Saplings Development

Goal

To provide energy efficient, quality, affordable residential housing currently unavailable in the greater Vancouver, BC community.

Core Stakeholders

Project Structure

Land & Financing

• Land purchased from capital raised by Equity Investors
• Land serves as Sapling's equity for construction financing
• Construction financing: 100% LTC on project improvements including soft costs, subject to 80% cap of as-completed value
• Subject to approved licensed and bonded General Contractor
• Commitment to pre-sell units during construction period

Commercial Units

• Built to suit, triple net (NNN) leases
• Lender approves commercial mortgage as take-out financing once NNN leases are executed
• Project Real Estate Holding Company serves as borrower for commercial mortgage

Residential Units

• Project will have unit models (4 types) completed for viewing as early as possible
• Residential construction proceeds paid off by unit sales
• Unit collateral release price exceeds allocated construction loan proceeds — sufficient to pay off the construction lender by 80% of units sold

Order of Project Payout

Partnership Structure

Project Real Estate Holding Company

• General Partner: Sapling Dev (lowest percentage allowable)
• Limited Partners: Homebuyers

Commercial Leases

Each business tenant enters a build-to-suit, triple net lease with a minimum 5-year term and renewal options.

Governance

Managing Board

Homebuyers vote to establish a Managing Board, decide how many members serve, and set member rotation terms. The Managing Board:

• Collects building unit maintenance fees and commercial rents
• Manages payable relationships and monthly building expenses
• Establishes professional services relationships: banking, accounting, tax preparation, etc.
• Manages Net Operating Income (fees & rental after expenses, including commercial mortgage payment)
• Creates capital expense accounts to prefund predictable maintenance and upkeep
• Oversees discretionary improvements to the building and grounds

Ownership Accrual Accounts

Allocation to owners — funds cannot be drawn until ownership is fully vested.

Community Covenants

• Changes to CCRs require 2/3 vote of the Board and 75% of the homeowners
• Vesting period requirement cannot be changed
• Violation of the vesting period activates General Partner authority to intervene, up to assuming full ownership of the RE Holding Company

Project Costs & Key Metrics

Project costs include hard costs (land, improvements & contingency) and soft costs (including Sapling Project Management Fee).

Key Metrics

• Unit cost, sales price, and market value by type
• Equity Investor ROI threshold and payout percentage by unit type
• Sapling payout percentage by unit type
• Collateral release price by unit type (to achieve payout by 80% of total sales)
• Commercial unit rent threshold (minimum 1.25× commercial debt service payment)
• Required homebuyer household income by unit type
• Ratio of required household income to Area Median Income by unit type
• Required household income to purchase units at market prices
• Ratio of required market household income to Area Median Income