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| Heron Lake Commercial Enterprises, HLCE |
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| HLCE believes there are more opportunities for profit now that the market is irregular and sluggish than when it is stable and booming. As an experienced buyer of commercial real estate, with a decided focus upon execution and operation, HLCE feels there are windows of opportunity to acquire properties at reasonable prices and re-engineer them to improve operations and thus profit exponentially. |
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| HCLE takes past business experiences, and current real estate investment knowledge, and combines the two to create a new form of passive investing. Even in the most troubling times and through economic uncertainties, real estate is a natural means to wealth and passive investment. This is the ticket for some people. What passive investment means to HLCE investors is: the acquisition of properties, professionally managed through HCLE, whereby HCLE handles all the issues of property management, while paying investors through positive cash flow and end of project profits. The investment approach allows investors to be just that, an investor, without the headaches and hassles of managing their investment. |
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| Rising demands in broader rental markets is already reflected in improving occupancy trends for professionally-manage apartment’s properties in the Northeast. |
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| Other parts of the country are demonstrating similar trends. HLCE intends to capitalize, with our investors, on such market trends. |
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| Property Acquisition |
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The Acquisition process is comprised of:
a. determining metro areas with strong prospects for growth; b. locating growth submarkets, within the metro markets; c. identifying properties within the submarkets; d. conducting due-diligence (consisting of a visual on-site inspection coordinated with financial evaluation for efficiency and potential increased profitability). Such evaluations are detailed to a gross property evaluation for external services and overall appearance; as well as a per-rental-unit basis, both in physical property evaluation, and lease/tenant evaluation. |
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| HCLE works specifically on finding properties that meet the company’s, and investor’s goals with certain market criteria. Property searches are conducted in a number of ways, including reaching out to commercial brokers, who have the largest deal flow available. Potential sellers are targeted directly through Dunn & Bradstreet records, and databases of multi-family owners by property size and metro area that meets investment objectives. |
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| Investment approaches are conducted to property owners by phone and mail to assess their desire to transfer ownership at the current time or in the future. Personal referrals, local newspapers, advertisements and contact with local area governments all provide information about potential opportunities and business development in a community that will affect the housing/rental market. Through all these sources HCLE will consider and analyze thirty (30) or more properties per month to convert them to one (1) or two (2) deals that will fit investor’s strict buying objectives for possible purchase and investment opportunities. |
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| The acquisition department is made up of dedicated financial and real estate professionals with many of years of experience. HCLE brings a team of experts together to find properties that will grow the company and return investment dollars to investors. |
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| General Market Trends |
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| The timing of investment with HCLE is ideal, given the current dynamics of the apartment market. The supply and demand fundamental, lower vacancy rates and higher rents are all indicative of the improving market. The apartment market had been in malaise since 2000, when vacancies were 3.1%. The vacancy rate shot up to 6.7%. By 2005, low mortgage rates and relaxed lending policies enticed renters to enter the buyer market. By 2008, such lending practices reached a predictable end, and mortgage based lending tightened. These forces are turning marginal buyers back to the rental environment. The current macro economic trends estimated rentals prices to be up 4.8%. |
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| In addition to declining affordability based on income, banks are requiring higher equity in the home purchases to help offset some of the risk and income sensitivity to mortgage rate fluctuations. The increased equity requirement will likely keep many tenants in their rental units due to an ability to procure the required down payment. Owner-occupied housing has become so expensive that the disparity between average rent and a typical mortgage payment is now at its widest point in years. Although housing prices have begun to drop, the moderate correction in home prices would have only a minimal impact on apartment demand. |
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| The low interest rates experienced a few years ago weren’t the only factor fueling the housing boom. Liberal lending policies, such as 100% financing no income or asset verification, etc. for individuals with spotty credit records and the heavy use of adjustable rates loans to qualify for larger mortgage, resulted in poor credit underwriting. Rising interest rates have increased the monthly payments to levels many borrowers can no longer afford. Declining home prices have prevented many individuals; especially those with little to no equity, from being able to sell or refinance their homes. These factors have greatly contributed to record foreclosure levels and a virtual perfect storm at the lower tier of the housing market and will drive people into the rental market. |
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| The sharp increase of foreclosure in the sub-prime mortgage market, which began in the US in 2006 and later became a global crisis in 2008, has yet to be resolved and has caused numerous financial institutions to file for bankruptcy or shut down their sub-prime lending operations. The growing list of homeowners losing their homes to foreclosure is also forcing tens of thousands of people back to rentals. These market trends strongly favor investment in appropriately managed rental property opportunities. |
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| Management Strategies |
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| HLCE believes in using professional team members on all levels, to provide oversight of all properties. To this end, HLCE will insure that local management is available to maintain quality properties on a local market perspective. The appointed management team, whether external management companies, or internal employees, will be responsible for executing an assurance role to oversee all on-site personnel, collection, new rentals, renewals, day to day operations and financials for property. Through these managers, the Company will be able to control the operations at each property to produce the lowest possible cost with the highest possible return. |
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| HCLE takes a highly disciplined approach to developing its profit potential. Defining tenant satisfaction results is imperative its goal is to reduced costs and increased profits. The following synopsis of the process that will be undertaken by the property manager immediately following an acquisition: |
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All tenants receive an introductory letter and a welcome packet. (Deferred maintenance questionnaire and a survey with suggestions and recommendation to management are also included. |
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A toll free hotline is set up for the tenants to call, 24 hours a day, to be connected to the appropriate on-site personnel. |
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Maintenance issues are handled within 24 hours of tenant request. |
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Common areas (laundry facility, lobby, parking lot, etc) are immediately improved. |
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Tenant appreciation parties are conducted so the tenants get to know the property managers personally. |
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A tenant referral program is established to encourage their family and friends to become tenants. |
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Some creative programs are established to create and maintain tenant/management interaction. |
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A newsletter is created for each property to keep the tenants informed of activities, new programs and the latest news. |
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| These procedures promote increased occupancy rates and help ensure a superior quality tenant in each unit. HCLE believes that heightened tenant satisfaction improves a property’s financial condition, translating into the profits for investors. As a method of quality assurance and to risk management, HCLE will conduct insurance evaluations and tax protests on an annual basis to reduce costs. |
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| Investor profile |
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| HLCE is seeking investors with 3-, 5-, and 7-year time frames. Each potential investor will be invited to participate in each property purchase. He will be supplied with a property package that outlines each property’s specifics, financial information including business pro forma, and other essential data. He will be invited to invest in a block amount, usually between $50,000 and $100,000. Blocks offered will be limited to a first come, first serve basis based on each property. The pro forma will delineate cash flow, amortization, depreciation, and anticipated revenue upon sale. The investor will have clear expectations of both quarterly returns and ultimate return upon sale of property. Investors can register in the Investor Registration section of the HLCE website. |
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| Our Principals |
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| Sean McLean, and a little about Sean. |
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| Sean McLean began his career as a healthcare provider and continues to provide community healthcare services for the needy and physically challenged. In the last 15 years, Sean has worked consistently in the General Contracting and Housing Rehabilitation. With an extensive desire as an entrepreneur, Sean has extended his learning objectives in Real Estate and Business principles to create opportunities in the Residential and the Commercial Real Estate Markets. With a profound understanding of the Isolated Profit Markets throughout the US, he can provide analysis and leadership to target exceptional cash flow and equity properties while consistently solving financial expenditure challenges while maximizing value thru Capital Improvement and maintenance reductions. |
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| Mark Coughlin, P.E., and a little about Mark. |
| Mark has developed a keen understanding of public and private development systems, and municipal regulatory practices through experience as a civil engineer. He brings understanding of many processes related civil engineering design and land development. While managing development projects for a Top 10 homebuilder, Mark managed budgets approaching $100 Million. He is quite adept at managing business plans on a detailed level. |
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| Both as an engineer, and a land development manager, Mark developed and maintained working relationships with local, and state regulators, engineers, and other consultants in order to generate cost effective, constructible, and approvable plans in a timely fashion. Such relationships speed projects through entitlements, while saving costly extras sometimes imposed by less experienced engineers. |
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| Both as an engineer, and a land development manager, Mark developed and maintained working relationships with local, and state regulators, engineers, and other consultants in order to generate cost effective, constructible, and approvable plans in a timely fashion. Such relationships speed projects through entitlements, while saving costly extras sometimes imposed by less experienced engineers. |
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| As a process and project manager, and professional engineer licensed in the State of Maryland, Mark’s experience in the development industry brings a breadth of knowledge rarely equaled. He can now control profits directly for our investors |
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