OZ Pitch Day - March 7, 2024
In this webinar, Jamie Nahon discusses the Eagle OZ Fund, which is developing multifamily housing in Chicago’s historic Bronzeville neighborhood located just south of downtown.
- An overview of Eagle OZ, a real estate company investing in new construction of apartment buildings in Chicago’s historic Bronzeville neighborhood.
- The launch of Fund II, which will develop nearly 200 units in Chicago and features a favorable profit split for investments made in 2021.
- The selection of Eagle OZ as America’s Top OZ Project, recognizing the commitment to
- The reasons why Jamie believes Bronzeville is an “unusually good investment opportunity,” including the emergence of an increasingly wealthy middle class in the area.
- The timeline for Eagle OZ Fund II, starting with lot acquisition now underway.
- The major developments now underway on the south side of Chicago, including a hospital redevelopment, the Bronzeville Lakefront site, the Obama Presidential Center, and a new Tiger Woods golf course.
- How Chicago housing prices compare to other major metro areas, and the opportunity that this creates for investors.
- Exit options for the fund after the 10-year time horizon.
- The impact of Eagle OZ, including the creation of construction jobs that pulls from the local labor pool.
- Q&A with webinar attendees.
Featured On This Webinar
- Jamie Nahon on LinkedIn
- Eagle OZ
- Bronzeville Lakefront Development
- Obama Presidential Center
- South Shore & Jackson Park Golf Course Restoration
- Pitch Deck [PDF Download]
Industry Spotlight: Eagle OZ
Eagle OZ is a group of seasoned local real estate professionals who are already active with creating and managing hundreds of affordable housing units in neighborhoods south of Chicago’s downtown core. They are brought together by the shared vision to use the Qualified Opportunity Zone for an investment that is great for both investors and the subject communities at large.
Learn More About Eagle OZ
Jimmy: So, now without further ado, I’ll turn it over to Jaime Nahon. You can talk to us about what you’re developing there in Chicago’s historic Bronzeville community. Jamie, take it away, please.
Jamie: Yes, sir. Opportunity Zones are said to be the greatest tax incentive of all time, but you can still make a bad investment in an Opportunity Zone, saving on taxes while losing money. Welcome to historic Bronzeville, just south of Chicago’s downtown. Bronzeville is an unusually good investment opportunity. Powerful forces of revitalization are all coming together with billions of public and private dollars, setting the stage for catalytic economic growth and depreciation. Eagle OZ is a single asset Opportunity Zone Fund, building 264 multi-family rentals in Bronzeville. Fund I construction is already underway with 66 units. Look at these photos. We are launching Fund II with a $20 million raise to build 198 more units and we invite accredited investors to join us. We are projecting a 20% plus IRR for ground-up construction in Chicago, a low-risk investment with a nice upside profile. And for investors who sign up before the end of 2021, we are offering a discounted profit split of 85/15, which will put an additional $8,900 of expected profits into your pocket for every $100,000 invested by year-end, increasing to 80/20 in the new year if space is left.
The shaded green blocks are Eagle OZ Opportunity Zone tracks and are the closest opportunity zones to downtown Chicago. We are local Chicago developers with our own money invested in Eagle OZ. I am Jaime Nahon, a chartered financial analyst with 20-plus years experience managing real estate investment funds and I’m proud to be at the head of Eagle OZ. My partner, Scott Allbright, has been a general contractor and operator in Chicago for 30-plus years. His construction company is building Eagle OZ multi-families. Our head office, with 50 local employees is located just south of Bronzeville. Here’s a picture of the home team. I am excited to announce that Eagle OZ won the award for America’s Most Impactful Project at the Opportunity Zone Expo in Denver this summer, recognizing our efforts to create jobs and housing. It’s one thing to be recognized with an award but serious investors know accolades alone don’t make great investments.
I’ve made the claim that Bronzeville is an unusually good investment opportunity, now I will tell you why. Firstly, you don’t see many big developers in Bronzeville because there are no large tracts of land or right for residential development. Unfortunately, this limits new housing inventory in a market where there is strong demand and need for new housing. We overcome this obstacle, achieve scale, and create a compelling Opportunity Zone project by assembling many smaller infill parcels into a single fund, and Eagle OZ faces lower overall competition with fewer developers in Bronzeville, the economics are on our side. Secondly, notice that Opportunity Zones only appear on scattered blocks here as we are well on the way to revitalization following in the footsteps of the transformed Hyde Park, home to President Obama to the immediate southeast. This observation is supported by new 2020 census data that shows an affluent middle class emerging in Bronzeville. A recent Cranes article makes a case that 10% population growth and a surge in $500,000-plus home sales are pointing to true revival in Bronzeville comparable to Chicago’s North Side neighborhoods in recent years.
Note that Bronzeville held its ground during COVID with stable rent and occupancy demonstrating resilience. These green dots are Eagle OZ Fund I addresses, all walking distance to the metro and a 10-minute ride to downtown. We are now starting to acquire lots for Fund II. Here’s the development plan. Catalytic growth is coming to Bronzeville with $10 billion of economic development and 55,000 new jobs all breaking ground this year. Chicago is the nation’s third-largest metro, an international hub for financing culture but residential property values lag 50% behind the two larger contenders, New York and LA. Conditions are perfect for housing appreciation. Here are the big catalysts which I’ll zoom into in the coming slides. The Bronzeville Lakefront sight, the Obama Presidential Center, Tiger Woods’ new PGA golf course, the University of Chicago. This is the stage for Eagle OZ’s program. Most exciting is the $3.8 billion redevelopment of the Michael Reese Hospital site known as Bronzeville Lakefront. Seven point eight million square feet of new mixed-use space plus an additional 5.5 million future development planned on the adjacent marshalling yards.
This economic engine will create 40,000 new jobs and spin the entire neighborhood into further revitalization. Groundbreaking is scheduled this year with a forecasted of $8.2 billion economic impact. Next, the Obama Presidential Center, just south of Brownsville in Hyde Park with a $700 million ticket. Having broken ground this August, it is expected to create $3 billion of economic development, 7,500 new jobs, and attract 700,000 annual visitors. And just north of here is the Museum of Science and Industry with a million and a half annual visitors. Tiger Woods announced he will open a new PGA golf course in Jackson Park with a $150 million economic impact. And don’t forget the world-class University of Chicago is right here with 35,000 staff and enrollment, a $10 billion endowment, ranked sixth best university in the country and eighth in the world. And we are a stone’s throw from McCormick Place in downtown Chicago, the nation’s third-largest city. Eagle OZ offers you a venue to participate in this wave of catalytic, financial, and social upside with the added bonus of Opportunity Zone tax incentives, an unusually good investment opportunity indeed.
In 10-plus years, we expect to have two exit options, either a sale to investors or to home buyers with appealing units built to new condo standards, all three bed two bath units with enclosed parking. A 20% IRR projection assumes a $465,000 sale price per door to home buyers, based on 2.9% annual home price appreciation from the current market of $350,000, a modest assumption given the catalytic growth coming to Bronzeville. Here’s a sensitivity to our 20% profit expectation with different home price appreciation scenarios from zero to 5%, showing a profit range of 14% to 24%. Let’s talk about impact. We’ve been operating in these markets for many years, and part of our business plan has always been to improve the quality of life for our tenants. We are targeting a 20% affordability ratio delivering 380,000 square feet of new stable living space for over 1,300 people. Eagle OZ is creating at least 150 new construction jobs and 10 new permanent jobs drawing, at least 25% from the local labor pool, and at least 10% of our construction work is subcontracted out to minority-owned businesses. And we follow green standards with energy-efficient all brick buildings and industry best materials across the board. You see the long list here from triple-pane windows to LED lighting. We’re proud to be improving housing quality according to IRIS+ impact standards, with features that improve living comfort and safety in Bronzeville while reducing tenant and landlord maintenance costs.
On a quick tangent and of great interest, Bronzeville is before Congress to be named a National Heritage Area because of its historical significance as a hub of black culture, leaving an outsized footprint on America. The likes of Nat King Cole, Gwendolyn Brooks, and Louis Armstrong found fame here. Bronzeville is home to the Wabash YMCA where Black History Month started, and the Pilgrim Baptist Church, known to be the birthplace of gospel music. National Park Service will be engaged to maintain Bronzeville, telling this nationally important story with $10 million pumped into preserving its remaining buildings and traditions. We are honored to do our part to revitalize this important corner of American history. Back to business, Fund II will build 198 units at a total cost of $211 per square foot. Here’s the operating pro forma for Fund II rentals. We forecast a 6% operating cash yield based on an average year one rent of $2,400 versus the current market of 2,500, allowing room to hit our 20% target affordability ratio. Our competitive 1.25% asset management fee will be deferred until the 6% cash return is paid up to date.
The exit pro forma projects a 17% IRR before OZ incentives and 20% plus IRR after OZ incentives. There is a 9% IRR hurdle, so the manager only participates in profits after you the investors receive a minimum profit of 9% per annum. Once again, for investors who sign up before the end of 2021, we are offering a discounted profit split of 85/15 increasing to 80/20 in the new year. For every $100,000 invested, this promotion works out to an additional $8,900 of profits going into your pocket in 10 years. Don’t miss out. Some risk factors include the rising cost of building materials, which you face in any real estate project while our numbers are based on current prices. The absorption of rentals, mitigated by strong demand here, property taxes in Chicago are always a concern. We’ve assumed a 5% conservative annual growth rate. And crime is often on investors’ minds, but we are in a transforming market where crime is down and where new homes sell for over $600,000. And Eagle OZ diversification of multiple addresses with appeal to both homeowners and tenants in this transforming market really offset many other typical market risks.
Our Fund II equity raises $20 million. The minimum investment is $50,000 for signups before the end of 2021, increasing to $100,000 in 2022 if space is left. We are a single asset boutique OZ fund focused on this one small sub-market of Chicago soon to be a National Heritage Area. We are not a blind pool fund, and we did not go out looking for an OZ project, the Opportunity Zone came to our backyard and we jumped on the opportunity to use these unprecedented tax incentives to drive much-needed investment dollars into our home market. In summary, we are projecting a 20% IRR with stable interim cash flow, all supported by $10 billion of catalytic growth with 55,000 new jobs here in historic Bronzeville, with the added benefits of Opportunity Zone incentives. It’s not often that these many positive factors come together, which is why I think Bronzeville truly is an unusually good investment opportunity. We’d like to invite all viewers to a community investors forum, followed by a site tour next week on November 10th in Chicago. Please email us at [email protected] for details. You can download our investment summary on our website and email us at [email protected] for a subscription box. And remember, investments made before year-end will receive a discounted profit split of 85/15 while space is left going to 80/20 next year. Thank you for your interest.
Jimmy: Jamie, terrific. Thank you for your presentation today. Thank you for partnering with OpportunityDb on OZ Pitch Day once again. I’ve got time for one or two questions here. We got one question few minutes ago came in from an anonymous attendee, he or she asks, could you explain those two exit options that you were talking about? Do you mean that you can either sell the entire portfolio or sell off the individual units?
Jamie: So, you know, we will have all those options, we can sell the entire portfolio to an investor if that’s where we will max out on our price, or if home price appreciation exceeds the value of income. So, if the value of these condos to buyers who want to live in them increase more than investors desire or cap rates in this market, we will end up selling these units to end home occupants, home buyers. It really depends on what happens in the market in the next 10 years.
Jimmy: It’s time will tell is the short answer to that question. One more question, Jamie, and then I’ll cut you loose. We’ll go on to a quick break before we resume programming.
Jimmy: Gary asks, is there any distributable cash flow from permanent financing, and if so, when?
Jamie: So, we are projecting a surplus from refinancing, and that will be probably early in the third year or late in the second year of the project. And you can do what you want with that money, you can put it aside to pay your tax bill in 2027, or you can reinvest it and have it ready there to pay your tax bill.
Jimmy: Tremendous. Well, Jamie, again, thank you for participating with us today. Thanks for your time. Please do email [email protected] or visit eagleoz.com to learn more and to request subscription documents. Jamie, again, always a pleasure speaking with you. Thank you so much.
Jamie: Thank you, Jimmy, for putting this event on.