Hospitality Project In A Booming Texas OZ, With Coastal Bend OZ

In this webinar, John Berlet presents a short-term rental project in Rockport, Texas inspired by a popular Moroccan tourist destination.

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Webinar Highlights

  • John’s history as a financial planner who sold his practice, and traveled to see hundreds of OZ locations in 17 states;
  • Genesis of the Blue Zone project in Rockport, Texas;
  • Rockport’s status as a tourist destination;
  • Review of the Blue Zone destination, inspired by Chefchaouen in Morocco;
  • Live Q&A with OZ Pitch Day attendees.

Industry Spotlight: Coastal Bend

Coastal Bend is developing the Blue Zone Resort, a short-term rental resort located near the Rockport (Texas) Cultural Arts District, surrounded by galleries, art studios, wineries, bars, restaurants, and shops.

Learn More About Coastal Bend

Webinar Transcript

Jimmy: The next fund that we’ll be presenting is Coastal Bend OZ. It’s a hotel project in Rockport, Texas. I’m gonna promote John Berlet to panelist now.

John: Okay…

Jimmy: That looks beautiful.

John: A little bit who I am, and then I’ll tell you about the Blue Zone Resort, our destination hotel, boutique hotel in Rockport, Texas. Long story short, I had a financial planning practice in Austin where I lived for 44 years. I focused on retirement income planning, tax planning, Roth conversions, cash balance pension plans. And worked with primarily folks that were 50 and up that wanted to create guaranteed lifetime income. Ended up selling my fixed-index annuity book of business March two years ago this month, and had a capital gain event. So, I started learning all I could, did a deep dive. In fact, I bought a motor home. This is my wife and I right here off the showroom floor. Traveled 17 states looking at hundreds and hundreds, and hundreds of opportunity zones. We came across this property, which we purchased in August of 2021 in Rockport, Texas called the Oleander Courts.

It’s in the hotel district three blocks from the bay, and also nine blocks from the downtown district shopping, the harbor. And I’m gonna tell y’all a little bit about Rockport because I’m anticipating most of you guys are not in Texas. Texans know Rockport. This is what we’ve designed our hotel after a blue city in Morocco called Chefchaouen. And the whole city’s blue. It was a Portuguese refugee. And I’ll show you more about the blue city here in a minute. But why Rockport? Rockport is where Hurricane Harvey made landfall, destroyed half of the structures in the City of Rockport, population 10,000. This is our new courthouse and city hall that… This photo is about 10 days old. It’s about a $35 million ground up. And then we just completed a $12 million art center right over here in this area.

So, Rockport is a fishing destination. Texans have been coming here for generations, I literally mean generations. This land right here, I’m gonna go back. Whoo, whoo. Okay. This property right here is in the Rockport Harbor. This is owned by the Bass Brothers out of Fort Worth, oil money. They also own a island right out here three miles off the bay called San Jose. And their uncle, Sid Richardson, big oil money from…in the 30s acquired this land. And so it’s been in the land now for… in the family, the Bass family for 80 years or so. Some of our famous second home residents here are George Strait. He loves Rockport. If you call City Hall, ask them to put you on hold, you’ll hear a commercial by George Strait. The art community’s big. Absolutely the number one fishing destination in Texas.

I know Austin really, really well. I didn’t tell you, I spent a significant amount of time buying property at tax sales. Started buying in my IRA in 1992 in the Travis County Courthouse steps. At one time, owned over 40 properties. I know Corpus is becoming a hotspot for workforce relocation. Rockport’s been named the top five small coastal towns by USA Today for the last five years running. So, we’re just 30 miles north of Corpus Christi, which Corpus is the fifth largest transporter of energy in the US. And we’re within a three-hour drive, a very short drive for San Antonio, Austin, and Houston. This was in the newspaper recently. We held a summit here in Rockport, Aransas County Economic Development Summit. And this is a professor that was a panelist, Dr. Jim Lee, who’s a Texas A&M economic professor.

He said, “Addressing all the talk about a pending recession, it’s possible, but it won’t be felt in Rockport.” Thought that was a pretty strong endorsement from a total unrelated… And I got permission from Dr. Lee to share that slide. This chart really tells the story. This is the 2% of the 15% hotel-occupancy tax that goes to the local Chamber of Commerce. The Chamber here does a remarkable job getting Rockport… known to have billboards, five billboards right now around the state of Texas promoting tourism in Rockport. I serve on the Chamber’s Tourism Development Council. And this 2%, this chart tells you that that 2% of hotel-occupancy tax generated directly to the chamber to spend on promoting tourism reached almost half a million. Hurricane Harvey made landfall, and you can see the trend ever since then. 2021 and 2022 have reached new highs. People are coming here absolutely recharged to tell the whole story.

This is revenue for hotel spend room, and that’s $36 million in 2022, population 10,000. Seven and a half percent of the population make their living as professional fishing guides. So, the locals here call it a drinking town with a fishing problem. So, we’re gonna tap into this. There’s been no news resorts… or there’s no resort here, number one, but there’s no new hotel. What we’ve come up with is a 60-door Blue Zone Spa Resort, unique… boutique property. We’re three blocks from the bay. This is a real live picture here. This is a rendering back here. We’ll have a rooftop lounge, a high-end luxury spa with argan oils and hydrotherapy, wet saunas, dry saunas, mineral pools. Here’s the ask. We’re raising $8 million. We’re a Reg 5… Reg D 506(c) for accredited investors only. We’re a total of $16 million build. We’re seeking $8 million, kind of a small raise, minimum 50,000.

The distribution is a 8% pref. Once our investors are made whole, then we’ll split 30% to the sponsors. And we’re having some… We’re seeking a co-sponsor at this point. But 70% will be split to the investor Class A members, and 30% to the sponsor. So, here’s the source of the use of the funds, $8 million in equity, about $4 million in PACE financing, $4.2 million in senior debt. We’re leaning toward the USDA agricultural loan right now. And then we anticipate bringing… incorporating solar credits into the project. Personally, we have skin in the game, $780,000 raised to date, $380,000 from myself and other management team members. You can see here the use of the funds. This is an illustration showing a $100,000 investment with a debt cash-out refi in December 26, year three. Or in other words, 52.3% will be returned to the investors based on this illustration. In year 11, we exit with a 18.83 IRR and a 3.2X, which only gets better if you invest with capital gain monies.

We have a significant amount of non-capital gain money in our fund, like y’all were talking about just a minute ago with Ashley. I personally have some Roth money, I have clients with IRA monies. I told you about myself. This is Stormy Johnson, he’s our investment relations manager. Stormy lives just outside of Austin in Lago Vista. He also has a securities license, a financial-service background. Had a star… a farmer’s insurance agency as well as security book of business. And he sold his… a portion of his insurance business, had a capital gain event. Knows real estate, he is invested here in Port Aransas, which is… we’re 20 miles from Port Aransas. Our sage and wise legal counsel, Patrick Sughroue. Many of you in the OZ space know Patrick, he’s a distinguished securities attorney. We’re real happy to have him on our team.

This is our development team. We have a architectural, the… structural, and MEP engineers in place. Our general contractors in place with 35 years experience. And I don’t know how we’re doing on time, Jimmy, but this is… if you’ll take your phones out, snap this QR code here on the left, that’ll get you right into Stormy’s calendar where he’d be happy to spend 10, 15, 20 minutes going over the project answering any questions. I’m certainly available. And then this other QR code goes directly to our website. And our offering docs are available. If you’re an accredited investor, we encourage you to take a look. And welcome any tough questions. Jimmy, I’ll send it back to you.

Jimmy: That’s great. Well, hey, John, thank you so much. And thanks for participating on OZ Pitch Day this time around. I know this is your first time presenting in front of our group, so great to have you here. We do have time… we got… I think we got a couple minutes left actually. So, let’s get to some questions. You did get some questions. Who is the primary customer for the Blue Zone Resort?

John: Great question. It’s families by far, fisher men and women. I failed to mention our corporate meeting space. We just recently revised the design to include corporate space because weekenders are the primary audience. From San Antonio, they’ve been coming here for generations. I grew up in high school and graduated in San Antonio, Houston, Austin, the Hill Country. These people know Rockport. They come here for the arts, for duck hunting, for the beaches, the natural resources. It’s just a lot of festivals go down here, hunting, and by far fishing. So, our strategy is to get some corporate smaller meeting space used during the middle of the week when our occupancy is down. The town is nothing like it is on the weekends during the middle of the week. And get some corporate meetings for corporate people to have a day and a half fishing and a half day meeting or vice versa, is our target audience.

Jimmy: Good. And can you talk a little bit more about the solar credits that you’re going after?

John: You know, I don’t have enough information on that yet to talk intelligently about that. I do wanna incorporate it. It’s a… mostly because it’s a 10-year hold, and keep our operational costs. We’ve got some large swimming pools associated, multiple pools. And the mineral pool, and the dry and wet sauna. So, being able to bank some of that energy during the week when our occupancy is not great will help us keep our operational costs down over the 10-year hold. And…

Jimmy: And then…

John: With the cost segregation, of course, coming into play there as well.

Jimmy: Good. And then the last question, I’ll ask Matt’s question. Matt asks, this is quite… a little bit unclear what he means. Seeded the project, question mark. I think he’s asking if, if you’ve seeded the project with any of your own money or…? Tell us a little bit about the equity that’s come in already?

John: Yeah. Actually, I had a capital gain event from the sale of my annuity book of business. So, I deployed $180,000 in capital gain in this project. And we purchased the property in August of 21. We already had the zoning in place. We’re going 45-foot vertical will be the tallest structure in, I think, all of Rockport, certainly South Rockport.

Jimmy: Fantastic. Well, John, we have run outta time, but thank you so much for participating on OZ Pitch Day today. And I have included a link to your website in the chat. Head on over to to learn more about John’s offering and to get in touch with his team. You can navigate the website and find out where to schedule a call with Stormy or scan the QR code on your screen right now. Thank you so much, John, really appreciate your time today. And thank you for partnering with us on OZ Pitch Day.

John: Very happy to be here, Jimmy, and looking forward to the rest of the day.

Jimmy: Right on. I am as well, John. Thank you so much.