Investment Overview

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US Capital Investment Management

GPC FUND I (PRIORITY RESERVE), LLC


US Capital Investment Management

* Dividend payments contingent upon the financial health of the issuing company.



INVESTMENT OPPORTUNITY


GPC Fund I (Priority Reserve), LLC (the “Issuer”) is offering membership units to accredited investors. Issuer will use the proceeds to invest into GPC Fund I (the “Company”). The objective of the Company is to provide current income, and achieve consistent returns through the acquisition, rental of residential real estate located in and around the Kansas City metropolitan area, and to increase the value of invested capital through appreciation.  The Manager will leverage its track record in the distressed SFR market to originate transactions that fit the Company’s investment criteria and provide on-going originations, structuring, and servicing capabilities.  To date, the Manager has raised $6,000,000 in equity and deployed approximately $15,000,000 into the market. The fund is already partially seeded with assets. New investments will be applied pro rata to buying into the existing pool as well as funding further growth.

The Company’s investment strategy is to buy, renovate, rent and eventually sell a large portfolio of single family homes to a larger institutional investor such as Blackstone or Colony, who has a lower cost of debt capital and generally an appetite to purchase stabilized portfolios at greater than retail market value. The Company buys homes at a discount to current market values, typically 10% discount. Unlike multi-family assets, the Company’s assets are not valued purely on an income basis approach and because of the low supply of large single family rental portfolios it has been documented that large buyers tend to pay over FMV for the portfolios. Demographics are projected to drive the demand of single family homes higher than apartments over the next 5-7 years. The current investment opportunity is focused in and limited to Kansas City, but the operator through his work experience has purchased and managed 2500+ homes across 7 markets in previous ventures, so the current single city is simply one of many more opportunities to be rolled out.

As of February 17, 2017, the company has acquired a portfolio of 109 homes at a total cost basis of $139,000 per home, earning an average monthly rent of $1,391 per home with an average unlevered capitalization rate of 7.7%. The average time from purchase of a home to completing renovation and having a tenant in place, a key financial and operational metric, has been 3.2 months, vs. business plan of 4.0 months – showing operational and project management efficiency as well as market rental demand. Finally, the company has recently closed $6.14MM of permanent debt across 62 of the properties, and expects to close further tranches as the portfolio continues to grow.

Golden Pacific Capital, LLC (the “Manager”), a Delaware Limited Liability Company, serves as the manager of investment funds created by the Manager.  The Manager manages a sizeable team of employees, experienced independent contractors, property managers and consultants to implement the firm’s acquisition activity, oversee and manage each property, protect the Company’s and its investors’ interests and support the day to day operations. 

US Capital Global Securities, LLC (“USCGS”) acts as the placement agent for the Issuer to raise up to $10,000,000 membership interests.



MARKET


Kansas City has been significantly less volatile than the US as a whole and other well-known markets; drop in prices and recovery have both been delayed¹. Kansas City has a strong and diversified employer base (federal government, education, health care, Sprint, Cerner), and among the highest percentages of college / university graduates in the US. Kansas City is rated as a top 10 market for SFR investment by RealtyTrac. Larger institutional participants have not entered the market, limiting sophistication, scale and liquidity of competing operators. SFRs are more liquid than multifamily homes and commercial real estate, and can currently be obtained at 10-25% discount to market and 8% CAP rates.


1. Source: Golden Pacific Capital, LLC study based on St. Louis Federal Reserve data.



INVESTMENT STRATEGY


The Company plans to acquire up to 700 homes over an 18-36-month period (the “Acquisition Period”) at 10-25% discount to current market values.
The Company targets homes in average to above average school districts and in neighborhoods that are over 80% owner occupied – two characteristics which the Manager believes will enhance capital appreciation and resale potential of the properties.
The Company rehabilitates these homes for an immediate value appreciation and increased rentability.
The properties are being rented and professionally managed for recurring rental income.
The Company plans to sell the properties at the end of the Fund’s term (6-8 years), or could continue to hold them if investors so desire.
The Manager believes that an exit as a single transaction to a larger institutional investor with a lower cost of capital is a likely outcome; a home-by-home retail sale is also possible.

Properties are selected based upon a determination by the Manager that the property can be improved or otherwise repositioned in the market, rented over the course of the holding period and sold at a profit upon liquidation.

During the Acquisition Period, the Company is acquiring the properties through a variety of channels, including public listings, bank short sales, foreclosure auctions and other outlets. The acquired properties are being professionally rehabilitated and rented out to largely blue-collar families seeking affordable, attractive, clean housing in a safe neighborhood. Professional property management is in place to maximize net operating income and preserve the capital value of the properties. Upon termination of the Holding Period, Properties are planned be sold to individual buyers, investors or pursuant to a sale of all or a portion of the portfolio to a larger institutional investor.

Returns to the investors are planned to be as per following: (1) cash on cash return paid in the form of quarterly Net Cash Flow distributions over the course of the holding period, and (2) liquidation distributions of both net cash flow and net capital proceeds made over the course of the liquidation period.



TEAM


GPC is led by industry veterans with extensive investment experience and a proven track record of successful real estate transactions. Through running their own real estate investment companies and holding senior financial and operational positions, the Principals have been directly involved with acquiring, rehabbing and managing over 2,500 homes in California, Nevada, Utah, Texas and Kansas City, Missouri and managed over $300,000,000 on behalf of Tricon Capital, Goldman Sachs and other large institutions. Two of these funds have been recently closed in which GPC Principal and Co-Founder Hub Hultgren was the lead partner with Tricon Capital Group as the principal equity investor. The sale involved 1,100 single family homes and delivered a 21% IRR and a 2.1x multiple to investors. The funds were just over 4 years old with an average asset hold period of 2.75 years, so this represents a highly successful outcome. Of note GPC is using the exact same business model that Mr. Hultgren used in the 6 other markets in which he invested on behalf of Tricon.


Hubert Hultgren - Principal, GPC


Mr. Hultgren was the co-Founder of Tricon American Homes, one of the largest Single Family Residential rental groups in the  US. He purchased over 2500 homes and managed over 7000. His career in real estate spans over 15 years, including most recently at McKinley Capital Partners where as a partner he ran the SFR business. Mr. Hultgren holds a M.S. in Accounting from the University of Virginia and a B.A. in Finance from the University of Colorado Boulder.


Ian Fisher – Principal, GPC


Mr. Fisher built a highly successful real estate business in Kansas City and has invested a significant portion of his family’s wealth into assets similar to those now being purchased by GPC. He was a partner in the Seabury Group, a premier global advisory firm, and for over a decade lived and worked on four continents, advising large airlines on their most challenging and complex strategic, operational, and financial issues. Mr. Fisher holds a B.A. from Yale University.



COMPANY’S PERFORMANCE


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INVESTMENT OPPORTUNITY


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RISK FACTORS


You should be aware that an investment in Membership Units of the Issuer involves considerable risks, including the possible loss of all or a material portion of your investment. The abbreviated risks set forth below, as well as the detailed risk factors set forth in the Private Placement Memorandum of the Company, are not the only risks facing investors.

The abbreviated risks set forth below, as well as the detailed risk factors set forth in the Private Placement Memorandum are not the only risks facing investors.


Sole asset of the Issuer will be a membership interest in the Company. Therefore, Issuer’s performance is dependent upon the profitability of Company’s investment strategy
The Company may suffer losses in its portfolio
Poor economic conditions may cause the Company to suffer higher default rates on its loans and decreased value of the assets it holds as collateral
Investments are generally risky and offer no guarantee of success
The Company’s performance is dependent on key personnel and the loss of one or more of those key personnel may materially and adversely affect the Company’s performance and prospects
The Company may lack diversification which could increase the negative impact of the performance of a small number of investments
The Company will make unspecified investments so Limited Partners must rely solely on the General Partner
The Company’s portfolio will lack liquidity
The Company has no operating history
Portfolio investment selection may not fulfill investment objective
Partnership investments are subject to general credit and interest rate risk
Risks Relating to Real Estate Investment
Investment in real estate can lead to substantial losses
The Company may be subject to counterparty risk
Investment in real estate entails valuation risk
Substantial competition in the market could adversely affect the Company
Incentive Allocation may lead to increased risk-taking by the General Partner.


DISCLOSURES


This presentation does not constitute an offer to sell or a solicitation of an offer to buy any security and may not be relied upon in connection with the purchase or sale of any security. Any offer would only be made by means of a formal offering memorandum. No offer or solicitation will be made prior to delivery of a confidential information memorandum, private placement memorandum, or similar offering documents (“Offering Documents”). Offers and sales will be made only in accordance with applicable security laws and pursuant to the Offering Documents, operating agreement, subscription agreement, and other definitive documentation.

This presentation does not purport to be all-inclusive or to contain all of the information that the recipient may require and is qualified in its entirety by reference to the Offering Documents. This presentation is not a part of or supplemental to the Offering Documents or such definitive documentation. The Offering Documents and any supplements will supersede this presentation in its entirety. Projections and other forward-looking information as to events that may occur in the future (including projections of revenue, expense, net income and stock performance) are based on information provided by the Company and other publicly available information as of the date of this presentation. There is no guarantee that any of these estimates or projections will be achieved. The recipient should not rely on any information contained herein. No investment, divestment or other financial decisions or actions should be based solely on the information in this presentation. Actual results will vary from any projections in this presentation, and such variations may be material, including the possibility that an investor may lose some or all of its invested capital.

This presentation is confidential. By acceptance hereof, you agree that (i) the information must not be used, reproduced, or distributed to others without prior written consent; (ii) you will maintain the confidentiality of all information herein that is not already in the public domain; and (iii) you will use the information contained herein solely for preliminary informational purposes.

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Securities offered through US Capital Global Securities, LLC, member FINRA, SIPC.

IMPORTANT: All investing is risky, and no investor should decide to commit funds without first consulting with a competent professional adviser. Some or all invested funds can be lost. The past performance of any investment, investment strategy or investment style is not indicative of future performance. Future results may vary, and are not guaranteed. The value of investments and their income may increase or decrease, and a loss of principal – including all principal – may occur.

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