Rare Affordable NYC Residential Rental Development and Opportunity Zone Investment Opportunity ($21MM)

24-Mar-2023

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An eternal optimist, Liu-Yue built two social enterprises to help make the world a better place. Liu-Yue co-founded Oxstones Investment Club a searchable content platform and business tools for knowledge sharing and financial education. Oxstones.com also provides investors with direct access to U.S. commercial real estate opportunities and other alternative investments. In addition, Liu-Yue also co-founded Cute Brands a cause-oriented character brand management and brand licensing company that creates social awareness on global issues and societal challenges through character creations. Prior to his entrepreneurial endeavors, Liu-Yue worked as an Executive Associate at M&T Bank in the Structured Real Estate Finance Group where he worked with senior management on multiple bank-wide risk management projects. He also had a dual role as a commercial banker advising UHNWIs and family offices on investments, credit, and banking needs while focused on residential CRE, infrastructure development, and affordable housing projects. Prior to M&T, he held a number of positions in Latin American equities and bonds investment groups at SBC Warburg Dillon Read (Swiss Bank), OFFITBANK (the wealth management division of Wachovia Bank), and in small cap equities at Steinberg Priest Capital Management (family office). Liu-Yue has an MBA specializing in investment management and strategy from Georgetown University and a Bachelor of Science in Finance and Marketing from Stern School of Business at NYU. He also completed graduate studies in international management at the University of Oxford, Trinity College.

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Projected capital structure: $106MM ($26MM equity, $80MM debt)

171k bsf (affordable residential 51k nsf (76 units) / free market residential 51k nsf (76 units) / retail 49k sf (3 units))

1) JV GP or LP equity investment available: $21MM (Sponsor puts in 20% ($5MM) and looking for 80% partner

This is a rare affordable NYC private equity commercial real estate development and qualified opportunity zone investment opportunity. The Sponsor is acquiring an existing cash flowing asset on a large 24k sf corner lot and will earn $1MM annually on a stable five-year lease back while re-zoning the property ($146/bsf on re-zoned site) to min. 7.2 FAR. The Sponsor has operational expertise in managing a diverse portfolio of mixed-use properties and redevelopment projects. The local Sponsor is passionate about community driven-development in his neighborhood.

The Sponsor will build a 151k nsf, 155 units (76 units affordable, 76 units free market, 3 retail units) ten-story mixed-use complex. This development is also a qualified opportunity zone with major frontage on a high traffic street and across from a $2B mega development. The commercial retail space will have world class retailers given the Sponsor’s expertise and long-term relationships in the retail sector. Residents will benefit from the following value-added amenities due to the property’s close proximity to the largest privately-owned NYC community-driven development including community health and wellness facilities, an arts and culture hub, cinema, supermarkets, and restaurants. The site will also be next to 2 acres of public open space for plenty of light and air quality amenities. The property is located next to a transit station for easy access (10 minutes) to midtown Manhattan.

The property is ideal for investors who value a tax shelter from long-term capital appreciation in a QOZ and the comfort of capital preservation from NYC residential rental properties while also earning short-term income in an existing cash flowing property during the ULURP re-zoning approval. This trendy NYC neighborhood is only in the early stages of gentrification and will have plenty of upside long-term capital appreciation potential.

Control of Land and Current Status The Sponsor will soon sign a binding LOI and expects to close PSA within 90 days. The agreement includes a five-year leaseback with seller for $1MM annually which will be used to fund the ULURP re-zoning process and also further lower the cost basis. The Sponsor is looking for a GP or LP partner for 80% of the equity in order to help acquire this site and conducting pre-development costs (architect designs, engineering, and zoning analysis). The Sponsor will build a politically-endorsed mixed-use retail, residential affordable, and free market rental complex strategically located in the path of growth of a $2B megaproject which is also one of the largest private affordable housing projects in NYC history.

Investor Equity, Debt Financing, and Investment Tax Credits This 171k bsf development site is available for JV partnership ($21MM GP or LP equity investment opportunity is negotiable). Sponsor will have $5MM equity in the project. Sponsor is in the midst of acquiring control of the corner lot and is also negotiating control of three additional adjacent sites (30k sf) to assemble a potentially even larger 200k sf assemblage. Construction can be completed with non-union labor and within 18-24 months. Sponsor will look for $80MM in construction financing once ULURP re-zoning process is completed.

This affordable housing development project has political support from NYC’s mayor and governor who are pro-development and want to encourage long term investment in the community with the rehabilitation of the commercial district and also the creation of much needed affordable residential rentals. This site is also a qualified opportunity zone. Given the NYC housing crisis it’s expected NY will renew the 421A tax abatement in order to encourage NYC developers to build new housing stock.

Value Proposition This corner mixed-use development is in one of the fastest growing and culturally diverse neighborhoods in NYC and is also situated in the center of the next great entirely new NYC neighborhood. providing residents with walkable access to

The property is located in a high population density area across the river from Manhattan, NYC. The development boom in this western frontier is attracting young professionals due to easy access to Manhattan while offering the value proposition of higher quality of life and affordable urban living in the 1st fifteen- minute city.

Economic Trends Favor Residential Rental Assets as a Long-Term Investment As a mega-city NYC benefits from many positive long-term economic forces such as diverse job creation, student population growth, and strong immigration which will continue to lead to strong affordable residential housing demand. Long-term economic forces and student housing demand in NYC continue to strengthen as demand for affordable housing is expected to rise dramatically in the next five to 10 years in NYC. NYC is a leading educational hub with at least sixty-three academic institutions which draw demand for affordable residential housing from students, young families, and young professionals. Studies project NYC will need over 500k in new housing stock by 2030. With a severe housing crisis in NYC, the shortage in affordable housing stock has created a strong long-term need for affordable housing.

Project Valuations Acquired land at $25MM ($146sf) / $320 hard costs + $32 soft/finance/marketing costs = $620nsf All-In Costs

Total All-In Cost: $106MM / $620nsf

YTC: 7.4%

We project the following:

51k nsf ($41.55 rsf, 76 units) affordable and 51k nsf ($75.61 rsf, 76 units) free-market rents

EGI $2.1MM / NOI $1.7MM / 5% Cap = $34MM

EGI $3.9MM / NOI $3.1MM / 5% Cap = $62.4MM

49k sf Retail at $69.49 rsf = EGI $3.4MM / NOI $3MM / 6% Cap = $51MM

$147MM MV based on sum of parts

Investor ERM: 2x, IRR: 48% / $2.6MM cash on cash return 23% (8.5% rate & $26MM equity)

Time line: ASAP – This asset is a high-quality off-market opportunity on a prime corner lot next to a $2B megaproject

Oxstones Real Estate, www.Oxstones.com CRE@Oxstones.com

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