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Finance and Investment Group - May 2020 Presentation - Information Part

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BridgeGaps Real Estate
BridgeGaps.com
BridgeGaps.com
Disclaimer
General Disclaimer

This Business Plan contains privileged and confidential information and unauthorized use of this information in any manner is strictly prohibited. If you
are not the intended recipient, please notify the sender immediately. This Business Plan is for informational purposes and not intended to be a general
solicitation or a securities offering of any kind. The information contained herein is from sources believed to be reliable, however no representation by
Sponsor(s), either expressed or implied, is made as to the accuracy of any information on this property and all investors should conduct their own
research to determine the accuracy of any statements made. An investment in this offering will be a speculative investment and subject to significant
risks and therefore investors are encouraged to consult with their personal legal and tax advisors. Neither the Sponsor(s), nor their representatives,
officers, employees, affiliates, sub-contractor or vendors provide tax, legal or investment advice. Nothing in this document is intended to be or should
be construed as such advice.

The SEC has not passed upon the merits of or given its approval to the securities, the terms of the offering, or the accuracy or completeness of any
offering materials. However, prior to making any decision to contribute capital, all investors must review and execute the Private Placement
Memorandum and related offering documents. The securities are subject to legal restrictions on transfer and resale and investors should not assume
they will be able to resell their securities

Potential investors and other readers are also cautioned that these forward-looking statements are predictions only based on current information,
assumptions and expectations that are inherently subject to risks and uncertainties that could cause future events or results to differ materially from
those set forth or implied by such forward looking statements. These forward-looking statements can be identified by the use of forward-looking
terminology, such as “may,” “will,” “seek,” “should,” “expect,” “anticipate,” “project, “estimate,” “intend,” “continue,” or “believe” or the negatives
thereof or other variations thereon or comparable terminology. These forward-looking statements are only made as of the date of this executive
summary and Sponsors undertake no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.
Financial Disclaimer

This Business Plan further contains several future financial projections and forecasts. These estimated projections are based on numerous assumptions
and hypothetical scenarios and Sponsor(s) explicitly makes no representation or warranty of any kind with respect to any financial projection or
forecast delivered in connection with the Offering or any of the assumptions underlying them.

This Business plan further contains performance data that represents past performances. Past performance does not guarantee future results. Current
performance may be lower or higher than the performance data presented.

All return examples provided are based on assumptions and expectations in light of currently available information, industry trends and comparisons to
competitor’s financials. Therefore, actual performance may, and most likely will, substantially differ from these projections and no guarantee is
presented or implied as to the accuracy of specific forecasts, projections or predictive statements contained in this Business Plan. The Sponsor further
makes no representations or warranties that any investor will, or is likely to, achieve profits similar to those shown in the pro-formas or other financial
projections.
BridgeGaps.com
Experienced Sponsor Team
Vinit Nagda
• Co-Founder and Principal at BridgeGaps
• Full time Real Estate Entrepreneur and Investor.
• General partner in 650+ units of multifamily properties
worth $64M in the states of New Jersey, Arizona,
Georgia & Florida. Equity partner in 1000+ units.
• 12 years of diverse real estate experience includes buy
& hold, rehab and flip, foreclosure investing, private
lending, passive and active multifamily investing.
• Served as Treasurer and President of a 250+ unit
condominium for 4+ years.
• Licensed Real Estate Agent in the state of New Jersey.
• Masters in Computer Science.
BridgeGaps.com
Experienced Sponsor Team
Vishal Arora, CFA
• Co-Founder and Principal at BridgeGaps
• Serial Entrepreneur and experienced MultiFamily
investor.
• Equity partner in 600+ units in multifamily properties.
• Spent 13 years in Financial Services industry at
Standard and Poor’s. Oversaw M&A with other
exchanges and other companies. Also ran custom
index operations and fixed income research that
had more than USD 100 Billion of products tied to
them.
• Started his first business at the age of 15.
• Undergraduate degree in computer science and
CFA charter holder.
BridgeGaps.com
Agenda

Residential Real Estate, Why?

Common Terms, Deal structure, and Deal Cycle

Risk Management & Asset Protection

20 Questions to ask every sponsor before investing

First Q&A Session

An Example deal and how to evaluate it

Sample Monthly / Quarterly updates

Q&A Session
BridgeGaps.com
Housing shortage across growing
cities
Why, Residential
Real Estate
Acquisition at cheaper price than
replacement value
Steady cash flow with lower volatility
Calculated use of leverage to
enhance returns
BridgeGaps.com
Growing States:
Markets to invest
& why?
North Carolina, Georgia,
Florida, Texas, Tennessee,
South Carolina
Landlord Friendly laws:
Nonpaying tenants can be evicted easily
Population Trends:
Job Growth and population migration from northern states
Weather:
Warmer Weather
BridgeGaps.com
Available to Accredited and
Sophisticated investors
What are Private
Placement Deals
Typically not publicly
advertised.
Governed by the SEC rules
BridgeGaps.com
Deal by Deal
Closed ended
Example Deal
Structure
Fund Structure
Closed ended
Open ended
BridgeGaps.com
10
Deal Sourcing
Creating Business Plan
Typical Deal
Cycle
Implementation of the Business Plan
Selling the Asset
BridgeGaps.com
Deal Sourcing & Creating Business Plan
Typical Deal
Cycle
• Develop relations with brokers and owners
• Reviewing new deals on a regular basis
• Underwrite the deal and detailed analysis
• Create preliminary business plan
• Submitting Letter of Intent (LOI)
• Getting in contract
• Due Diligence period
• Finalize business plan (in sync with
property management company)
• Decision point after Due Diligence - What
happens if we don’t move forward?
• Raise money and close the deal
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Implementation of the business plan
Typical Deal
Cycle
(Continued…)
• Work with PM to implement business plan on a
weekly basis
• Manage regular operational aspects of the deal
• Manage capital expenditures for the deal
• Oversee the PM book keeping
• Communicate with investors on a monthly basis
(or more if needed)
• Return distributions to investors on predefined
frequency
Selling the Asset
• Keep a close eye on the market activity and
decide a suitable time to refinance or sell the
property
BridgeGaps.com
Preferred Return/Hurdle Rates
The preferred return, or hurdle rate, is basically a minimum
annual return that the limited partners are entitled to before
the general partners may begin receiving carried interest. If
there is a hurdle, the rate is typically around 8%
Internal Rate of Return (IRR)
Commonly
Used Terms*
*Source: Investopedia.com
The internal rate of return (IRR) is a metric used in capital budgeting to
estimate the profitability of potential investments. The internal rate of
return is a discount rate that makes the net present value (NPV) of all
cash flows from a particular project equal to zero. IRR calculations rely on
the same formula as NPV does.
Cash on Cash Return (COC)
A cash-on-cash return is a rate of return often used in real
estate transactions that calculates the cash income earned
on the cash invested in a property.
Debt Service Coverage Ratio (DSCR)
In corporate finance, the debt-service coverage ratio (DSCR)
is a measurement of the cash flow available to pay current
debt obligations. Banks look for a DSCR Ratio of more than
1.25
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Claw backs
A claw back is a contractual provision
whereby money already paid must be returned if
certain goals are not met.
Asset Management Fees
Compensation for the sponsors to manage the deal.
Commonly
Used Terms
(Continued)
Cap Rate or Capitalization Rate
The capitalization rate (also known as cap rate) is used in the
world of commercial real estate to indicate the rate of
return that is expected to be generated on a real estate
investment property.
Return of Capital vs. Return on Capital?
BridgeGaps.com
Fees Structure
Acquisition Fees
Typically 2-3% of the purchase
price or total project cost
Financing Fees
Typically 0.5% - 1.5% of the loan
amount
Asset Management Fees
2% of the gross revenue
Disposition Fees
1% of the selling price
Profit Sharing
Profit Split between sponsors
and Limited Partners
Examples on next page
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A Flat Cut
• An example is a flat cut of 80/20% on every dollar earned
Preferred Return with hurdles
Example Profit
Sharing
Structures
• A preferred return is offered typically 6-8% per year
• Deal Sponsor takes a profit cut in the range of 20-50%
• Deal Sponsor’s profit share increase after a certain IRR
hurdle is hit
Preferred Return with upside cap
• A preferred return is offered typically 6-10% per year
• Deal Sponsor offers a profit cut above the preferred return
• Investor has a preset cap. Any returns above that cap is
kept by the deal sponsor
Preferred Equity Tranche
• A preferred return is offered at 8-10% per year.
• No upside above the preferred return is offered.
• The investor is senior on the capital tranche. Gets paid
before the general equity tranche.
BridgeGaps.com
Type of Loans
Use of
Leverage and
Investor Risks
• Typically Loan to Value (LTV) 70-80%
• Agency or Conventional Loans
• Preference is Fixed Rate, Long Term debt
Investor Risks
• Investors never have to guarantee the
loan/debt
• Investors don’t have to provide any
personal financials
• Lenders CAN NOT go after the investors if
asset does not perform.
BridgeGaps.com
Segregation of Ownership and
Management
• One entity is created to own the property
• Another entity manages the property;
typically sponsor’s entity
Asset
Protection
Protection against lawsuits
• Property Management company should be
the first line of defense
• Management company should be the next
in line
• After that ownership entity comes in line.
Creating a significant protection.
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Market Risk
• Occupancy/Housing Demand
• Population Trends
• Ease of Doing Business
• Landlord/Tenant Laws
Team Risk
Risk
Management
• Integrity and Vision of Sponsors
• Competency to execute the business plan
Deal Risk
• Interest Rate Risk
• Fixed Rate/Long Term Debt
• Business Plan Risk
• Work with established Property Management Companies
• Continuous learning and development of sponsors
• Creating ways to increase the Net Income of property e.g.
Corporate housing, AIR BNB etc.
BridgeGaps.com
20 Questions to
ask every Deal
Sponsor…
BridgeGaps.com
What is the breakeven occupancy for the property?
What are the major risk points for this project?
Deal Specific
Property
Questions
What’s the status of the major systems, like the
plumbing, roofs, siding, windows and HVAC?
Why is the owner selling?
How do the year 1 income and expense projections
compare to the trailing 12-month financials?
How much money are you placing into reserves each
year? What is the debt structure?
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Is the return guaranteed?
How long do I have to keep my money in the deal? What
happens if I want to use my invested money for something
else? Can I pull it out?
How do you make money? What are all the fees charged?
Investment
Related
Questions
How much money will you have in the deal? How much is
your family investing?
What type of financing do you typically get with these assets?
Has your company ever been sued or being sued now?
What type of reserves are typically established with each
property to shield the investors from any potential capital
calls?
BridgeGaps.com
There are a number of general partners in the market.
Why should an investor invest with your company?
Who is a part of your team?
Team
Questions
Have you ever taken a deal full cycle?
Tell me about your worst syndication/most difficult
deal? What happened?
Have you ever sold your own shares before selling the
property in any syndication?
How many of your investors have invested in multiple
assets?
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How do you qualify a
market?
Market and
Sub-Market
Questions
Are there any crime issues?
What are the rent comps and
sales comps for this property?
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25
Q&A
BridgeGaps.com
Contact Information:
Vinit Nagda
646-457-8852
[email protected]
Vishal Arora, CFA
347-647-1426
[email protected]
BridgeGaps.com
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