LG Capital Partners Investor Presentation › uploads › 4 › 9 › 0 › 1 › 49016519 › lg_c… · AppFolio) Automated tenant rent payment systems Market research database

LG Capital PartnersInvestor PresentationE: [email protected]: (201) 620-6683www.lgcpartners.com

Calvin GaiCo-Founder, President, Chief Executive Officer (201) 620-6683 ext [email protected]

Yun LeiCo-Founder, Chief Operating Officer(201) 620-6683 ext [email protected]

Peter ZhangCo-Founder, Chief [email protected]

Darren ChanCo-Founder, Chief Financial Officer, Property [email protected]

Mike HuangCo-Founder, Chief Research Officer, [email protected]

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Sponsored Offering: Opportunistic325 Broadway Ave, Bayonne NJ Development

325 Broadway, Bayonne NJ Bayonne, New JerseyProperty Introduction

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Proposed Transaction if Entitlement ApprovedInvestment Strategy Opportunistic

Total Purchase Costs (est.) $1.1Mil to $1.5Mil

Financing 50%LG Capital Partners Equity 1 - 10%Projected Equity Yield 26%

Property Snapshot

Number of Units 40 Units (900sqt/unit)(36,000 sqt)

Number of Stories 4 to 5 storiesLot Area 100x100

Type of Construction1st Floor Steel Framing, Wooden Framing 2nd to

4th floor, CMUs

Financial Pro-formal if Entitlement Approval

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Market research and property due diligence is based on comprehensive market research and property specific analytics to project cash flows and profitability, please also note that we will also additional benefits from tax abatement. For conservative reason, tax abatement is not considered in this valuation projection)

325 Broadway, Bayonne NJ Finance ProjectionProformal Analysis Year 0 Year 1 Year 2

Effective Rental Income - -

Operating Expenses 42,840 43,697

Capital Improvement

Net Operating Income after Cap Improvements (42,840) (43,697)

Building Sale (Valuation based on $2.3 * 40 Units * 50% expense ratio *12 / 5.4% - 9,193,121

Free Cash Flow (6,660,000) (42,840) 9,149,425

Debt CF 3,330,000 199,800 3,529,800

Free Cash Flow to Equity (3,330,000) (242,640) 5,619,625

Levered IRR Including Appreciation is estimated to be 26%, Unlevered IRR is roughly about 17% assuming that the property get sold @ 5.4%

$6.5 Mils includes the construction costs of 135 dollars/sqt*(40 units*900 sqt/unit) + $1.5Mil of Acquisition Costs + 20% Margin of Acquisition CostsThe building rent assumes that the rental level is stagnant for the two years, if assumed rent goes up by 3% per year, building sale should be $9.7Mil

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Market Analysis

Bayonne City Market Analysis

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Unemployment Rate Trend

Employment Count Trend

Class A: 1 Bedroom Monthly Rate

Source: Census.gov, BLS

Class A: 2 Bedroom Monthly Rate

New York-Jersey City-White Plains, NY-NJ Metropolitan DivisionMarket Analysis (Part I)

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Employment Count Trend

Unemployment Rate TrendHousing Price Index

3.90

4.00

4.10

4.20

4.30

4.40

4.50

4.60

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Employees/Units

Source: Census.gov, BLS

New York-Jersey City-White Plains, NY-NJ Metropolitan DivisionSupply and Demand Analysis

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Source: Census.gov, BLS

Housing Units by CountyYear employment Bergen Hudson New York Total Year Empl/Units2005 6,292,363 346,033 247,446 819,796 1,413,275 2005 4.452006 6,398,448 348,180 251,211 840,443 1,439,834 2006 4.442007 6,415,787 349,534 254,780 844,349 1,448,663 2007 4.432008 6,380,856 351,593 257,153 850,942 1,459,688 2008 4.372009 6,140,861 351,486 259,674 858,284 1,469,444 2009 4.182010 6,232,573 352,412 270,578 846,962 1,469,952 2010 4.242011 6,300,806 352,496 272,793 846,177 1,471,466 2011 4.282012 6,383,229 354,694 272,840 850,490 1,478,024 2012 4.322013 6,471,019 355,099 274,540 852,642 1,482,281 2013 4.372014 6,668,854 356,367 277,172 867,643 1,501,182 2014 4.442015 6,855,247 355,139 277,812 869,890 1,502,841 2015 4.56

Increasing ratio is a good sign

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Bayonne Resident Destination to WorkBayonne has no rent control, but has rent stabilization, similar to policies of NYC.

Residents Income Distribution2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002

$1,250 per month or less 16.7% 17.1% 17.4% 17.1% 17.3% 18.1% 17.9% 18.2% 19.5% 19.4% 19.9% 19.8% 21.5%$1,251 to $3,333 per month 30.9% 31.1% 31.2% 31.5% 32.7% 31.9% 33.5% 34.7% 36.0% 37.4% 37.4% 39.4% 39.7%More than $3,333 per month 52.4% 51.8% 51.4% 51.4% 50.0% 49.9% 48.6% 47.1% 44.5% 43.3% 42.7% 40.8% 38.7%

Residents Destination to Work Concentration in 2002 Residents Destination to Work Concentration in 2014

About Us

LG Capital Partners (“LGCP”) is a real estate private equity company established to offer accredited investors access to real estate investments in New Jersey and New York

LGCP specializes in investing in multi-family residential properties within emerging markets

LGCP leverages its extensive knowledge of the real estate market and our robust experience in financial analysis and risk management along with access to various investment channels to bring you value at every stage of the investment process.

Headquartered in New Jersey, LGCP is comprised of professionals of combined expertise in real estate, financial management and analytics and engineering.

About Us

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Providing investors with investments with the care that they deserve. Imagine an investment partner that will guide and direct investments every step of the way that will lead your financial prosperity.

Sponsored Offerings

Our sponsored offerings provide investors access to residential properties with competitive pricing. We leverage our extensive knowledge of the real estate market through dedicated research and our robust experience in financial analysis and risk management along with access to various investment channels to bring you value at every stage of the investment process. Our sponsored offerings include funds with core, value-add, and opportunistic strategies.

Investment Consulting

We provide consulting services to clients who wish to invest in residential properties under separate account. We advise clients on multiple fronts including:

1. Property Sourcing: Through our multiple access channels, we have the ability to prove you the most competitive leads for your next purchase

2. Research: We conduct comprehensive market studies with detailed due diligence to help you uncover profit potential

3. Negotiation: We can help you negotiate a target price that pertains to your investment objective.

4. Operation: We provide you an operation framework to guide you in legal, tax, and property management to ensure that your investment strategy is executed properly

Our services

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Core Investment Principles

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Providing a bridge between investors’ money and sound investments

Risk

•Our professionals are passionate about the real estate industry and constantly revaluate our strategies everyday

•Understanding the inherent risks within a project, rigorous risk management including stress testing of liquidity

•LG Capital Partners provides your investments with the care that they deserve

•Ability to invest in real estate opportunities through various channels including off-market properties

Access Integrity

Passion

Core: Investment in stable, fully leased, residential properties to obtain predictable cash flows and potential capital growth through property appreciation

Non-Core: Buying inefficient/distressed properties for high upside opportunity in cash flow and appreciation– Value-added investments: LG Capital Partners seek to create arbitrage from the

mispricing of properties arising from the increased risk perception of non-core investments compared to core investments. These investments are typically hindered by physical, operational, or financial issues which can addressed through active property management. Moderate leverage is typically employed, and in contrast to core strategies, the return is more dependent on price appreciation.

– Opportunistic Strategy: This strategy is designed for clients/investors seeking investments with higher risk profiles. These investments focus on distressed properties and real estate developments and can be achieve high returns through significant capital employment. These investments are highly leveraged and the return is solely dependent upon price appreciation.

Investment Strategies

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Providing investors predictable income and capital growth through real estate investments driven by comprehensive market and property analysis

Investment Process

Investment Process Framework

AcquisitionProcess

OperationProcess

SalesProcess

I. Identification of potential market areas

II. Property searching/capturing seller leads, screening and analytics

III. Purchase negotiation, due diligence, and contract closing

IV. Execution of property management/reposition

plan

V. Market identification of sales opportunities through monitoring of key market indicators

VI. Capturing buyers leads through various channels

VII. Sales negotiation and contracting closing

Identification of Potential Market Area– Identification of potential markets for real estate investment is based on

average return vs. risk tradeoff and qualitative and quantitative market analysis of the market area. Market analysis includes supply and demand analysis and assessment of local economic indicators. Market statistics are systematically sourced from leading real estate applications such as CoStarand authoritative websites published by government and state authorities Examples: population, employment, housing units, stock market indices,

overall market sentiment, and state and local policies and spending

Property Screening, Analytics and Due Diligence– Identification of specific properties for investment is based on a number of

quantitative assessment Screening of all available real estate sales in the identified market based

on quantitative metrics such as comparing current rent rolls relative to surrounding properties and projecting residual value in value-add projects

Detailed model-based sensitivity analysis to understand the investment risk and utilize that metric to project required return of an investment

Property Acquisition Process Framework

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A rigorous due diligence review process is undertaken prior to the acquisition of real estate investments based on investment strategy

Maintenance

Leasing

Accounting / Reporting & Legal

Research & Technology

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Property Management Operations FrameworkLGCP is comprised of dedicated and experienced partners to offer a comprehensive and cost effective residential property management solution 24/7 in-house maintenance support

Local contractor database and negotiation of repair services

Conducting inspections / repair cost estimates

Planning / execution of maintenance programs (e.g. renovation projects)

Management dashboard (delinquencies, vacancies, maintenance expenses)

Financial statements to assess profitability

Access to competitive legal service rates (e.g. eviction filings, legal compliance)

Federal / state tax filings

Marketing of vacancies

Market rent analysis

Tenant screening / due diligence

Execute lease agreements

Execute repossession (e.g. exit inspection, eviction filing, debt collection)

Property management software (e.g. Buildium, AppFolio)

Automated tenant rent payment systems

Market research database (current market rental rates, property sales, contractor rates)

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LGCP employs active investment management to generate the highest potential return for investors when executing the real estate investment sales process

Property Sales Operations Framework

Investment Strategy Holding Period

Market Timing

Scenario Analysis

Qualitative Analysis / Expert Judgment

The type of investment strategy (Core/Non-Core) is the primary determinant of the holding period for a real estate investment and the timing of the potential sale in the future

Core investments eventual sale will be based only on the future market conditions

Non-Core investments eventual sale will be on the completion of property repositioning and/or future market conditions

LGCP’s proprietary market research database is the foundation for investment decision making

Historical and current market indictors (e.g. employment / population trends, housing prices, stock market price indices) areemployed to assess current market supply and demand conditions which support the initial investment property purchase and itssale in the future

LGCP performs comprehensive baseline / stress scenario analysis to assess future market conditions

Scenario analysis is based on performing historical regression analysis to identify key market leading indicators which may signal opportunities both to purchase or sell real estate properties

During the initial property purchase process, scenario analysis is performed to provide investors with potential timeframes for the sale of their property based on the current / forecasted economic cycle

LGCP’s significant real estate experience will augment the intensive market data driven analysis to ensure the future timing andproperty listing price is optimal for investors

Expert judgment is founded on the principle of leveraging an extensive real estate brokerage network who are informed regarding observed current market supply and demand

Experienced real estate brokers will conduct the property sale process including price negotiation and due diligence

Risk Identification Risk Mitigation Strategies

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Risk Management Framework

Market Risk

Model Risk/Liquidity Risk

Operational Risk (e.g. tenant risk, maintenance risk, legal risk)

Pre-acquisition market studies to identify opportunistic locations for real estate investments (e.g. areas undergoing gentrification and markets where demand outstrips supply)

Pre-established property management policies and procedures (experienced attorney to execute eviction process for delinquent tenants, experienced real estate broker for leasing, reliable contractors to perform routine maintenance and construction)

Periodic market studies to identify downturns in the housing market s based on key national and local economic indicators

Sophisticated pre-acquisition model-based property analysis to project repositioning costs, cash flows, and valuation. Baseline results are then stressed to determine solvency issues under adverse scenarios.

Risk Identification: Understanding the risk drivers involved in the investment process based on performing comprehensive baseline and stress scenarios reflecting in-depth market and macroeconomic analysis

Risk Mitigation: Implementation of mitigation strategies to predetermined risks

Experienced risk managers will assess the risk versus return potential in all aspects of the investment process

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Investment Terms

As compensation for the identification, acquisition, financing, management, and sale of investment properties, participation by investors will include the following fee rates:

Our Investment Terms

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LG Capital Partners works closely with investors to implement investment strategies at very competitive fee rates

Fee Type Description Fee %

Property Management Fee

Professional management of investment properties(property acquisition, rent collection, leasing, maintenance, legal, property sale); percentage of collected rent

10%

Carried InterestPercentage of profits of real estate investments received by LG Capital Partners after return of all capital contributed by investors

30%

Acquisition Fee for Loan Guarantee 1%

Notes: (1) The preferred rate is specific to the investment property and is derived not only based on perceived risk of the market, but also extensive analysis on regional indicators and property specific analysis including scenario-based cash flow and pro-forma analysis

We believe the investment process should be as simple and transparent as possible for investors 1. Meet our team: Schedule a one-to-one meeting with our sales officer to go through the

investment process, obtain more information on our investment approach, and learn how our investment strategies can meet your investment goals

2. Select an investment strategy and property: Our sales officer will provide an overview of our investment strategies (Core and Active) and potential properties that we are looking to invest in for each strategy based on our extensive due diligence process.

3. Select the investment amount: We would like to target a minimum investment amount of $50,000. To ensure an investor’s interests are aligned to our interests, all investments are required to include an investment ranging from 1 to 10% from us, collectively. We manage investor fund contributions the same as our own contributions.

4. Track your investments: We believe in full transparency throughout the investment process. You will receive direct communication from your investment manager and personal attention if you have any questions or concerns. We will also provide a quarterly report to provide the performance of your investment.

5. Capital Recapture: Rental income from the investment will be paid out on a quarterly basis directly into the account you specify and capital gains will be distributed when the property is sold

Becoming an Investment Partner

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Rest assured that your contributed capital is managed and invested with integrity. LG Capital Partners provides your investments with the care that they deserve.

Contact Us:

T: (201) 620-6683E: [email protected]: www.lgcpartners.com

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