James Burke
Grosse Pointe, MI (USA)
Role(s):
Founder/Owner/Principal
Heritage National Investments Corp
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Startup
Location:
Grosse Pointe
Industry:
Real Estate
Year Founded:
2010
Number Employees:
10-50 people
Business Stage:
Creation/Idea
Entity Type:
Limited Liability Company
Description:
The proposal is to establish a funding facility of up to $10M to accommodate "start-up" cost to establish and operate a modular home manufacturing facility in the City of Detroit. This facility would produce housing units and housing panels, to be assembled in the field, to service government contracts and support the development of a 1200 acre residential community.
The costs to start-up and operate the manufacturing facility proposed are estimated at approximately $6M with additional cost of up to $4M associated with the development of the 1200 acre residential community. Those costs include the procurement of equipment, software and licensing agreements, building materials, supplies and related operating costs for the initial duration of 12 to 18 months. This facility would install and operate 3 production lines which would produce more than 1100 single and multi-family units annually. Current purchase orders include the request to produce for a major metro area developer 72 multi-family garden style units with the anticipation to receive additional orders.
Wholesale activity would be accommodated by the procurement of government contracts as a result of responding to Request for Proposals (RFP) solicited by government agencies.
Retail sales would include the production and sale of single and multi-family residential style units for an estimated 1500 prospective home buyers receiving up to $70K in home buyer’s subsidies. Those prospective buyers’ average annual income is approximately $57K, employed by a Michigan based company whose sales are up 30% and on track to achieve full-year targets of $1.5B in net income, free cash flow in the first quarter of $1.7B and $65B in revenue. The residential development is located within 1.6 miles away from the aforementioned employer.
Residential “retail sales” for the proposed development are estimated at $255M with an estimated gross profit margin of 23% (or) approximately $58.7M in gross profits. Approximately $3.5M has been expensed to install infrastructure i.e., water, sewer, utilities, roads, curves, etc. in the community proposed for development. Brownfield Tax credits and an additional $6M may be available from the City of Detroit as a result of a previously approved bond placement. Property tax subsidies and/or abatements of up to 67% of the current property tax assessment rate are available to each home buyer purchasing in the community.
Three retail commercial banks and two national retail mortgage bankers have expressed their ability and desire to provide retail mortgage lending services for those buyers. And the company has full access to employee communication channels managed by the employer which would support the company’s sales, marketing and advertising campaigns.
Additional revenues would be realized from contracts procured for production to accommodate wholesale activities i.e., sales to local developers, builders and non-profit housing development agencies and organization. Respectfully cost and revenues would be realized from the construction, leasing and management of more than 600 rental units developed and leased by the company in the community proposed.
The exit strategy would include reconciling the investment (or) funding facility with notes secured by profits generated from retail and wholesale sales. Additional collateral would include equipment, contracts-to-build and/or payment drafts received from the retail sales and/or purchase contracts executed with respective retail buyers' mortgage.
The procurement and servicing of government contracts, providing newly constructed retail housing to more than 3000 employees of an extremely qualified and stable employee base desiring to live in a community located within 1.5 miles away from the proposed residential; developing for delivery a efficiently designed and constructed LEED Certified housing unit and products; the development of state-of-the-art construction building practices and technologies; creating more than 600 permanent jobs and thousands of ancillary construction jobs; addressing the extremely high-demand for market rate and subsidized multi-family style rental housing units are more than enough compelling and justifiable reasons to accommodate the proposal to establish the funding facility requested.