5111 Maufrais – April ’24 Update

Alright, hey folks, this is an update on the five one-one-one-move-frame project. This is the first time I’ve done this, so excuse the composition of this recording, but we’ll see how we do.

Some things have changed in the, uh, the project of the course of the last year and a half. In particular, some of the different things that have happened at the city of Austin have resulted in some changes to our plan for the project.

So we’ve sort of had to adjust to what the city has given us and some of these things have been good and some of them have been you know difficult but all in all I think it’s mean going to result in us getting a better product for the fun generally. Let me walk through exactly what that means. At the end of last year The city of Austin passed the home initiative.

The biggest thing that happened in the home initiative is that all residential lights in the city of Austin went from being, having the ability to build two units with a very reduced footprint for the second unit to three residential units, so basically combining all of the different single family zonings from the city, SF-2, SF-3, SF-1s into this one sort of bundle called SFR or single family residential, which allows you to build three units.

Now there’s challenges with that. You don’t necessarily get all the same compatibility stuff. There’s limitations on the floor area ratio of the impervious cover that you still have to work within. So it doesn’t mean you can just build three huge townhouses, but some restrictions been reduced, like for example, the tent that used to exist is no longer a thing, maximum building height goes up to 35 feet, so you can potentially have a livable third floors now.

It’s going to markedly change how builders across the city construct and it’s going to markedly change the product that’s available. That’ll be good for a lot of people and it’ll be sometimes maybe a little bit less suitable for certain types of buyers. But that’s just the reality of where we’re at.

When the city did this, we decided for the Maufrais project that we were going to try and use the home initiative to increase the number of units on the five triple one-millimeter project. So we went from originally looking at building something like two duplexes on two different lights to now we’re going to construct six four-bedroom homes or kind of like in a townhouse layout on the side.

This still requires the same sort of paperwork for a subdivision. So we’re still going to move forward with the subdividing into a lot, one and a lot too. But we are going to be able to have sort of a single driveway to handle left-hand side and then a phase development of three units on the front, a lot and then three units on the backboard.

We’ll all be in the same sort of structure, same layout, same footprint, nothing changes terribly. on that. So we can reuse all of our engineering and things. But it doesn’t mean we have much, much greater density and a much higher unit count. It’s originally, you know, this site would have only supported two units. 

We’ve effectively tripled the capacity of the units and increase the square footage of those units as well. There’s a death of four-bedroom housing across Austin. It’s incredibly hard to lease, it’s incredibly hard to buy. The four-bedroom product is overly expensive to the point where sometimes rental premiums are upwards of 60% for a fourth bedroom, which is just crazy. We think we’re building a good product here, we think it’s going to have product market fit and we’re pretty excited about it.

TEAM

Architect

Let me go through and explain who we’re working with. So we have a design firm called Baron Custom Design, a Felicia Foster at Baron Custom Design, an excellent architect who’s been rewrite to the land development code at the city of Austin for a significant period of time now. Felicia was behind some of the biggest innovations at the city with respect, designing and compatibility is incredibly creative on what she can produce. We’re working with her team on the 5111 Maufrais Ln project for almost a year and a half now. So her design will be the one that is implemented on all six of the homes. 

Builder

Then our builder is 360 construction, they’ve come a foot over with them. He’s a partner in the fun. He’s going to be the general contractor. He has a four or five person team of salaried employees that are part of that construction unit that we’re going to be utilizing and they’re ready to go.

We’ve got plans submitted at the city with approval for the first three units. We’re just waiting on confirmation of the subdivision in order to be able to submit plans for the second half, which is the back three units.

There’s a little bit of a hiccup with what’s being the reason that’s the held up right now is if you look at this permit set of plans that were submitted to the city, you can obviously see the renderings here, but you’ll notice that there’s a flag lot that’s been created here such that we can develop the site that way that we want to. The challenge we is that down in this corner of the side is a electrical service pole utility that is impinging on the driveway.

That service pole doesn’t actually serve as our property, it serves as the neighbor immediately to the plant self. So we’ve got to have that moved and we can gauge someone to do that.

So we’re in the process of moving that pole now, but that pole and plans for the service to the neighbor have to be a driver prior to completion of the subdivision, which means that we can only submit for the first three homes initially, then we’ll go back and we’ll submit for the second three homes.

We could still build them all at the same time, but it sort of depends now on just financing and how that sort of stuff works out as to whether or not we just start everything or whether we start three.

Either way, starting three or still work. So, as soon as we can get that moved, our max, our civil engineer will have subdivision done, and we’ll be off and racing.

Everything else is approved there. So let me go back to, let me go back to our plans here. Okay, so the current status of the project is waiting on that subdivision, we’re trying to confirm financing for a construction line, We’re waiting for a final approval for all of the plat, and then we’re going to be, as soon as we can finalize construction, we’ll be able to start with development. Besides already been, the previous structure that was on the site has already been knocked down.

So we’re kind of ready to go with, with development, some minor grading needs to be done, and then some site prep stuff, obviously for all the utilities, but all that flatwork is going to be relatively easy on this site, because there’s no trees or anything. So yeah, we’re ready to go. Sums are all set up, just need to find a nice financing.

On the financing site, obviously things have changed a little bit because we’re increased the construction budget fairly considerably, because we’re now building six full single family homes, all with four bedrooms, higher bathroom counts, more kitchen, right, more roofs, it all adds up.

So the construction budget is going to increase to about $2.6 million. That still leaves us in a pretty good shape.

It’s really just a question for us now, obviously being in OZ fund, what do we decide to do on the backend with the project, right?

Because we can sell some units to reduce our cost basis, or we can obviously hold on to as many as possible, because given the amount of money that we are given the amount of equity that we should be able to create, we want to keep as many units for leasing as possible long-term.

So we’ve priced out a few different options here for the sale of the units. We think that if we sell four we can get this project after having a cap rate of almost 40%.

That would mean holding on to two. If we can sell three, however it might make a little bit more sense because that means we could sell three on one site and we could keep three on one of the other legal lots as well.

We also have the option to just lease all of them long term if we can get some attractive financing. But that’s two years down the road, most likely, getting post construction re-fire.

Not sure how the interest rates are going to look at that time. If they look really attractive, we’ll be in a position to sell fewer of these units.

But either way, we have really good exit options here on the back end through sale of some, sale of all, sale of none, right?

So if the project works either way, I’m pretty confident that we’ll do well on this. So so as we can get a construction loan, it be often going with that.

That’s the update on the finances currently. The only addition that I’ll make to that is we’re looking at buying out the existing bridge loan.

So we have a to buy that out on June 1st, which is a capital commitment of about $360,000, so major investors will be asked if they want to contribute to that.

I think they’ll be inclined to, that’ll mean that we own this free and clear as opposed to being financed and we should be able to have an easier time of going to get construction financing, especially given the new plan with the about.

I think that’s it. Obviously if you’re interested in contributing more to the fund or to this project generally you can feel free, my contact information is at the bottom so we can talk about it anytime just give me a call and expect a new update on another project sometime next 24 48 hours.

Cool, thanks guys.