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Page 1: Kevlar biz plan_update

Kevlar Group Corporation

Business Plan

April 11, 2023

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BUSINESS PLAN NON-DISCLOSURE AGREEMENTBy Possessing or reading this plan you accept the following:

THIS MEMORANDUM IS SUBMITTED ON A CONFIDENTIAL BASIS FOR THE USE SOLELY IN

CONNECTION WITH THE CONSIDERATION OF THE PURCHASE OF THE SECURITIES DESCRIBED

HEREIN. THE RECEIPT OF THIS MEMORANDUM CONSTITUTES THE AGREEMENT ON THE PART

OF THE RECIPIENT HEREOF AND ITS REPRESENTATIVES TO MAINTAIN THE CONFIDENTIALITY

OF THE INFORMATION CONTAINED HEREIN. THIS MEMORANDUM MAY NOT BE REPRODUCED

IN WHOLE OR IN PART AND ITS USE FOR ANY PURPOSE OTHER THAN TO EVALUATE AN

INVESTMENT IN THE SECURITIES IS NOT AUTHORIZED. NEITHER MAY THE CONTENTS OF THIS

MEMORANDUM BE COMMUNICATED TO ANY THIRD PARTY WITHOUT THE PRIOR WRITTEN

CONSENT OF THE COMPANY. THE RECEIPT OF THIS MEMORANDUM CONSTITUTES THE

AGREEMENT ON THE PART OF THE RECIPIENT TO THE FOREGOING.

THE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY

NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND

APPLICABLE STATE AND FOREIGN SECURITIES LAWS PURSUANT TO REGISTRATION OR

EXEMPTION THEREFROM. THE EXEMPTION UNDER THE SECURITIES ACT PROVIDED BY RULE

144 MAY NOT BE AVAILABLE. ALL INVESTORS WILL BE REQUIRED TO UNDERTAKE THAT THEY

WILL NOT RESELL THE SECURITIES EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION

STATEMENT OR AN EXEMPTION FROM REGISTRATION. CERTIFICATES FOR THE SECURITIES

WILL BEAR A LEGEND TO THAT EFFECT. INVESTORS SHOULD BE AWARE THAT THEY MIGHT BE

REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD

OF TIME.

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY

REPRESENTATION CONCERNING THE COMPANY OR THE SECURITIES OFFERED HEREBY

OTHER THAN THOSE CONTAINED IN THIS MEMORANDUM AND, IF GIVEN OR MADE, SUCH

OTHER INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING BEEN

AUTHORIZED BY THE COMPANY.

THIS MEMORANDUM DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF AN

OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES OFFERED HEREBY, NOR DOES

IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY FROM ANY

PERSON IN ANY STATE OR OTHER JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION

WOULD BE UNLAWFUL, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS

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NOT QUALIFIED TO DO SO, OR TO A PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN

OFFER OR SOLICITATION.

STATEMENTS IN THIS MEMORANDUM ARE MADE AS OF THE DATE HEREOF UNLESS STATED

OTHERWISE AND ARE SUBJECT TO CHANGE, COMPLETION OR AMENDMENT WITHOUT

NOTICE. NEITHER THE DELIVERY OF THIS MEMORANDUM AT ANY TIME, NOR ANY SALES

HEREUNDER, SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT THE

INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE

HEREOF.

THE COMPANY HAS ESTABLISHED INVESTOR SUITABILITY STANDARDS FOR PURCHASERS OF

THE SECURITIES. EACH INVESTOR MUST REPRESENT TO THE COMPANY THAT: (A) SUCH

INVESTOR HAS SUCH KNOWLEDGE AND EXPERIENCE IN FINANCIAL AND BUSINESS MATTERS

SO AS TO BE CAPABLE OF EVALUATING THE MERITS AND RISKS OF HIS, HER OR ITS

INVESTMENT IN THE SECURITIES AND SUCH INVESTOR IS ABLE TO BEAR THE ECONOMIC

RISKS OF AN INVESTMENT IN THE SECURITIES AND TO AFFORD THE COMPLETE LOSS OF THE

INVESTMENT; (B) THE SECURITIES TO BE ACQUIRED BY SUCH INVESTOR ARE BEING

ACQUIRED FOR HIS, HER OR ITS OWN ACCOUNT AND WITHOUT A VIEW TO, OR FOR RESALE IN

CONNECTIONS WITH, ANY DISTRIBUTION THEREOF OR ANY INTEREST THEREIN; AND (C) SUCH

INVESTOR HAS HAD ACCESS TO SUCH FINANCIAL AND OTHER INFORMATION, AND HAS BEEN

AFFORDED THE OPPORTUNITY TO ASK SUCH QUESTIONS OF THE REPRESENTATIVES OF THE

COMPANY AND RECEIVE ANSWERS THERETO, AS SUCH INVESTOR HAS DEEMED NECESSARY IN

CONNECTION WITH HIS, HER OR ITS DECISION TO PURCHASE THE SECURITIES.

CERTAIN PROVISIONS OF VARIOUS AGREEMENTS ARE SUMMARIZED IN THIS MEMORANDUM,

BUT PROSPECTIVE INVESTORS SHOULD NOT ASSUME THAT SUCH SUMMARIES ARE

COMPLETE. SUCH SUMMARIES ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO THE

TEXTS OF THE ORIGINAL DOCUMENTS, WHICH WILL BE MADE AVAILABLE BY THE COMPANY

UPON REQUEST BY PROSPECTIVE INVESTORS.

PROSPECTIVE INVESTORS SHOULD NOT CONSTRUE THE CONTENTS OF THIS MEMORANDUM

AS LEGAL OR INVESTMENT ADVICE. THE COMPANY HAS NOT ENGAGED LEGAL OR OTHER

ADVISORS FOR OR ON BEHALF OF ANY INVESTOR AND EACH INVESTOR SHOULD CONSULT

HIS, HER OR ITS OWN COMPETENT COUNSEL, ACCOUNTANT, OR BUSINESS ADVISOR AS TO

LEGAL AND RELATED MATTERS CONCERNING THE INVESTMENT. THE COMPANY IS NOT

MAKING ANY REPRESENTATION TO ANY OFFEREE OR PURCHASER OF THE SECURITIES

REGARDING THE LEGALITY OF AN INVESTMENT THEREIN BY SUCH OFFEREE OR PURCHASER

UNDER APPROPRIATE INVESTMENT OR SIMILAR LAWS. IN MAKING AN INVESTMENT

DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE COMPANY AND THE

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TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. BY ACCEPTANCE

OF THIS MEMORANDUM, PROSPECTIVE INVESTORS RECOGNIZE AND ACCEPT THE NEED TO

CONDUCT THEIR OWN THOROUGH INVESTIGATION AND DUE DILIGENCE BEFORE

CONSIDERING AN INVESTMENT IN THE SECURITIES. REPRESENTATIVES OF THE COMPANY

WILL BE AVAILABLE TO DISCUSS WITH PROSPECTIVE INVESTORS, ON REQUEST, THE

INFORMATION CONTAINED HEREIN.

THE SECURITIES ARE BEING OFFERED BY THE COMPANY, SUBJECT TO PRIOR SALE,

ACCEPTANCE OF AN OFFER TO PURCHASE, WITHDRAWAL, CANCELLATION, MODIFICATION

OF THE OFFERING WITHOUT NOTICE OR APPROVAL OF CERTAIN LEGAL MATTERS BY THE

COMPANY’S LEGAL COUNSEL. THE COMPANY RESERVES THE RIGHT TO REJECT OR REDUCE

THE SUBSCRIPTION OF ANY PROSPECTIVE INVESTOR EVEN IF SUCH INVESTOR SATISFIES ALL

OF THE SUITABILITY STANDARDS DISCUSSED IN THIS MEMORANDUM. IF THE PROSPECTIVE

INVESTOR RECEIVING THIS MEMORANDUM DOES NOT SUBMIT AN OFFER TO PURCHASE, OR

IF SUCH OFFER IS SUBMITTED BUT NOT ACCEPTED BY THE COMPANY, THE PROSPECTIVE

INVESTOR AGREES TO RETURN PROMPTLY THIS MEMORANDUM AND ANY ACCOMPANYING

DOCUMENTS PROVIDED IN CONNECTION HEREWITH

IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION

OF THE PERSON OR ENTITY CREATING THE SECURITIES AND THE TERMS OF THE OFFERING,

INCLUDING THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN

RECOMMENDED BY ANY FEDERAL, STATE OR FOREIGN SECURITIES COMMISSION OR

REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT

CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY

REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

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Table of ContentsEXECUTIVE SUMMARY...................................................................................................6

Objectives..................................................................................................................7Keys to Success........................................................................................................7Strategic Advantages.................................................................................................7Risk/Variable..............................................................................................................8Conclusion.................................................................................................................8

CURRENT COMPANY POSITION....................................................................................9COMPANY OVERVIEW AND VISION....................................................................................9PERSONNEL...................................................................................................................10

Management Team..................................................................................................10Attorneys and Accountants......................................................................................10

STRATEGY AND IMPLEMENTATION...........................................................................12BUYING & ACQUISITION STRATEGY.................................................................................12SALES STRATEGY..........................................................................................................15IMPLEMENTATION PROCESS FLOW..................................................................................16

MARKET..........................................................................................................................17OVERVIEW.....................................................................................................................17COMPETITIVE ADVANTAGES............................................................................................18BARRIERS TO MARKET ENTRY........................................................................................19COMPARABLE BUSINESS MODEL.....................................................................................19

PEST ANALYSIS............................................................................................................20

SWOT ANALYSIS...........................................................................................................23

MARKETING IMPLEMENTATION AND STRATEGY....................................................27OVERVIEW.....................................................................................................................27

EXIT STRATEGY............................................................................................................28

PROCESS DEVELOPMENT MAP..................................................................................29

Financial Model and Projections......................................................................................31

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Executive Summary

Kevlar was formed to invest in commercial and residential performing and non performing mortgage notes. The company will target 1st position notes only, staying mostly in the United States. The company is owned by Mr. Anthony Giambanco. In addition, a team of well qualified management, attorneys, and accountants support the internal operations of the company.

Because of the mortgage crisis that is ongoing in America, there exist tremendous opportunities to buy notes at substantially discounted prices, securing a high rate of return by either reselling the notes to another financial organization, or servicing the notes and restructuring the payments for the homeowner. This service provides both intrinsic and extrinsic value. To the homeowner, it allows the opportunities for families across the US to remain in their homes and save their investment, and to investors it provides an enormous opportunity to create great financial gains with regular schedule income.

Generally notes will be purchase for 30% to 60% of the of property value for non-performing notes, and up to 70% on performing ones. The Company’s first option to the homeowner will be to execute a loan modification, which can involve lowering the interest rate and other terms of the loan. Practicing a socially friendly approach, foreclosures will be avoided whenever possible. If foreclosure becomes the only option, then the company will do so, and then locate a buyer for the property, selling at a profit.

Kevlar will purchase mortgage notes for a variety of property types including single family residences, multi-family units, condominiums and townhouses and commercial properties. Improved and unimproved land will not be considered.

The owner of the company, Mr. Anthony Giambanco is a seasoned entrepreneur that has gained great successes in the “paper” and notes industry. He specializes in discounted mortgages and other cash flows, being frequently

Approximately 80% of U.S. mortgages issued in recent years to subprime borrowers were adjustable-rate mortgages (ARM). In 2006 & 2007, defaults and foreclosure of these loans increased dramatically as easy initial terms expired.

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called upon by some of the largest real estate firms and banks in the industry to provide consulting advice and education.

Objectives

Obtain sufficient capital financing to allow for note purchases.

Develop key relationships with bank managers, sellers agents and other decision makers at financial institutions.

Purchase the right mortgage notes in bulk.

Increase marketing initiatives that will further promote the business and its services.

To expand nationally and globally if the right opportunity presents itself.

To create a profitable business, that will produce double digit gains for investors, owners and employees.

To hire and retain the necessary talent needed to grow the business.

Keys to Success

Initial capital financing in the amount of $15M.

Thorough assessment of notes and risks involved.

Successful operations, meeting or exceeding financial projections.

Diversification, purchasing from a variety of sources and locations.

Effective monitoring of homeowner’s financial situation, and timely implementation of liquidation strategies as necessary.

Hiring and recruiting the right management team, portfolio analysts and customer service representatives.

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Strategic Advantages

Low risk, high rate of return model

Timing is right for such a venture

Management extensive experience

Existing relationships with financial institutions

Social benefits by providing a solution that helps homeowners

Risk/Variable

By purchasing the notes at a discount, Kevlar significantly lowers its risk given that the notes are collateralized. In the case of a default, the property can be foreclosed on, and resold to another buyer. The discounted prices paid on initial purchase typically allow room for negotiation to create a motivated buyer. However, with the remaining slump in the housing market, there remains the probability that a defaulted note may sit for a certain period of time. In this scenario, the company may also choose to sell the note. Careful selection of notes, along with educated price offering will limited the risk to the company and its investors.

Similar to bonds, other risks includes the fact that a borrower can prepay the debt early, lessening the gains that can occur with the note. Kevlar utilizes conservative numbers in its projections to compensate for this. However, there is the understanding that even in this case, the company will see a profit, because the new mortgage note given to the buyer, was still a markup profit of the original purchase price.

Conclusion

The shift in the economy and the current mortgage crisis has provided an environment where mortgage notes can be purchase at substantially discounted prices. While there are never any guarantees in this type of business, there is a wealth of evidence that purchasing these notes can be extremely profitable.

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Sufficient analysis of the notes, prior payment history and the collateral supporting the note, can provide substantiated insight into the outcome of the purchase, creating fairly low risk opportunities. The payout is further enhanced by the viably good it does for Americans and the economy. With an expected rate of return of 15% to 35% annually, it can be a sound investment opportunity for the right investor. As an investor you will be purchasing shares into Kevlar, a company backed by a sound and proven business model that is led by a visionary leader who has had proven success in this financial arena.

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Current Company Position

Kevlar Group Corporation is a private firm located in New Jersey. The company has achieved unprecedented success in the purchase of bank financed mortgage notes, private owner finance mortgage notes, deeds of trust, land contracts and note appraisals. The group works with both residential and commercial entities.

Company Overview and Vision

Kevlar currently executes the strategy discussed in this document with other investment companies and has delivered high performing investments that exceeded expectations. The company now sees great opportunities available and is seeking the funds to expand its own base, with the goal of eventually going public.

The firm attributes its success to its careful selection of notes, along with their competitive pricing and customer service.

Kevlar will be purchasing both performing and non-performing notes at different price points. Depending on the situation, the notes may be resold to another buyer or investor, or be fully managed by the company.

This business model has been tested and proven and Kevlar intends to utilize this system to create a highly profitable and sustainable company. This is not only a strategy for a down economy, and will work during difficult or flourishing times. However, the economy as it is today, does lend itself to the opportunity to purchase notes at steeply discounted prices, creating a wider profit margin for Kevlar. Consequently, even in great economies, banks and financial institutions sell notes on a regular basis. Selling to Kevlar is preferential because the company is typically willing to pay a little more than a larger bank would exhaust, especially when dealing with performing notes.

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PersonnelManagement Team

The strategies and tactics that will be implemented will stemmed in part from the know-how and experience of the owner. Brief biographies of his background, along with that of other key players are provided below:

Anthony Giambanco

Anthony Giambanco is the visionary leader and astute financial powerhouse of Kevlar Group Corporation. With more than 10 years successful professional and entrepreneurial experience, he is often called upon by large financial institutions and real estate firms for speaking engagements, mentoring and consulting work. He has brokered in excess of $1,000,000 in annuities and structured settlements within the last year.

Some of his accomplishments and recognitions include being a fund manager for The Stone Financial Group as well as the CEO of several Note Investment Groups. He also founded Paper Boy Investments a Independent Investors Group. A seasoned and skilled entrepreneur, Mr. Giambanco has opened and sold several successful businesses including various restaurants and a commercial and residential property.

Robert Hart

Talented, self-motivated and highly creative Banking and Finance Professional with a dynamic 15-year career in commercial real estate and business finance within very competitive business markets. Established capabilities in underwriting and relationship building with outstanding presentation, negotiation and closing skills.

EXPERIENCE

CU BUSINESS CAPITAL (A Credit Union Service Organization) – MIRAMAR, FLORIDA

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7/09 - PRESENT

VICE PRESIDENT / SENIOR CREDIT ANAYLST

Underwrite and negotiate small to middle market real estate and business transactions including retail, office, warehouse and multi-family loan requests. Underwrite the more complex loan requests including owner-occupied, construction and sale lease-back transactions. Loan sizes range from $250M to over $5MM. Also work with other lenders and credit unions to arrange syndications for funding the larger transactions. Perform some portfolio management duties including annual reviews, site inspections and collections.

WASHINGTON MUTUAL –PLANTATION, FLORIDA

1/06 – 10/08

VICE PRESIDENT / SENIOR UNDERWRITER - COMMERCIAL REAL ESTATE

Underwrote commercial real estate loans including multi-family, office, retail and warehouse throughout the entire eastern seaboard. Loan sizes range from $250M to $10MM, with signing authority of up to $2MM on final commitments and $3MM on LOI. Performed some portfolio management and credit review of closed and delinquent loans preparing them for workout. 2006 performance award winner, who averaged over 200% of goal for all of 2006 and 2007.

STERLING NATIONAL BANK - NEW YORK, NEW YORK

9/03 – 12/05

VICE PRESIDENT / COMMERCIAL REAL ESTATE

Originated, structured, underwrote, made loan committee presentations and closed commercial real estate and middle market business loans including multi family, office, retail, warehouse and construction for investors and business owners. Loan sizes range from $500M to over $10MM. Generated new banking relationships through middle market lending, receivables factoring, equipment financing, deposits and other retail services with owners and brokers. Received additional credit training by an SVP with 20+ years experience in commercial real estate lending.

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FIRST LENDERS MORTGAGE CORPORATION – AVON, NEW JERSEY

9/00 – 8/03

BUSINESS DEVELOPMENT OFFICER

Maintained intermediary referral base of attorneys, accountants, financial advisors and real estate brokers. Originated, structured, processed and placed commercial and residential real estate transactions including multi-family, office, retail, SBA, construction and bridge loans. Provided lines of credit for small and middle market businesses.

Attorneys and Accountants

Mark L. Newfeld

 

With over twenty eight years of serving clients in a variety of industries, Mark Newfeld’s areas of expertise include commercial transactions, business formation, purchase and sale of business enterprises, contract preparation and review, corporate compliance, review, analysis and preparation of bank documentation related to loan or asset workouts including modification, forbearance, intercreditor and other agreements and other business related matters. His real estate practice focuses on commercial and residential transactions within New York City, Nassau, Suffolk, and Westchester Counties.

 

William J. Fallon

 

With a background in litigation and small business, Mr. Fallon is engaged as legal counsel for a diverse client base including Fortune 100 lenders, title insurance companies, Wall Street traders, business

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and individual litigants. In his real estate practice, he concentrates on commercial, mixed use and multi-family mortgage lending, distressed commerical real estate and assets, and also litigation.

About his firm

The Law Office of Newfeld and Fallon, PLLC is a general practice law firm founded by Mark Newfeld and Will Fallon with concentrations in real estate, contracts, small business representation, bankruptcy, foreclosure, litigation and bank representation related to commercial and multifamily mortgage transactions and also commercial loan and asset workouts including modification, forbearance, intercreditor and other agreements.

 

Our mission goes beyond providing excellent legal counsel. We understand that when it comes to providing legal services one size does not fit all. We pride ourselves in taking the time necessary to understand our clients and their needs. This

in-depth knowledge allows us to provide thoughtful insight and cost effective legal services specifically tailored to each client.

 

The firm’s varied clientele includes banks, lending institutions, title and abstract companies, real estate entities, partnerships, corporations, joint ventures, limited liability companies, businesses and business owners, litigants and individuals.

 

The firm's real estate practice maintains an extensive national network of lenders, realtors, mortgage brokers, title insurance companies, portfolio managers and specialized attorneys that further enhances the comprehensive service we provide to each real estate client

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Vincent Civale - Accountant

Vincent Civale, a Certified Public Accountant with over 30 years experience, entered the practice of public accounting in 1967. After graduating from Rider University with a Bachelor of Science degree in Accounting, he established a high quality accounting and tax practice.

Vince continues to combine a solid understanding of the situations and goals of each client with long term vision to provide the management advisory and tax planning services in which he excels. Vince has extensive dealings in real estate development. He is an active member of the AICPA and the New Jersey Society of CPAs.

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Strategy and Implementation

Kevlar specializes in “paper” acquisition. The company’s strategy is simple, which is to acquire notes at competitive prices that provide significant opportunities to yield double digit returns for the company and its investors. To do this, the company will form valuable relationships with banking executives and seller agents in the US. The company will look to acquire roughly 100 notes to start, averaging between $80,000 and $150,000. Notes can be for residential or commercial properties, with a performing or non-performing status. The company can purchase notes from the following entities, and is seeking primarily bulk purchases:

Community Banks

Credit Unions

Rehab Lenders

Conforming Mortgage Lenders

Other Financial Institutions (Large National Banks etc.)

Builders/Contractors

Real Estate Developers

Independent Private Investors

Private Mortgage Holders

Hedge Funds

Private Equity Firms

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Buying & Acquisition Strategy

When determining which notes to buy, Kevlar considers the following:

The value of the property which serves as collateral for the loan

The terms of the current loan (interest rate, length of term, etc)

The amount of the down payment made on the property

The location of the property (state, city etc.)

The status of the loan (current, in default, late payments, etc)

o If in default, the company looks at how long in default, in addition to reasons if known

The loan to value ratio (the amount of money remaining to be paid on the loan balanced against the value of the property which serves as collateral for the mortgage note)

In order to gain deeper discounts, the company will seek to buy in bulk pools from various financial entities.

As timing is limited during the buying process, Kevlar has created a streamline process that will allow the company to quickly but strategically evaluate the notes portfolio to determine the best course of action.

Kevlar is seeking a rate of return between 15% and 20% annually. Two examples are provided below on how notes can be purchased.

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EXAMPLE 1

Home Value: $200,000

There are two notes on the property.

1st Mortgage Note 2nd Mortgage Note

Note Balance $125,000 $25,000

Kevlar’s Pays 60% 40%

Kevlar’s Cost $75,000 $10,000

Kevlar now owns the property at $85,000. With the home costing $200,000, the company can sell home at under market value for $175,000

Kevlar’s Total Cost: $85,000

Kevlar’s Gross Profit: $90,000

Over 100% gross profit.

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EXAMPLE 2: Non Performing Note

Home Value: 200,000

There are two notes on the property.

1st Mortgage Note 2nd Mortgage Note

Note Balance $125,000 $25,000

Kevlar’s Pays 60% 40%

Kevlar’s Cost $75,000 $10,000

Current Mortgage Payment $1,099.50 $366.84

Current Mortgage Terms 30 year, 8% 10 year, 10%

Total Mortgage Payments $1,466.34

New Terms with Kevlar

One Mortgage of: $150,000 $0

Mortgage Payment $1,250.58

Mortgage Terms 20 year, 5.5%

Kevlar now owns the property at $85,000. The company maintains the original $150,000 balance, but Kevlar bought the property for $85,000. This allows for an equity profit of 65,000, 76% profit.

Essentially, Kevlar is now locked in for profit plus interest, and whenever the home is sold or if it gets defaulted, the company makes money. Kevlar can also choose to resell the note to another institution or investor, after a certain period of collecting monthly payments.

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The homeowner also saved 10 years on mortgage payment, along with $215.42 (Previous Mortgage Payment – New Mortgage Payment).

To acquire these notes, the company will cold call financial institutions and utilize various networking techniques in order to stay in the loop of new offers. Close relationships with seller agents will prove effective. Proposals will be sent out and transactional meetings will occur. Maintaining quick accessible capital will be essential to accomplish these strategies.

Sales Strategy

The company will continually evaluate its portfolio, debt to income ratios, and risk exposure and determine when it is necessary to sell the notes being managed in house.

Generally the following scenarios can occur with the newly purchased notes:

1. Kevlar modifies the existing loan in terms of years, interest and monthly payment and manage the note.

2. Current homeowner is unable to pay based on financial situation.

a. The company will offer a deed in lieu of foreclosure and take the property from the owner. At this time the note can be sold or property sold to a new buyer.

b. A foreclosure takes place, and property is sold.

3. Kevlar flips the note immediately for a profit and sells to another investor or firm.

To execute these strategies Kevlar will use FCI a loan servicing company to manage customers that remain in-house. Kevlar will also form relationships with various investors, hedge funds and private equity firms across the US. Alliances will also be form with real estate agents and brokers, to ensure that properties that have to be sold, can be done effectively.

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Implementation Process Flow

The diagram below depicts the process that Kevlar will execute in purchasing notes:

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Market

Overview

In 2006, $1.93 trillion of mortgage debt was issued on the US bond market. This amount is roughly the GDP of the United Kingdom. In the US bond market, mortgage related debt amounts to $6.5 trillion in total.

The industry is known as the “paper” industry, and is considered to be in its infancy stages. Roughly $25 billion worth of paper is created yearly. There are about 1000 full time brokers, and another 10,000 that perform in a part-time capacity. However, most brokers specialize in the secondary real estate market.

The phrase subprime mortgage crisis has been written and documented extensively over the last three years. Several analysts have looked at the causes of the subprime mortgage crisis. Essentially, approximately 80% of US mortgages issued in recent years to subprime borrowers were adjustable rate mortgages (ARM). After the housing market peaked in the middle of 2006, refinancing became more difficult as house prices began to drop. Concurrently, ARMS began to reset at higher rates and mortgage delinquencies soared.

As of March, 2007, the value of USA subprime mortgages was estimated at $1.3 trillion, with over 7.5 million first-lien subprime mortgages outstanding. The value of all outstanding residential mortgages, owed by USA households to purchase residences housing at most four families, was US$9.9 trillion as of year-end 2006, and US$10.6 trillion as of midyear 2008.

The entire occurrence has made financial institutions respond by selling notes in order to gain cash flow, and avoid taking bailout funds issued by the Government. It has created a perfect timing for Kevlar, while providing additional opportunities for homeowners to stay in their home when re-modifications are possible.

Experts in the industry predict that the mortgage crisis will continue to escalate through 2013. This is specifically in reference to subprime, Alt A and prime loans. An anticipated $1.0 trillion is expected to be in default. This will ultimately cause credit and liquidity issues for lending institutions. Even as the economy

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improves, selling off mortgage notes will continue to be a mechanism utilize, as it has occurred for several years.

Competitive Advantages

There are several types of opportunities available in the cash flow business, and brokers can take varying routes. Consequently, there are private mortgage notes, bank financed notes, mortgage back security notes and several other variations. One of the distinctive advantages of Kevlar is the immense knowledge and experience the management team possesses in this area. This in itself creates a lower risk opportunity, in that the founder understands how the systems work, and how to effectively maneuver the system to create double digit returns.

The founder’s wide exposure with key players in the industry correlates to greater opportunities for proposal and bid acceptance. This will allow the company to gain ground at a faster rate, while the real estate market is extremely hot.

Ultimately competitive advantages exist in the following manner:

1. Management experience and network strength

2. Multiple liquidity solutions and multiple exit strategies

3. Ability to “cherry pick” notes

4. Focus only with 1st position and primary notes

5. All notes are secured

6. Substantial equity at purchase

7. Accessibility to a variety of financial entities with the ability to act quickly

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Barriers to Market Entry

There are several barriers to market entry for new firms, they include the following:

Capital: In terms of working with banks and larger financial institutions, there is a substantial requirement in terms of cost. Most national banks will require a minimum purchase of $5M for a note pool.

Relationships & Alliances: In general most transactions are initiated with a Sellers Agent requiring strong networking and firm commitment.

Knowledge/Know-How: Being an extremely aggressive market, there are tons of demands for the notes, so any company entering the field must have a great know how of execution to avoid costly and timely mistakes.

Comparable Business Model

With over 10,000 companies performing in this space, it is a competitive market. Most companies provide services that allow the customer to remain in their home, while maximizing profits. These models all hinge on the same principles:

The sustainable competitive advantage of Kevlar will be its relationships, experience in the business, knowledge base and overall strategy.

Purchase Notes at Discounted Prices

Loan Remodification to Homeowners

Liquidate by Selling Notes

Property Selection

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Pest Analysis

A scan of the external macro-environment in which the firm operates can be expressed in terms of the following factors:

Political Economic Social Technological

The acronym PEST (or sometimes rearranged as "STEP") is used to describe a framework for the analysis of these macro environmental factors. A PEST analysis fits into an overall environmental scan as shown in the following diagram:

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Political Factors

Political factors include government regulations and legal issues and define both formal and informal rules under which the firm must operate. Some examples include:

Tax Policy Statutory Compliance Environmental Regulations Trade Restrictions and Tariffs Political Stability

The US Government has taken an active role in resolving the mortgage crisis, and providing financial institutions with incentives to create remodification loans for homeowners. Various financial bailouts were also provided for the larger national banks. Many experts question the viability of these programs, and while it has help, the problem is large scale and ongoing, growing in numbers with time. In as much as the services provided by Kevlar provide great financial gains for the company and its investors, it also inevitably helps homeowners to stay in their homes, providing a great benefit to society.

Economic Factors

Economic factors affect the purchasing power of potential customers and the firm's cost of capital. The following are examples of factors in the macro economy:

Economic Growth and Stability Interest Rates Exchange Rates Inflation Rate

It is apparent that if interest rates drop, homeowners whose notes Kevlar has purchase, may choose to refinance, and ultimately cause early exiting. This is a typical side effect of this industry. However, with banks, being extremely tight on lending credit, there is less possibility for this to occur, even if interest rate drops.

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The current state of the economy actually increases opportunity for Kevlar. In addition, the company gains equity upfront by purchasing the notes at a discount.

Social Factors

Social factors include the demographic and cultural aspects of the external macro environment. These factors affect customer needs and the size of potential markets. Some social factors include:

Health Consciousness Population Growth Rate Age Distribution Service Popularity and Adoption

Kevlar is a socially friendly company. The apparent good of the company in the terms of assisting homeowners is clear. The company will also participate in charitable organizations. The company may offer credit repair services and assist in educating homeowners.

Technological Factors

Technological factors can lower barriers to entry, reduce minimum efficient production levels, and influence outsourcing decisions. Some technological factors include:

E-Commerce Teleconferencing Technological Incentives Rate of Technological Change

The use of the Internet and many of the new technological advances currently available actually allows Kevlar to keep expenses low, and reach more institutions. There are significant benefits in this capacity for the company.

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SWOT Analysis

In evaluating both the advantages and the challenges present within this business model, the resulting balance of strengths, weaknesses, opportunities, and threats are noted below:

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Strengths:

Expansive Knowledge and Experience – The management team are skilled and proven leaders in the industry, with the knowhow of the internal workings of the system.

Strategic Relationships – Kevlar has strong existing relationships with many of the key players in the industry, giving the company a competitive advantage in securing notes.

Multiple Exit Strategies – The Company will have many ways to recoup its investment and lessen risk exposure.

Substantial Equity at Purchase – By purchasing at the rate of 40% to 60% on non-performing notes and 80% to 85% on performing notes, the company immediately creates equity on purchase. All notes will be purchase below the market value of the property.

Timely Liquidation – The Company in most cases will be able to quickly liquidate a note based on foreseeable circumstances.

Collateralized Notes/Primary Notes – All notes being purchased are for primary, first mortgage notes that are secured by an asset/property. This limits the risk exposure for the company and its investors.

Weaknesses:

Capitalization – If Kevlar is not capitalized according to the schedule set forth herein, management will not be able to take advantage of the opportunity presenting itself at this time.

Opportunities:

Subprime Mortgage Crisis – The recent subprime mortgage crisis has created increase opportunity for the notes and “paper” industry. With millions of ARM notes coming due, and tighter credit lending guidelines, banks are leaning towards selling their non-performing notes.

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Trillion Dollar Deficit – Because of the extent of the debt currently existing, in terms of outstanding mortgage notes, there will be significant opportunity for Kevlar for many years. The larger the deficit the more prone banks desiring to increase cash flow, will be willing to sell their mortgage notes.

Threats:

Competitive Marketplace – Because of the intense competition in the industry, Kevlar will have to create streamline processes and form strong relationships to ensure that the company wins bids and purchase notes at prices that will maintain its overall objective.

Status of Unemployment in the US – In order for loan remodification to work effectively, homeowners must be generating income. The unemployment rate introduces some risk with homeowners losing work after the loan has been modified. Consequently, in such situations, Kevlar will attempt to resell the note. As notes are purchase at discounted prices, the company in most cases will recoup cost and make a profit.

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Assimilating these lists into relevant, task-oriented analysis based on categorized criteria yields the following Strengths and Risks Matrix:

Criteria Strength Risk

Market Presence The owner of Kevlar is already a well recognized and accomplished professional in the industry. This gives the Company access to deals and opportunities that others may not be aware of.

It is important to balance the business of Kevlar with the social responsibility of assisting homeowners.

Strategic Alliances

Strong alliances and partnerships with banking executives, real estate brokers and Supplier Agents will ensure that the company is kept abreast of the best deals forthcoming.

None

Capitalization The business model is in place and the company is positioned to move forward in its plans with appropriate start-up capital.

If opportunities occur quickly, under-capitalization could minimize the growth opportunities that Kevlar can take advantage of.

Demand There is a significant need throughout the US.

Ultimately because of the demand, the industry is highly competitive

Growth Kevlar will be able to quickly grow and develop a healthy note portfolio once the right resources are in placed.

None

Cost Structure Management has proven its ability to contain costs, purchase low and deliver double digit returns.

None

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Marketing Implementation and Strategy

Overview

In general, Kevlar will be utilizing existing contacts and network in order to gain access to notes pool. The company will also utilize grass roots cold calling and emailing to contact Sellers Agents. Kevlar will create marketing brochures targeting the investment opportunity, along with the note servicing solutions to promote to both the investor and the financial entities. Face to face presentations will be utilized whenever possible, but in general meetings with occur via phone and online conferencing.

The company will be targeting most efforts to small to large pools of notes. For the private owner notes, the company will include some brief testimonials in order to inspire trust and alleviate any concern. The management team will ensure that it provides visual representation of the company, by implementing a consistent theme and look, and participating in various engagements catered towards the financial and mortgage industry.

To gain further credibility, the company can increase visibility by effectively utilizing various Internet tools such as blogs, Twitter, LinkedIn and other social sites, including performing search engine optimization techniques through the company’s website, so as to ensure top positioning on search engines when key phrases are entered.

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Exit Strategy

As discussed prior in this document, the company will utilize multiple exit strategies to ensure that the company is able to achieve double digit returns. These strategies include:

1. Refinancing notes once performing

2. Sell note to note investors once performing

3. Deed in Lieu of Foreclosure (in the scenario where homeowner does not agree, nor desire to utilize loan modification options)

4. Short Sale

5. Foreclosure

The company will determine on a case by case basis how long the note will be serviced. At this time, it is estimated that for performing notes, the company may hold note for 12 to 36 months, before selling to a broker, hedge fund or private equity firm.

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Process Development Map

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Financial Model and ProjectionsAttached is a one-year financial model that seeks to illustrate the process of purchasing and liquidating notes. While some will be held for longer periods, most will be resold at mark-up an average of three months after purchase. The attached model seeks to illustrate this strategy from a financial standpoint. Because of the cost of the notes and the fact that they will be purchase in cash there are no discernable liabilities from Kevlar, and the operating expenses estimated are simply for day to day procedures. There will be a decrease in cash of about $5M during the first year of the model but it is important to note that after the 12th month of operation there will be no more cash utilized for buying as all notes will be purchased in the first twelve months. After that period the notes will simply serve as cash cows, and can be used as the basis for another round of funding and internal growth. Based on projections, the company will generate a positive net income of almost $1.6M in Year One, will have a positive cash balance of roughly $10M, and will have positive Owners Equity of over $18M.

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