrics. Strict and disciplined
adherence to these figures as well as our LTV Limits is what makes the 52 houses project both viable and achievable. Costs fall
within average industry standards and within the past performance of Arkad management.
Average Purchase Price Per House $175,000
Purchase Closing Costs as % of Purchase Price 3.0% $5,250 Legal, Inspections, Title etc…
Repair Costs as % of Purchase Price 25.0% $43,750
Acquisition Fee Per Asset as % of Purchase Price 2.0% $3,500
Opperating Expenses as % of Purchase Price 1.0% $1,750 Clerical, LLC formation, Accounting, etc…
Property Management Costs as % of Purchase Price 1.0% $1,750 Security, Maintanance, Mgmt, etc…
Holding Costs as % of Purchase Price 2.0% $3,500 Property Taxes, Utilities
Annual Fund Management Fee (2% Annually) Avg Per Property Costs $4,000
Resale Closing Costs as % of Sales Price 7.0% $23,558 Legal, Sales Taxes, Broker Fees, Consessions etc…
Total Estimated Expenses Per Unit $87,058
ALL-IN
*Estimated ALL-IN Per Unit $262,058 Used for Calculations in Phase 1 & 2
RE-SALE PRICE
**Avg Resale Price = (Purchase + Repairs / % Limit) % Limit (LTV) 65.0% $336,538 Used for Calculations in Phase 1 & 2
Key Assumption Metrics
The 52 houses fund was created specifically for the 52H52W project. The
fund is currently raising capital in the form of 104 units of ownership or
equity with a minimum buy in of $50,000 per unit. $5.2 mm will be required
to complete the project. The following Pro Forma indicates the projected
time line of events, expenditures required and the projected profits to be
realized. Investors are being offered an 8% preferred return on their
investment and a profit split of 20% of the net proceeds once the project is
complete or at the maturity date, which ever comes sooner.
The 52 houses fund was created specifically for the 52H52W project. The fund is currently raising capital in the form of 104 units
of ownership or equity with a minimum buy in of $50,000 per unit. $5.2 mm will be required to complete the project. The
following Pro Forma indicates the projected time line of events, expenditures required and the projected profits to be realized.
Investors are being offered an 8% preferred return on their investment and a profit split of 20% of the net proceeds once the
project is complete or at the maturity date, which ever comes sooner.
Time Line
Below is a spreadsheet indicating the projected time line of purchases and sales.
The project is split into 3 phases. Phase one is essentially a purchase and renovation
phase for the first three months and ends with a strong liquidation phase in months
4, 5 and 6.
Phase two continues the liquidation phase and as capital is freed up, purchases
continue for the next three months.
Phase 3 is the final liquidation phase where most of the profits are realized.
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6
*Estimated ALL-IN Per Unit Homes Purchased 6 6 4 3 5 8
**Avg Resale Price = (Purchase + Repairs / % Limit) Homes Sold 0 0 0 4 6 4
Raised Capital $3,000,000 $1,100,000 $1,100,000
Funds Deployed - *(ALL-IN) x (Homes Purchased) $1,572,346 $1,572,346 $1,048,231 $786,173 $1,310,288 $2,096,462
Balance - (Working Capital) - (Homes Purchased) $1,427,654 $955,308 $1,007,077 $220,904 $256,769 $179,538
Gross Proceeds - (Re-Sale Price) x (Homes Sold) $0 $0 $0 $1,346,154 $2,019,231 $1,346,154
New Working Capital - (Balance) + (Gross Proceeds) $1,427,654 $955,308 $1,007,077 $1,567,058 $2,276,000 $1,525,692
Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Phase 3 - FINAL Liquidation
Homes Purchased 5 4 6 5 0 0
Homes Sold 3 5 8 5 6 11
Funds Deployed - *(ALL-IN) x (Homes Purchased) $1,310,288 $1,048,231 $1,572,346 $1,310,288 $0 $0
Balance - (Working Capital) - (Homes Purchased) $215,404 $176,788 $287,135 $1,669,154 $3,351,846 $5,371,077
Gross Proceeds - (Re-Sale Price) x (Homes Sold) $1,009,615 $1,682,692 $2,692,308 $1,682,692 $2,019,231 $3,701,923
New Working Capital - (Balance) + (Gross Proceeds) $1,225,019 $1,859,481 $2,979,442 $3,351,846 $5,371,077 $9,073,000
Gross Estimated Fund Profits
Phase 1 - Capital Raised / Purchases Phase 2 - Liquidations Begin
Phase 3 - Final Liquidations
As you can see, our target purchase and
sales figures fall in line with our past
performance. Certain figures such as
renovation costs have been increased from
18% to 25% to offset increases in material
costs and to offer value added upgrades in
certain areas that may demand a higher
standard of quality. In most cases,
renovations will still arrive at18% - 20% of the
purchase price.
Projections
Structured Purchases
The 52 Houses project will take advantage of Akad Group Corp’s current
procurement methods. 52 Houses will be purchased within our specified metrics.
Assets will be upgraded for value and placed back on the market within a 12-
month period. Any Net profits realized from sales during the projected period will
be re-invested back into the fund to finance new purchases until the goal is
achieved.
Projections
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Time Line – continued
The graph below shows the utilization of the funds and the resultant projected proceeds. As you can see the capital is steadily
deployed for the first 9 months during the first two phases of the project. The bulk of the profits are realized at Phase 3 – Final
Liquidation Phase.
Total Homes Purchased 52
Total Homes Sold 52
Gross Estimated Fund Profits $9,073,000
Returned Principal of Invested Funds $5,200,000
Preferred Return to Investor $832,000
NET Estimated Profits available for Disbursement $3,041,000
Senior Partners Proceeds $2,432,800
Estimated Investors Profits Profit Share % 20.0% $608,200
Preferred Returns to Investor Preferred Rate 8.0% $832,000
Total Estimated Profits to Investors (Pref + Share) $1,440,200
Investor ROI 28%
Investors Estimated Profits
Sponsor's Estimated Profits
Profits
The figures below indicate the projected preferred returns, profit splits and fees
associated with the project. Based on these metrics we project a return of 28% to
our investors..
* * T h e i n f o r m a t i o n p r o v i d e d t h r o u g h o u t t h i s b o o k l e t a n d i n t h e p r o f o r m a p r o v i d e d h e r e i n i s s u p p l i e d i n g o o d f a i t h b a s e d o n i n f o r m a t i o n , w h i c h w e b e l i e v e , b u t d o n o t
g u a r a n t e e , t o b e a c c u r a t e o r c o m p l e t e . P a s t P e r f o r m a n c e i s n o t n e c e s s a r i l y i n d i c a t i v e o f f u t u r e r e s u l t s . T h i s d o e s n o t c o n s t i t u t e a n o f f e r t o s e l l o r s o l i c i t a t i o n o f a n
o f f e r t o p u r c h a s e s e c u r i t i e s . A s a l l p r o s p e c t i v e i n v e s t o r s m u s t b e " q u a l i f i e d e l i g i b l e p e r s o n s , " t h i s i n f o r m a t i o n i s n o t r e q u i r e d t o b e a n d h a s n o t b e e n f i l e d w i t h t h e
C F T C . A s i n a n y I n v e s t m e n t , p a r t i c i p a t i o n i n t h e p r o j e c t i n v o l v e s s i g n i f i c a n t r i s k s . T h e r e c a n b e n o a s s u r a n c e t h a t t h e p r o j e c t w i l l b e a b l e t o r e a l i z e i t s o b j e c t i v e s .
A n i n v e s t m e n t i n t h e p r o j e c t i s s p e c u l a t i v e a n d s h o u l d n o t b e c o n s i d e r e d b y a n i n v e s t o r w h o c a n n o t a f f o r d t h e t o t a l l o s s o f h i s / h e r i n v e s t m e n t .
Who do we work with?
ACCREDITED INVESTORS
SOPHISTICATED INVESTORS
NON-ACCREDITED
INVESTORS
$200,000/yr
income (Individual)
< $200,000/yr income
(Individual)
$300,000/yr income (Couple)
< $300,000 / yr
income (Couple)
Net worth of
$1MM
Net worth of $1MM
A bank,
insurance company, registered investment company,
business development company, or small business
investment company,
mutual fund, retirement
fund, officer, or general partner.
The investor must have,
either alone or with his
purchaser representative,
such knowledge
and experience in financial and
business matters that he/she/they
is/are capable of evaluating
the merits and risks of any investment
contemplated.
A non-accredited
individual investor is one who has a net worth of less than $1 million (including spouse) and who earned less than $200,000 annually
($300,000 with spouse) in the last two years. Only 35 allowed per
fund
• Brokers/Realtors
• Wholesalers
• Transactional Agents/Brokers
• Asset Manager
• Auction Houses/Brokers
• BULK Sales
• Banks/Credit Unions
• Developers/Contractors
• Architects/Engineers
• Financial Advisors
• Mortgage Bankers/Warehouse NPN’s
• Estate Planning Attorneys
• Bankruptcy Attorneys
• City Planners & Officials
• Non-for Profits
• Local & State Redevelopment Agencies
• Direct Sellers/Principal/Custodian/Executors
M a r i o C a m i n o , F o u n d e r & C h i e f E x e c u t i v e O f f i c e r
N i c k T a v e r a s , C o - F o u n d e r & C h i e f I n v e s t m e n t O f f i c e r
D a n i e l R i v e r a , C o - F o u n d e r & C h i e f L i q u i d a t i o n s O f f i c e r
E r i c M o e l l e r , C h i e f I n v e s t m e n t O f f i c e r , M u l t i F a m i l y D i v i s i o n
K . R a c h e l l e B r i c e , E s q . P r i n c i p a l & C h i e f C o m p l i a n c e O f f i c e r
J e s s i c a P e r e z , P r o p e r t y M a n a g e m e n t & V a l u a t i o n s
W a l t e r C u b e r o , C h i e f P o r t f o l i o A n a l y s t
E m a n u e l H a m a d a , C h i e f D e s i g n O f f i c e r , A r c h i t e c t
J o h a o S a n t o s , H e a d o f R e n o v a t i o n s & I m p r o v e m e n t s
J a c k P i r e s , A d v i s o r & P a r t n e r V C M D e v e l o p m e n t C o r p
C h r i s G o o d s o n , E s q . , R e a l E s t a t e L i t i g a t i o n
S e a n M c D o n o u g h , E s q . , R e s i d e n t i a l R e a l E s t a t e
T o d d M a y o E S Q . C o m m e r c i a l R e a l E s t a t e
J o h a n n a R o s a r i o , C h i e f M a r k e t i n g O f f i c e r
T e r r y A n g u s , L o s s M i t i g a t i o n S p e c i a l i s t
D a r i u s A s k a r i p o u r , A r k a d N e w Y o r k C a p i t a l F u n d D i v i s i o n
H u g o R a m i r e z , A r k a d N e w Y o r k C a p i t a l F u n d D i v i s i o n
75 Paterson St . 2nd F loor . New Brunswick, NJ 08901 888 -38 -ARKAD 732 -626 -5204
845 3 r d Ave. 6 t h F loor New York , NY 10012 212 -240 -9444
7 5 P a t e r s o n S t . 2 n d F l o o r . N e w B r u n s w i c k , N J 0 8 9 0 1 7 3 2 - 6 2 6 - 5 2 0 4