JAK Capital Team8

James Hsieh Alan Chen Krista Sande-Kerback
JAK Capital: Distressed Real Estate
Acquisition & Turnaround
Day 5: Final Presentation
New Interviews: 12
Total Interviews: 45
Survey Respondents: 39
1

Buy side:
• Capital partners
• Real estate brokers
• Real estate agents
• Bank mortgage
portfolio managers
• Bankruptcy law firms
• Short sale specialists
Design/ build/
implementation:
• A/E/C consultants
• LEED consultants
• Automation/consulta
nts/ general contracts
• Government
expeditor
Sell side:
Value driving cost structure (creating max. value
through value prop)
Fixed cost: consultant fees (min. legal, accounting, corp
governance etc.)
Variable: consultants, brokerage/agent’s fee, purchasing
price $/sf.
Economic of scale: construction materials, labor costs,
agent’s fee % economic of scope: construction trades
combo
2
Production:
• Customized
automation system
• Product sourcing
• Consultant sourcing
Human:
• REI/Design/Architecture/Cons
truction/Finance/PE Capital
Finance:
• Self Funding/LLC partners
• GP/LP: HNW/UHNW, RE
Developers,
Alternatives:
• Banks: CoC (10%), PE (CoC +
fees)
• Newness/Performance/Co
nvenience-userability:
home automation –
iPad/tablet control
module lighting,
heating/cooling,
appliances, doors, TV,
audio, emergency, shut
offs etc.
• Performance/cost
reduction: LEED certified –
energy efficient building
envelope and HVAC
System, self sufficient
power supply
• VOC free materials:
allergic free materials,
toxic free, biodegradable
• Design: modern,
Scandinavian style,
packaged customization
interior (all built in, all
inclusive), including
cabinetry, furniture,
audio/visual system
• Price: $MM lifestyle @
$600k to $800k (20% + off)
• Premium quality and
design provider
(community)
• Strong warranty
period service
• Automation
efficiency and user
ability
• Cost: managed
• Real estate
• Broker/agents
• Bank mortgage
• Portfolio manager
• Marketing/ sales/ BD
team building
• Nich Market:
• Ago:25 to 55
• Income: $110k -
$120k min./yr/person
• Credit Score: 730 +
• Location:
metropolitan,
freeway access,
convenience, lifestyle,
safety
 Professional/ active
 Up to family of 4 or 5
 Young family, single,
couple
 Frequent travelers
 Environmentally
consciously
 Premium design/
differentiation
• Model A (Rehab via REO/SS) asset sale, dynamic pricing via
real time market
• Model B (Rehab via regular sale) asset sale, dynamic pricing
via RTM and Nego
• Model C (brown field development-MF/MU) asset sale, fix
pricing
• Model D (green field development-MF/MU) asset sale,
fixed pricing
• Model E (rehab/brown/green) renting/leasing
• Model F (management) – sub. Fee based, automation, prop,
magt,. Serviced-model
Day 1

Interviews
• Real estate agents: bullish on green+ automation combo MF units; if able to list at
between $500k to $800k, can promise to sell all units with asking price (or above w/
multiple offers)
• Real estate brokers: showed strong interest in listing such product types; want to be
seen as “green partners”
• Mortgage brokers: recommending HUD and FHA green building MF loan programs and
Fannie and Freddie green building loan programs; showed strong interest in
offering “Special Green Loan Package” for such project
• Potential home buyers:
- Afraid of rapid rising home costs
- Willing to live in smaller homes or MF units
- Want bright, open, and modern design and floor plan
- Green + automation combo is desired, but won’t pay more than $20k - $30k for
such investment; want break-even no more than 3 to 5 yrs
- Toxic-free building materials highly desired
- Concerned with down payments, broker fees, tradeoffs based on budget
3

What We Thought – Day 1
4
• Our business was about turning around distressed real
estate assets and adding green and home automation
features, with premium pricing
• One member of the team came in with extensive real
estate experience
• Our value proposition was all over the map
– We had a general sense of whom our customers would be
– We wanted to push our product without really thinking
about our customer – we were confident that the value-
added features would be desirable
– We listed our partners on the business model canvas
before we had acquired them

Buy side:
• Bank mortgage
portfolio managers
Design/ build/
implementation:
• Government
expeditor
Sell side:
Value driven cost structure (creating maximum value
through value prop)
Fixed costs: consultant fees (legal, accounting, corporate
governance etc.)
price $/sf.
Economies of scale: construction materials, labor costs,
agent’s fee %
Economies of scope: construction trades combo
5
Production:
• Customized
automation system
• Product sourcing
• Consultant sourcing
• Distressed assets
acquisition
• Rehabilitation/moder
nization
• Sell property
Human:
• REI/Design/Architecture/Construction/F
inance/PE Capital
Finance:
• Self Funding/LLC partners
• GP/LP: HNW/UHNW, RE Developers,
Alternatives:
• Banks: CoC (10%), PE (CoC + fees)
• Capital
• Expertise (home
automation & green
building)
• Newness/Performance/Convenience-
userability: home automation –
iPad/tablet control module lighting,
heating/cooling, appliances, doors, TV,
audio, emergency, shut offs etc.
• Performance/cost reduction: LEED
certified – energy efficient building
envelope and HVAC System, self
sufficient power supply
• VOC free materials: allergic free
materials, toxic free, biodegradable
• Design: modern, Scandinavian style,
packaged customization interior (all
built in, all inclusive), including
cabinetry, furniture, audio/visual
system
• Price: $MM lifestyle @ $600k to $800k
(20% + off)
• Improving the quality
of the customers’
living environment
through green
building, modern
design, and home
automation
design provider
(community)
• Strong Comprehensive
warranty program
• Automated efficiency
and user ability home
systems
• Cost: managed
Relative affordability
• Real estate
broker/agents
• Bank mortgage
• Portfolio manager
team building
- Advertisements
- Customer
database
- News media
• Niche Market
• Age: 25 to 55
• Income: $110k -
$120k+/yr./person
• Credit Score: 730+
• Metropolitan location
• Professional/ active
 Up to family of 4 or 5
 Young family, single,
couple
 Frequent travelers
 Environmentally
conscious
• Lifestyle
considerations:
- Convenience
- Use of space
- Green/ healthy
living
• Budget
 Premium design/
differentiation
• Model A (Rehab via REO/SS) asset sale, dynamic pricing via real time market
• Model B (Rehab via regular sale) asset sale, dynamic pricing via RTM and Nego
• Model C (brown field development-MF/MU) asset sale, fix pricing
• Model D (green field development-MF/MU) asset sale, fixed pricing
• Model E (rehab/brown/green) renting/leasing
• Model F (management) – sub. Fee based, automation, prop, magt,. Serviced-
model
• Dynamic Pricing
- Negotiation
- Real time market
Day 2

Multi-Family Housing Market Size
Total Available Market*
• 1.1M units /year in U.S.
• Ave. National MF price:
$149k
• 300k units /year in SoCal
• Ave. SoCal MF price:
$368k**
• Average 3
developments/year/SoCal
• Average 18
units/development
• Average price/unit: $680k
• Total annual revenue:
$36.72M
Sources:
*U.S. Census Bureau
http://www.census.gov/housing/ahs/data/metro.html
** National Association of Home Builders
http://www.nahb.org/fileUpload_details.aspx?contentTypeID=
3&contentID=149100&subContentID=354371
Total U.S. Market Size: $1.64T
Total SoCal Mkt Size: $110B
Our Opportunity:
$36.72M
6

What We Learned – Day 2
7
• We revamped and simplified our business model
canvas
• We identified a $36.72M opportunity in the
market
• We began testing our hypothesis with
prospective customers through a survey and
interviews
– Survey results validated that the features we were
offering were of interest to customers
– Interviews revealed that the biggest pain points for
customers were around cost issues
– Unclear whether customers would pay for green
features

• Bank mortgage
portfolio managers
• Government
expeditor
Value driven
governance etc.)
price $/sf.
agent’s fee %
acquisition
nization
• Sell property
• Capital
• Expertise (home
automation & green
building)
• Improving the
quality of the
customers’ living
environment and
saving annual home
operation costs
through green
building, modern
design, and home
automation at no
additional cost
design
• Comprehensive
warranty program
• Automated home
systems
• Relative affordability
• Real estate
broker/agents
team building
- Advertisements
- Customer
database
- News media
• Niche Market
• Age: 25 to 55
• Income: $110k -
$120k+/yr./person
• $600K-$800K
affordability
• Professional
• Lifestyle
considerations:
- Convenience
- Use of space
- Green/ healthy
living
• Budget
• Dynamic Pricing
- Negotiation
- Real time market
8
Day 3

Customer Segments
*Potential customer segment for future exploration: younger, active retirees
Meg
• Single professional
• Early 30’s
• Lawyer
• Lives in Torrance, CA
• FICO score: 730
• Concerned about tradeoffs
with space vs. amenities
• Wants to purchase real
estate as investment
• Travels frequently
• Interested in healthy living
Kelly & Nick
• Married couple
• In their 40’s
• Film industry
• Live in Van Nuys, CA
• FICO score: 790
• Two working adults
• Have two young children
• Want to move to complex with
more space
• Looking for safe, quiet place
• Want VOC-free home
Leigh & John
• Married couple
• In their 50’s
• Business owners
• Live in Anaheim, CA
• FICO score: 810
• Empty nesters / buy-down
market
• Needed less space;
downsized 4K sq ft to 1.8K
sq ft
9

Value Proposition
Our value proposition: Improving the quality of the customers’
living environment and saving annual home operation costs
through green building, modern design, and home automation
at no additional cost
10
Rank Pain Gain
1 Suffering from allergies/health
issues
Reducing health risks
2 Fire, burglary, other risks Providing home safety and security
3 High utility bills Reducing utility bills
4 Inconvenience of non-automated
systems
Reducing hassles

• Some misalignment: people interested in these types
of amenities typically prefer single-family homes
• Real estate agents indicated that they could sell all
units from $600K-$800K
– 2 real estate brokers showed strong interest in being seen
as “green partners”
• Mortgage brokers showed strong interest in offering
mortgages with preferred rates for green buildings
• Concerns from classmates
– Business might not be very scalable
– Green messaging in our marketing campaign
– Need to look further into competitive landscape
11

• Bank mortgage
portfolio managers
• Automation
consultants/ general
contracts
• Government
expeditor
Value driven
governance etc.)
price $/sf.
agent’s fee %
acquisition
nization
• Sell property
• Capital
• Expertise (home
automation & green
building)
• Improving the
quality of the
customers’ living
environment and
saving annual home
operation costs
through green
building, modern
design, and home
automation at no
additional cost
design
• Comprehensive
warranty program
• Automated home
systems
• Relative affordability
• Marketing/ sales/ BD team
building
- Advertisements
- Customer database
- News media
• Niche Market
• Age: 25 to 55
• Income: $110k -
$120k+/yr./person
• $600K-$800K
affordability
• Professional
• Lifestyle
considerations:
- Convenience
- Use of space
- Green/ healthy
living
• Budget
• Dynamic Pricing
- Negotiation
- Real time market
12
• MLS/Zillow/Trulia/Redfi
n/Realtor.com listings
• Owner’s loyalty
program
• Loan officers
• Media marketing
Day 4

13
FOR SALE
Fully Automated Eco-Friendly
Condo
1500 SF 3 bedrooms 2.5 bath
Asking $675k
RE
Agents
RE
Brokers
Direct
Sales Force
Digital
Marketing
News
Media
Budget:$600k to $700k
FICO: Ave. 776
Ready-to-Buy
Target purchase:
MF/PUD/1,500-1,800sf
Product
Sales
Channels
Market

Get Customers
• Take out a quarter page
of advertising in LA
Times
• Build Facebook
business page and
Twitter handle; start
social media
conversations with
prospective customers
• Mail 5,000 (per zip
code) direct mail
advertisements
through USPS in LA
County
Keep Customers
• Offer a homeowners’
loyalty and retention
program
• Follow-up with an email
survey regarding customer
satisfaction
• Conduct customer check-in
phone calls to make sure
needs are being met
• Communicate building
updates via email
Grow Customers
• Offer a cash-back
program for referrals
• Offer incentives for
upgrade from existing
unit
• Cross sell green home
with hybrid car
dealerships
14
Get, Keep, and Grow Customers

Revenue
Model
Distressed
Acquisitions
@$200/SF
$16M Total
Design/Buil
d
Turnaround
@$110/SF
$8.9M
General
Conditions
@$3/SF
$0.25M
Total Cost:
$25.15M*
15
Fed
Green
Bldg.
Rebate
$36k
State
Green
Bldg.
Rebate
$55k
Annual
One-Time
Rebate
$91k
3 Complex, 54 units,
1500- 1800 SF/Unit,
Asking $450/SF
~ $36.72M TOTAL GROSS
REVENUE
EBITDA: $11.7M USD
*Acquisition capital
Under current mgmt

• Beyond green building / automation, customers still
really care about the basics over all – location,
kitchen design, etc.
• Industry typically relies on traditional marketing, but
real estate becoming more competitive and our
particular customers are heavy users of digital
marketing, so this should be a major strategy for us
– There is a branding opportunity – still early movers in this
space
• Concerns from classmates
– Cost of capital
– Want more clarity on Get, Keep, Grow strategies
16

• Bank mortgage
portfolio managers
• Automation
consultants
• Value driven
• Fixed costs: consultant fees (legal, accounting,
corporate governance etc.)
• Variable: consultants, brokerage/agent’s fee,
purchasing price $/sf.
• Economies of scale: construction materials, labor
costs, agent’s fee %
• Economies of scope: construction trades combo
acquisition
nization
• Sell property
• Capital
• Expertise (MF design
home automation &
green building)
• Improving the
quality of the
customers’ living
environment and
saving annual home
operation costs
through green
building, modern
design, and home
automation at no
additional cost
design
• Loyalty and retention
program
• Customer follow up
calls and email
• Social media
campaign
• Direct mail campaign
• Newspaper ad
campaign
• MLS/Zillow/Trulia/Redfin/Realtor.
com listings
• Owner’s loyalty program
• Loan officers
• Media marketing
• RE Agents
• RE Broker
• Direct sales force
• Digital media
• News media
• Niche Market
• Age: 25 to 55
• Income: $110k -
$120k+/yr./person
• $600K-$800K
affordability
• Professional
• Lifestyle
considerations:
- Convenience
- Use of space
- Green/ healthy
living
• Dynamic Pricing
- Negotiation
- Real time market
17
Day 5

Where We Ended – Day 5
18
• What we learned
– Alignment between value proposition and customer segment is
extremely important –> “go out of the building!”
– Ask the right questions during customer discovery
– Be strategic with pricing – don’t price on cost
– Tie pass/fail metrics to the revenue model
• Next steps
– Interview 100+ highly targeted customers in Southern CA
– Design new survey and collect data from 1,000 people in the next 120
days
– Test hypothesis that we can collect down payments from potential
customers (0.5% of asking price)
– Continue exploring alternative capital structures (i.e. REIT Index Fund)
for scalability
– Engage with current and potential capital investors

Green Building = Cost More??
• Are green buildings more expensive to construct and
operate?
• Perhaps surprisingly, good green buildings often cost only a
few percentage points or no more to build than
conventional designs. Integrated design processes that
identify the most efficient, holistic approaches to building
green can reduce these initial costs. For example, in some
cases, when buildings are carefully designed to be energy
efficient, heating/ventilation/air conditioning (HVAC)
equipment can be downsized for significant savings. There
are also many green products and materials that cost the
same or even less than conventional ones.
Source: www.usgbc.org and http://www.epa.gov/greenbuilding/pubs/faqs.htm#14d
20

Annual Home Operating Cost Comparisons
21
Annual Home Operating Costs (MF Unit: 1500sf, $600k purchase price) 600000
Standard MF Units Green MF Units
Property Tax (1% ~) 6,000.00$ -$ (CA Property Tax Incentives - 100% system
value w/ Accerlated Depreciation)
Insurance (structure + interior) 1,200.00$ 1,080.00$ (10% green building discount)
Utilities:
Electricity 3,000.00$ 1,350.00$ (based on CA T24 + 40% energy saving)
Water 1,800.00$ 1,080.00$ (based on CA T24 + 25% water saving)
Gas 2,160.00$ 972.00$ (based on CA T24 + 40% energy saving)
Maintenance 1,000.00$ 1,000.00$
HOA($500/mon.) 6,000.00$ 6,000.00$
Total Costs: 21,160.00$ 11,482.00$
Annual $Savings: 9,678.00$
Annual Savings by %: 46%
Additional One Time Savings
Federal
Energy-Saving Tax Credit (18 units total - $200/unit) 36000
State
Bldg Permit Fee Waived 25000
CA Solar/PV Incentives ($97.5/unit) 1764
CES-New Solar Home Partership (100% max load/unit) 24300
CA Advanced Home Incentives ($200/unit) 3600
Total One-Time Development Savings: 90,664.00$

Residential Trends
• The Top 10 Features Home Buyers Want*
• Open Concept Homes -- …high ceilings that older houses don't provide.
• Smaller Homes -- ……the size just right for you.
• Outdoor Living Spaces - (for move-up buyers only)
• Neutral Decor - …..modern neutral hues.
• Modern Kitchens -- The heart of every home.
• Smart Growth -…water common areas with reclaimed water.
• Going Green -- Low Home Energy Rating System (HERS typical new home
is 30 percent more energy efficient than a typical resale house.
• Linen Closets & Smart Storage Options
• Energy-Efficient Fixtures & Appliances - Compare a typical new home
built today to a 10-20 year old home? Game over!
• Double Car Garage with Organized Work/Storage Space
*Source: www.newhomesource.com
22

National Assn. of Homebuilders’ Trend
Report*
• “The survey from NAHB, “What Home Buyers Really Want,” unveils top concerns
and priorities among homebuyers today, one of which is the desire to have energy-
efficient homes. This is partly due to the fact these homes have permanently lower
utility bills”
• “Home-automation technology can help by providing homebuyers with controls to
better monitor and manage energy consumption. These days, homebuilders are
more often including technology in homes to meet the desires of homebuyers”
• “One of the top five is the desire to have wireless home security systems and
whole-house electronics features offering entertainment, ease, and enjoyment”
• “As more homebuyers want green features in homes, home-automation
technology will inevitably find its way into more residences as a way to provide
owners with controls to manage energy consumption throughout the home”
*source: www.nahb.org
23

Success Story (55% Energy Saving)
Project Name: Cherokee Studios
City: Los Angeles, CA
Building Type: Multi-family; Low-rise (Less
than 4 stories)
Building Efficiency: Title 24 + 40%
Green Building Features: Roof garden with
drought resistant landscaping, cool roof,
20kW solar electric array, electric car
charging for every unit, high efficiency
tankless water heaters, efficient lighting
including strategic use of LED lighting, dual
flush toilets, ENERGY STAR® appliances,
formaldehyde-free cabinets and flooring,
Forest Stewardship Council certified wood,
low/zero VOC paints and finishes,
extensive bike storage.
http://www.californiaadvancedhomes.com/success-
stories/cherokee-studios 24

Success Story (86% Energy Saving)
Project Name: Fallbrook Pueblo
City: Fallbrook, CA
Building Type: Single-family; Custom Home
Building Efficiency: T24 + 71%
Green Building Features: Perform Wall
(lightweight structural insulated concrete form
alternative wall assembly made with 85%
recycled expanded polystyrene beads), no air-
conditioning, radiant barrier roof sheathing,
cool roof, reclaimed lumber, radiant floor
heating, Low-e windows, solar electric
(photovoltaic) and solar hot water systems.
Source:
http://www.californiaadvancedhomes.com/success-
stories/fallbrook-pueblo
25

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