6. ENSIGN PROGRAM DETAILS
Business
Primarily residential real estate acquisition, development, and construction, including marketing and financing; and some selected commercial developments.
Scope
Up to 41 projects consisting of town homes, condos, apartments, custom and semi-custom homes and selected commercial projects spanning approximately the next 10 to 12 years.
Approach
Niche market for higher profits, smoother exits and market shielded.
Project Locations
Colorado, New Mexico, Texas, Pennsylvania, Florida, and, two Caribbean islands
The goal
The Immediate Need
Straight equity funding ranging from $3.2M to $7.5M per project (first year); first year minimum goal is $21.7M (includes 5 projects) of the $52.8M projected requirement; and, one line item is a $12.0M municipal bond funding which is in negotiation.
Initial Projects
- Russell's Way (20 Town homes) - $3.5M construction loan - Colorado
- Serenity Point (9 custom homes) - $7.5M acquisition/development - New Mexico/Colorado
- Hier Lane Project is a planned highend custom estates (6) private community each on a minimum of 10 acres to a max of 35 acres - $1.8M acquisition/development each - Colorado
- "The Bank Concept" - $5.0M revolving Line of Credit to develop multiple small projects in multiple states
Funding Approach
Each major project sets aside an average of 12% ownership for preferred equity participants (LLC preferred members);after which there are several options offered to fund a project, ranging from all "straight equity" to all debt funding.
Corporate Structure
Each project is structured as a Limited Liability Company with separate ownership but maintains a central core management team.
The People
Core management team members have an exemplary track record, each has a minimum of 25 years' experience in his respective expertise.
Return on Investment
Most projects offer a "straight equity" interest with a "preferred return" in addition to a back end (end of project) pro rata participation in the net profits.
For straight equity investments, it generally accrues at a rate of about 12% for 1-year and/or 8.3% per annum for the term of the investment which generally spans about a 36-month higher risk in any one of the 41 residential and/or commercial development and construction projects.
The ROI is determined first by the funding approach, i.e., "preferred" debt or equity or a hybrid of these; then, ROI varies according to the specific project, its start up difficulty, niche market, completion term, etc.
Collateral
Generally 1st or 2nd lien position of the project's property is the first line of collateral offered.
Security
An extra measure of protection for the investor's equity capital contribution for large projects is put into place prior to the use of any major portion of funds invested. This technique is meant to guard the principal (capital contribution) regardless of the project's final disposition.
Tax Aspect
Under pass-through principles of 'partnership' taxation, the Company expects to be deemed for tax purposes to be a "dealer" in real property (one who holds real estate primarily for sale to customers in the ordinary course of business). Accordingly, any gain recognized upon a sale of such property would be taxable as ordinary income, rather than capital gain.
