In this webinar, Lev Gershman presents a multifamily OZ project in San Diego county.

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You can visit the Official OpportunityDb Partner Page for the Pepper Tree Lofts Project to:

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• Request more information from the fund sponsor.

Webinar Highlights

• Overview of Tideline’s mission and history.
• Summary of the Opportunity Zone in coastal San Diego where Tideline is developing.
• Overview of the Pepper Tree Lofts project, including neighborhood and renderings.
• Summary of investment terms.
• Live Q&A with OZ Pitch Day attendees.

Industry Spotlight: Tideline Partners

Tideline Partners is an award winning real estate developer and asset manager. Its mission is to make places better by creating economic value, cultivating community and protecting the environment.

Learn More About Tideline Partners

• Visit TidelinePartners.com

Webinar Transcript

Jimmy: Lev Gershman, you are up next. Lev is gonna be presenting the Pepper Tree Lofts, by Tideline Partners, that’s a single-asset multifamily development project in San Diego County, California.

Lev: All right. Thanks, Jimmy.

Jimmy: Lev, how are you?

Lev: Can you hear me? Hey, I’m great. Good to see you.

Jimmy: Good to see you as well. Thanks for participating on OZ Pitch Day. Without further ado, why don’t you dive in and tell us about what you got cooking in San Diego County, California, with Pepper Tree?

Lev: Wonderful. Thanks a lot, Jimmy. Good afternoon, everyone. My name is Lev Gershman. I am the founding and managing partner of Tideline Partners. I’m going to share with you our exciting new project. It’s an 80-unit development, called Pepper Tree, in North County, San Diego. Standard required disclosures, we’re not selling securities. A lot of the things here are based on assumptions. Our company was founded in 2013, and we’re headquartered in San Diego. We have a great team, and we’re supported by an accomplished board of advisors. We focus on infill development, in walkable, well-amenitized neighborhoods, and we take great pride in our work in managing the properties that we develop.

We were put in motion by our mission, and that mission continues to drive us today, and that mission’s simple. It’s making places better. We care about our neighborhoods, and our approach to community engagement frequently gets us recognized by press and industry organizations. The images you see on the screen are just some of the projects in the neighborhood that we’ll be talking about today. And the apartment project all the way on the right-hand side of the screen is called Found Lofts. It’s a development we just completed last year, and it’s two blocks away from the Pepper Tree development we’ll be sharing with you today.

Our first investors are still with us, 10 years. We are growing our investor community. We are self-funded, and we continue to self-fund our projects until we have a clear path to entitlements and delivery of the project. Above all, we protect loss of investor capital.

The Pepper Tree multifamily development is located in the only coastal Opportunity Zone in San Diego County. It’s essentially wrapped around the historic downtown of the city of Vista. I’ve been involved in this community for over 25 years, and historically, it was a low-income and high-crime neighborhood, and it had a lot of challenges. Due to kind of the macro drivers, as well as some of the local leadership and investments, the neighborhood is rapidly changing. It is the fastest-growing neighborhood in the county, and it has the fastest average annual income growth, for 10 years, since 2012.

This is a view of, an aerial view of downtown Vista. The projects in red are some of the developments that we’ve completed or are in the process of completing. We’ve been building in this community for 10 years. We’ve got about 500 units in the deal pipeline, and 30,000 square feet of commercial. The yellow square with a star in it is the Pepper Tree projects. And the, two blocks to the right, you could see the FL logo is our Found Loft projects, that we completed last year. You know, it’s been a pleasure and a really a rewarding experience to get to do work in this neighborhood, and really see it rise from its past, and meet its potential as envisioned in a thoughtfully laid-out community plan. We believe it will forever keep its small charm, without the gentrification, because it’s got this quaint topography, kind of agrarian roots, historic Route 395 runs through the downtown, and it’s just one of these little gems.

In big part, this neighborhood is growing rapidly because it’s surrounded by, you know, the quintessential eds, meds, and feds. So, we’ve got three higher education facilities around us, with roughly 60,000 students. We have three major hospitals, and, strategically important, Camp Pendleton, just to the northwest of downtown Vista. Not shown on the map, but two, three miles south of the project site is the Vista Business Park. It’s one of the larger business parks in the county. It’s 14 million square feet of flex, office, and industrial, and it’s running at the lowest vacancy in the county. It’s sub-3%.

Okay. Love this shot. We’re looking west, to the Pacific Ocean. At the bottom of the screen, you see the green star? That is the approximate location of the Pepper Tree development. We’re roughly 6 miles to the beach. As you could tell by all the logos, it’s a highly amenitized trade area. Immediately across the street from the project, you could see in the yellow rectangle is a Vista Village center. It’s a 250,000-square-foot regional power center, with lots of great inline retail, a movie theater, and a gym, and a grocery store, a very well-performing grocery store. Again, notice to the left of the green star, two blocks away, is our Found Lofts project, and this is, Found… Oh. Excuse me. Come back up. Okay. This is Found Lofts. Yeah, we’re really proud of this project. As you can probably tell, it’s a 5-story, 42-unit development. You know, a funny story about this project. We were building it through COVID, and our lender, Torrey Pines, actually asked to profile us on their website, because we were the only borrower in the region to come in on budget and on time.

The rents for this project came in 30% above our conservative underwriting. We completed the lease-up in three months, which is, if you think about it, basically a unit every other day. So, Found Lofts was a major win, and we’re really excited about this project. Pepper Tree is an even better location. It’s two blocks away. It’s an excellent hard corner. It’s facing directly into the beautiful, recently-renovated S Santa Fe corridor. It’s in the heart of the historic core. We sourced this deal off-market by developing a relationship with the family over a number of years. The family’s had this property in its family for 70 years. We’re planning around 80 units or so. Legislation, last month, was signed by the governor, allowing us to go up to 102 units, and this entitlement process is by right. So, at the 80-unit scale, the projected cost is $32 million. We’re conservatively assuming 50% leverage, so we’ll be capitalizing with $16 million worth of equity. We have roughly $2 million of available space for placing equity. We anticipate closing this raise in the first quarter of next year, and we’re targeting completion of construction, stabilization, and refinance in 2027. For the 10-year hold, we project an average annual cash-on-cash return of 8%, an equity multiple of 2.5%, and an average internal rate of return at 13%.

As far as the terms, the minimum investment’s $50,000, an 8% preferred rate of return, and standard, industry-standard sponsor fees for asset management and development, and a promote of 20%. In closing, I want to make sure I leave a few minutes for questions, but in closing, I just wanna show you the street frontage of where the projects going. So, you could see the white car on the left there, the Pepper Tree project would be immediately behind those palm trees on the left. This corridor’s come a long way. Believe me, it did not used to look like this, and it’s got a very vibrant and prosperous future ahead of it. As a parting sound bite, I’ll share this, just to brag a little bit about San Diego. Urban Land Institute, which is an 80-year-old global organization, last year, last week, released its annual Emerging Trends Report, which rated San Diego as a number six market in the nation for real estate investment, and multifamily as the number one asset class. That’s all. Thank you so much.

Jimmy: That’s awesome. Thanks, Lev. Hard to believe that that’s an Opportunity Zone, quite frankly. It looks like an incredible location for investors. We do have a few questions that came in. This first one is, “If I’m an LP, coming in from outside of California, will I still owe California income tax on the income from this fund?” And also, I would add to that, also from the disposition of the fund after the 10-year holding period.

Lev: Yeah. That is a great question. And I think, Jimmy, you can actually help me answer this question, I’m sure. But I think the short answer is yes. California does not participate.

Jimmy: Yeah, California does not conform with the Opportunity Zone tax incentive, unfortunately. So you will owe, you know, after disposing of the asset, or your shares in the fund, you know, 10-plus years down the line, you’re good to go, federal tax-wise, you know, as long as you fully complied with all of the investor requirements of being an Opportunity Zone investor, and I’m sure, you know, if you sign up with Lev and his team, they’ll get you sorted out with the proper paperwork. But you will owe state tax to California, capital gains state tax rate. So, it’s a little bit of a headwind if you’re investing in California, but there are other great reasons why you should invest in California, which I think Lev spoke about during his presentation. The income does get taxed as ordinary income. That’s regardless of whether you’re in California or not. That’s anywhere. I mean, you invest in South Carolina, or Texas, or Washington State, you’re gonna get income, cash distributions, spinning off from the investment after a stabilization period, and that cash flow will get taxed as ordinary income no matter where the investment is or where you live. But then, specific to this question, Lev, I believe there would be… I’m not a CPA. So, you know, take this with a grain of salt. I believe there would be nexus, in California. Would they get a California income return from you, Lev? Do you know about that?

Lev: Yes. That’s correct. And this is our second Opportunity Zone investment in this neighborhood, and I’m also not a CPA. But certainly, those are all questions we can address, and ultimately, we would encourage our investors to consult their accounting professionals on the treatment appropriate for their jurisdiction.

Jimmy: Absolutely. One other question that we, a few different fund sponsors have answered earlier today. We got this question early on, from one individual, who asked, if I put $100,000 into your fund, what should that, you know, assuming all your pro forma projections come exactly true, what sort of amount should I be holding at the end of that 10-year holding period? What should that $100,000 grow into, if everything goes according to plan?

Lev: Oh, good question. Well, if you recall, our projected return slide at the, on sale, and which would be in the 11th year, we are anticipating a two-and-a-half return. So, you get two-and-a-half times the money you put in.

Jimmy: So, the $100,000 turns into $250,000. By the way, that’s right in the ballpark of what everybody else has answered also. So, a lot of these end up penciling out more or less the same. Lev, we are at time. Really wanna thank you and Tideline Partners for supporting our event today, OZ Pitch Day, and being a partner with OpportunityDb. Hope to see you on more of these in 2024. If you have…hey, if anybody has questions for you, Lev, what’s the best way to reach out to you and your team?

Lev: Oh, yeah. Thanks for reminding me. I actually forgot to click on that slide. There you go.

Jimmy: There it is.

Lev: You’ve got some QR codes…

Jimmy: Yeah. That’s the money, right there.

Lev: Yeah, I know. Yeah, there’s my email, my phone number, and we have two QR codes. One will take you to the story, a video, a cool video story of the making of Found Lofts, and the QR code will allow you to schedule directly with us, to have a conversation and get into the details.

Jimmy: All right. I’m just gonna leave that up there for one more minute. I’m gonna note this in the chat, [email protected]. So, I just posted that in the chat as well. Lev, tremendous. Great having you on OZ Pitch Day again. Thank you so much for your time today. Really appreciate it.

Lev: Thank you, Jimmy. Wonderful. Appreciate it. Take care.