OZ Before And After, With Nest Opportunity Fund

In this webinar, Clint Edgington gives investors a look at a property that is undergoing a significant renovation followed by a review of some completed projects.

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Webinar Highlights

  • Walkthrough of a property in the Franklinton neighborhood in Columbus, Ohio that is undergoing rapid renovation.
  • Discussion of some of the issues that are usually encountered with buildings.
  • Live look in on rehab work in progress at a Nest property.
  • Live Q&A with OZ Pitch Day attendees.

Featured On This Webinar

Industry Spotlight: Nest Opportunity Fund

The Nest Opportunity Fund is an OZ investment program designed to not only do well for investors, but also do good for those in the communities targeted for fund investments. The fund invests in single-family homes and smaller multi-family homes because they present a lower risk to investors while maintaining the culture and character of the neighborhoods.

Learn More About Nest Opportunity Fund

Webinar Transcript

Jimmy: Clint is doing something that has never been attempted in the history of OZ Pitch Day. This is our ninth Opportunity Zone Pitch Day. Clint is doing something crazy. He’s going to actually do a live site tour of two different Opportunity Zone properties. But the problem is they’re about 15 minutes apart from each other. So we’ve broken up his presentation into part one and part two. So in part one, he’s going to do the “before” walk through what a dilapidated property looks like. And then, he’ll come back a little bit later this afternoon and do a walkthrough, what we’re calling part two, the “after” walkthrough. There he is. Clint, how you doing?

Clint E: Good, Jimmy. How you doing?

Jimmy: Great. Well, welcome. I just kinda set the stage for you. You’re doing something that’s never been attempted in the history of OZ Pitch Day. We’re doing a live site tour of, this is the before property, I believe. So tell us about it. Tell us what you’re doing. Take a few minutes to give us the little rundown here, Clinton. And thanks for coming today.

Clint E: Unfortunately Jimmy, we talked about the potential of finding squatters. This is a property we haven’t really done tons of work with yet, kinda getting it through blueprint architectural and permitting. But it’s heating up today, so we’re going to have a little bit of activity. Oscar and his crew are in the house actually doing a little bit of cleanup work on it. No squatters, but we’ll see some action. If you can’t hear me or have any issues, let me know or just cut to the other video I made. But this is a property in Franklinton, a neighborhood of Columbus, close to the Central Business District. It is part of kind of the urban revitalization that’s occurring here. In fact, when I look…well, not sure if you can see. But in the distance, you can see some high rises there. So we’re within walking, really a bicycle ride of the downtown. This Franklinton area is kind of undergoing a lot of change. There’s a lot of properties that have already been rehabbed, like this, which would be nice to take you through. But unlike a lot of your panelists today, who all look very professional and on point, we’re gonna get a little bit dirty. I’m gonna don my favorite rehab piece of equipment, the head lamp, and we’re gonna go in. Let me know if you have any questions, Jimmy.

Jimmy: No questions yet. We can see you and we can hear you loud and clear. So all is looking good. Can’t wait to get inside this property. Again, this is the before property. So take us inside, Clint.

Clint E: Okay. Oscar, can I sneak by?

Clint E: Thanks. This is Oscar. He’s working on some of the demo work here, just really kicked off the party. I’m gonna take you where I always look first in a property. All of our properties are gonna look like this, generally when we buy them. We are usually buying the worst property on a block. That’s the way we keep our costs low. And I’m gonna go in the basement first and it’s gonna be the nastiest part of one of these properties. So as you can see, see how dry it is. My camera work is not good. Actually the foundation here is good which is unusual since we usually don’t have gutters. We actually have a hot water tank here. But otherwise, no mechanicals, almost never.

This property was a burn property. So we’re gonna have additional structural and permitting that needs to go into place because they’re all gonna start off as condemned. This is a 2,500 square footish unit and…excuse me fellows. Take you all the way to the top.

Then the next place I’m gonna usually look is the top floor. That gives me an idea where usually the burns tend to go, what sort of structural issues I have. And then, hips, gabling and stuff can get very expensive. So you can see this property, here’s where the burn was. This upper third floor is always an issue for us, because we have issues of we need to create this firewall if we’re gonna keep it as one issue, or firewall the floors if we’re gonna have one full unit. So in this case, we’re gonna fireblock the floors because this is not large enough really to have bedrooms with egress. So this is the beauty of 869 and 871 Bellows [SP]. When I come back on in a bit, I’ll walk you through a property that’s been completed. Unfortunately, we’re gonna have to do a 3D tour of that since all of our completed properties are occupied. Questions? Can you hear me?

Jimmy: Yeah, we can hear you. That worked better than expected, Clint. You broke up a little bit in the basement, but we could still see what was going on and pretty good, I would say. I’m gonna hold off on questions until you come back. Clint is coming back on at 2:25 p.m. Eastern time with part two. I think you gotta drive across town a little ways, 10, 15 minutes and get to that next property. Is that right?

Clint E: Yeah, I gotta get my lighting right like I had this time.

Jimmy: Looks good, Clint. Well, this was a first on OZ Pitch Day. Again, this is Clint with Nest Opportunity Fund and he’s gonna come back in about an hour and do a walkthrough of the after version of what Nest Opportunity Fund does when they’re renovating these projects, these Midwest residential projects. Clinton, I think that’s all for now. We’ll see you in about an hour. Does that sound good?

Clint E: Yup. See you guys. Sounds great.

Jimmy: We’re heading back down to Columbus, Ohio. Clint has made the journey, I believe, back to his office there. And he’s gonna tell us about the after. So Clint, that was awesome. That was a first on OZ Pitch Day, that before walkthrough that you did of that dilapidated building that you are performing some substantial improvements on. So without further ado, I think you’ve got a few more minutes here to present what you got going on with Nest. Maybe a couple questions.

Clint E: Dilapidated? Geez. Hurts my feelings, Jimmy. That’s what I have set up next time you come to Columbus to visit me. You’re welcome to stay there. Yeah. So I’ve got a few more minutes. Hopefully you’ll give me a gentle reminder when I have, like, one minute left…

Jimmy: I will. I will do that.

Clint E: …just to make sure I get basic terms. Yeah. So it’s kind of fun walking you through a property. I thought it was gonna be open today, but we had Oscar and his crew in there doing the real work. And just to kinda remind you, we’re Nest Opportunity Fund. We work on smaller residential properties in the Midwest, in particular, Columbus, Ohio and Lexington, Kentucky. We like those two markets. Before we get into it, our forward-looking statement that our attorneys make us tell you that we really have no idea what we’re talking about. So do your own due diligence. But yeah. So Oscar and the GCs that we work with are kind of the boots in the ground, and we kind of need the backup sometimes and remember that this Opportunity Zone program was kind of intended to help those rise who kind of were left behind in the last economic recession.

So just a quick snippet. Clint, the other Clint, runs our Columbus operations. And he has kind of a passion for helping those that are on their path to recovery.

Clint C: We are currently daily impacting our community. We are providing safe, secure housing for people to have the opportunity to live their best life. We are providing the opportunity for those in transition to utilize their current skillset or develop a new skillset so they can live their best life.

Clint E: So he does a lot. The folks he brings on, his employees, generally have graduated from some sort of addiction recovery program. So there are some issues with, we do have turnover with initial folks. But we find that once they’ve gained some skills, they have kind of an immense loyalty to Clint and it’s actually helpful for us. So within Columbus and Lexington, we like those two communities, A, because that’s where we’re from and really real estate is a blocking and tackling game. So the best city with a poor general partner is gonna have lackluster results. But both Columbus and Lexington in the Midwest are some of the higher growing areas and that’s what we want. We want demographics to be helpful for us over the next 10 years. In addition, they’re relatively stable, which is good for us on the residential side.

I only have maybe two minutes left, so I won’t go through our A Fund, which we closed in mid-2021, I believe, just deals weren’t penciling that well and we reopened our B Fund. But we’ve got about 70, 75 units in our A. It’s pretty much deployed. But a lot of the same sort of properties. So we’ve got some smaller multi-family, largest is a 31-unit. And then, a lot of duplexes, quads, eight-units, even some single families. And then the B, Nest Fund B, which is currently open, and really kinda hit the ground running towards the end of last year, this is kind of our rehab status year over year. And you can kinda see these properties take awhile. So the burn property we looked at today, Bellows, if it’s something that’s been burned and condemned, it’s pretty much probably three months until we can even get in there. Fortunately from an asset allocation standpoint, it’s not really worth much on the balance sheet until we start kind of doing some work on it and putting money into it. So we do have a lot of our properties that are in inventory, that hang out there for awhile until we get through architectural. And they start to move down the pike a little bit faster.

So now, I’ll take you through a property that’s been compete, Bellows will look a lot like Jones after we’re done with it, and just walk you through. So some of these…Let me make sure I’m sharing the correct screen now. And Jimmy, you’ll chime in if you cannot see this 3D model.

Jimmy: No, I can see it. I see the 3D walkthrough. It looks good.

Clint E: Cool. Yeah. So you’ll see the exterior of the property, if I can get outside, is going to look a lot of the same structure as the Bellows property I went to today. Kind of a duplex. This is a pretty standard property in our neighborhoods.

Standard things we do. So we use wide plank carbonized bamboo hardwood. It’s very durable. To convince me, my Lexington GC, Jeff, who is a character, he left one outside in his property through all the weather for four years, until I said, “Okay, let’s start putting this stuff in.” So we do it. With its wide plank, the installation costs aren’t much more than LVP and it’s a heck of a lot durable. Butcher block counters, I think they look nice. Everyone tells me do people use them as cutting boards? They haven’t yet. We provide a cutting board when new tenants move in, but we anticipate in 10 years, when and if we decide to sell some of these, we probably will need to refinish it. But it’s relatively cheaper than granite. More importantly, it’s one less…our project managers who are working the properties can put these together pretty easy. We don’t have to have a granite installation group install. So that saves us a few weeks when we’re kinda getting through finishing.

You’ll notice in a lot of our corners, we do not have cabinets. The corner cabinet, a lot of times, is the non-standard cabinet, which decreases our speed. It gets things going. We usually try to have a half bath in most of our downstairs.

Again, these are relatively affordable units. So this unit rented for $1,500, I believe. and the unit on the other side rented for $1,300. I want to take you through the basement. They’re a little bit less fun when properties are finished than they were in properties that are not. But decent sized bedrooms in this property. Another interesting little thing that you probably wouldn’t have in your house, closet doors interestingly create a lot of headaches for us because a lot of times they’re non-standard size. And probably the fifth time I spent about a grand on closet door installation and recut and whatnot, I said, “Let’s just do curtains.” We see most tenants tend to kinda take them down anyways, especially if they’re bifold doors. We just have a lot of maintenance issues with them. So when we go to sell the property, if we go to sell the property in 10 years, we will maybe deal with the doors then.

But this little bad boy, this little attic right here, probably it was about 15 grand in additional spend and it was the big kind of head-scratching question on this particular property. Does it make sense, is someone gonna view this from a rental perspective as a bedroom or is it essentially going to be storage? This one was a win. We were able to rent this side for about $200 more than the other side, which is [inaudible 00:13:29.132]. So those are the fun things that we’re going through. Jimmy, can you see my regular presentation now?

Jimmy: I do and you’ve got one minute remaining.

Clint E: Perfect.

Jimmy: You’re doing great.

Clint E: Thanks. Quickly just take you through the terms of our offering. So we are gonna be relatively conservative offering. That doesn’t mean that we’re income-oriented. These properties are smaller, so they have pretty good capital gains. Generally we get to choose when we’re gonna sell. But they aren’t huge income-oriented investments like giant multi-family will be. We have the benefit though when interest rates go up, it’s not as much of an inverse correlation with the price.

So we’ve got total of $11 million contributed capital in the fund. About a million of it is the sponsors, myself, my business partners, my family. And we’ve invested as LPs alongside you. We’re gonna leverage up to about 65% and if we can’t pencil deals that are 15% projected project level rate of return, then we’ll start returning capital a little bit faster. We project the post-tax IRR of about 12%. That’s gonna be kind of in line with it being a little bit more of a conservative offering. Or fees are, on its face, about normal, but you’ll see ours are extremely straightforward. We don’t charge for marketing events. So I think Jimmy, I saw you, I think in OZ event in Denver two years ago that was at the Four Seasons. I was staying at the hotel across the street that was quite a bit cheaper. So we’ve got 1.5% percent management fee net assets. We have a 4% pref, fairly low. And we also have a fairly low carry at 15% once you get your pref back. Any questions or comments, feel free.

Jimmy: Yeah, we’re just about out of time. But we did get one question from Joaquin a little while ago when you were doing that walkthrough of that burn property. He wanted to know how much capital do you raise to maintain the operating costs for the business?

Clint E: I’m sorry. I got sidetracked. Joaquin is a guy that does our framing. So I was like wait, Joaquin? Hit me with that again.

Jimmy: Probably a different Joaquin.

Clint E: What was the question again, Jimmy?

Jimmy: How much capital do you raise to maintain operating costs for the business?

Clint E: So, you know, we’re in scatter site small projects, which create a lot of things that aren’t easy. But it makes the business model generally simpler. Not necessarily easy. But with the capital that we have, $11 million in capital, one property or an additional property or one less property doesn’t really matter much. So we buy with cash. We rehab with cash. We rent and then we refinance and do it again. So we have a relatively hefty cash cushion almost all the time. And the reason for this is that in purchasing these properties, you have to act fast. You have to act with cash to get the deals at a reasonable price. So we really can’t finance purchases, which makes working capital a lot easier. It makes purchasing the properties and doing your due diligence in four days heck of a lot harder. But it makes that particular issue not as much of an issue.

Jimmy: Well, Clint, we’re out of time. We’re actually a little bit behind schedule, so I gotta move onto our next presenter. Not your fault though. You were great. Thanks for presenting today. Always good to hear from you. Please do reach out to Clint and his team. You can contact [email protected] to learn more. I’ll post that.

Clint E: Or I’m admin-less this week, [email protected] the next two days would be good as well.

Jimmy: There you go. Get straight to the man directly. Clint, thanks so much for joining us today, really appreciate your time. Thank you.

Clint E: My pleasure. Thanks for having me.