Atlantis Alpha FundsBerk Manav, Rajeev Oak, Ishan Puri
Unlocking previously hidden asset classes, delivering returns, and bettering society.
Atlantis Alpha Funds
We create win-win situations through partnerships.
We access previously untapped assets (parking lots) en masse allowing builders to grow affordable multifamily inventory in underserved communities. We’re able to group these BMR assets in a fund with AMR projects to standardize returns.
We partner with class leading religious organizations to create value from under-utilized resources to all stakeholders. We empower more investors to enter affordable housing.
Atlantis Alpha Funds
Strategy
Atlantis Alpha Funds
We propose the creation of a fund solely focused on purchasing high-quality, unused land from religious organizations to unlock hidden value
The fund aims to develop a diversified portfolio with high-performing ground lease assets, which were previously inaccessible to private markets
Hence, the fund can sell the portfolio at a premium valuation (also due to CDFI designation), allowing it to meet return expectations while charging a lower rate on the ground leases
The affordable housing developer therefore gains access to substantial cost savings and cheap financing on the land
Based on the flat surface structure of the parking lots, the developer has additional savings from the reduced land repurposing and construction costs
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Developers
How it Works
Atlantis Alpha Funds
Pooled Capital
Blue Chip Tech Companies
Atlantis Alpha Funds
Religious Organizations
BMR Housing Developers
(40% Fund Composition)
Impact Investors
Family Offices
Investment companies want their involvement in solving affordable housing de-risked. The biggest hurdle for affordable housing developers are land acquisition costs. Atlantis Alpha Funds solves these problems for these key players.
Equity (LPs)
Banks Advisory Services
Lending
Land/Easement Acquisition
Ground Leases
Advisory
AMR Housing Developers
(60% Fund Composition)
Case Study: East Palo Alto Community ChurchEPA Community Church Represents a potential Core Asset of our portfolio within affordable housing.
0.612 acres of parking which borders a major thoroughfare.
Properties like this example are traditional inaccessible for developers. Atlantis streamlines the process.
Our case study indicates with rent levels at 30% of area AMI, returns are financially feasible for all parties
Atlantis Alpha Funds
East Palo Alto Community Church
● 0.620 Acres of developable land. ● Capacity for 40 units. ● Increased Parking Capacity for
residential and church.
● Development access in generally underserved and low inventory area.
● Next to major transit options.
Deal Economics & Risk Sharing
● Innovation: Atlantis buys the land or easement at favorable locations through partnership with religious organizations
● Secures long-term leases with credible counterparties
● Investors expect infrastructure returns, with IRR expectations of ~10%
Atlantis Alpha Funds
Atlantis Alpha Funds Affordable Housing Developer
● The developer leases the land from Atlantis at favorable rates
● Reduces upfront capital spent on land acquisition
● Gets access to prime urban locations● Investors expect opportunistic real estate
returns, with IRR expectations of 12%+
Project Returns to Both Parties based on Illustrative 10-Year Pro Forma Analysis
We will build a moat with access to cheaper capital and CRA / New Market credits
CDFI Designation
Atlantis Alpha Funds
https://www.ncua.gov/files/publications/resources-expansion/cdfi-faq.pdf, https://www.cdfifund.gov/Documents/Carsey%20Report%20PR%20042512.pdf , https://www.fdic.gov/consumers/community/CDFI/CDFIs_EntireReport.pdf, https://www.taxpolicycenter.org/briefing-book/what-new-markets-tax-credit-and-how-does-it-work
Financial Returns
● CDFI designation allows us to diverse our source of funds and lower our cost of capital
● With a defined mission supported with metrics like IMM and a target city rollout, we will qualify for CRA credits which we estimate can boost IRRs by 1-2%
● Gives us flexibility to move into related products (direct lending programs, residential, etc) - potential goal of getting CAMEL designation if this is our path in new opportunity funds
● Utilize New Market Tax Credits which have traditionally shielded ~40% of taxable income according to a FDIC study (likely to be renewed past 2020)
Operational and Societal Returns
● Reduce our compliance overhead by removing ATR (ability to repay) requirements, allowing us to move into development if we want in the medium-term
● CDFI designation has been shown in research to reduce risk on mainstream lenders
○ We aim to develop education/advocacy programs in tandem with these lenders to reduce predatory lending and other tactics sometimes aimed at our target population
Legislation is accelerating and bringing incentives and economics to the strategy
Why Now?
Atlantis Alpha Funds
Bill Premise Date Introduced
SB-899
Exempt affordable housing projects from review under California Environmental Quality Act and other permit streamlining, up to 40 units and larger than 10,890 square feet
March 2020
Assembly Bill 1851
Allowing development of more than 50% of parking spaces and relaxing other existing rules on development of parking lot space for religious institutions
September 2020 (Approved)
https://www.natlawreview.com/article/proposed-legislation-aims-to-boost-affordable-housing-land-owned-religious
We will work with developers to pass on these savings to the end renter
Pass on Savings to the End Renter
Atlantis Alpha Funds
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Reduced cost of rezoning due to new legislation
Lease land instead of buying land allows us to scale faster
Ability to develop larger properties (previously constrained by 50% parking rule)
Parking lots are flat with limited abatement costs
Cost of capital savings from CDFI designation
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5 target cities where affordability is a problem and appreciation potential is strong (employment growth), with a leaning towards coastal cities. Total target population of ~3m in initial phase.
Scalability
Atlantis Alpha Funds
City Average Home Price % of Total Income Population Below Poverty Line
Los Angeles $906,000 92% 740k
Miami $370,000 86% 489k
New York $900,000 85% 1.5m
San Francisco $1,448,000 82% 90k
Jersey City $627,000 66% 47k
https://www.realtyhop.com/blog/realtyhop-housing-affordability-index-january-2020/, assumed 4.5% interest rate with 20% down and a 30 year mortgage; https://datausa.io/profile/geo/los-angeles-ca#:~:text=19.1%25%20of%20the%20population%20for,the%20national%20average%20of%2013.1%25, St. Louis Fed, SFGov
Further, we calculate an IMM multiple (Impact Multiple of Money) that aims to quantify the societal impact we bring with each project and present that to our LPs
In mixed income units, we’ll make sure the property design allows for the seamless integration of affordable and market-rate units, creating a welcoming community
As residents, this allows new voices to be heard in local politics and government
We will vet developers and only work with those committed to social change
We increase accessibility for historically disenfranchised groups in cities that are typically out of reach
We will align ourselves by raising from mission-driven LPs that understand the value of social change
Racial Equality and Inclusion
Atlantis Alpha Funds
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Risk Mitigant
Slowed developer interest due to Covid 19
Offer advisory services to these developers to smooth revenue, choose cities with resiliency where demand is pent up, pass on savings from our lower cost of capital
Developers going direct to parking lot ownersBuild a reputation amongst religious institutions for generating long-term stable cash flows and value-add to the community
Working in cities with legislation that is still in progress
Lobby local agencies with our reputation and our IMM multiple
Negative side effects from new development and local community unhappy
Measure early project increased congestion, noise, crime and change population mix within developments as needed
Consideration of COVID-19 and Other Risks
Atlantis Alpha Funds
Appendix
Atlantis Alpha Funds
Ground Lease Model Output - Atlantis
Atlantis Alpha Funds
~10% IRR with YY year ground leases (compared to average infrastructure returns of 9%), with developer markup of 30%
https://www.preqin.com/insights/research/blogs/risk-and-return-of-infrastructure-funds-compared-to-other-fund-types-november-2014#:~:text=Infrastructure%20funds%20generate%20a%20median,of%20funds%20vehicles%20(7.6%25)
● Assumes a flat entry/exit cap rate and two tax credits per the CDFI program
● 70% LTV ● Assumes 20% OpEx cushion● $3m equity for the East Palo Alto deal
Assumptions
Ground Lease Model Output - Atlantis
Atlantis Alpha Funds
~15% IRR with a mix of affordable and market-rate housing units, through access to favorable financing on the ground lease
Assumptions
● 40 units on 0.6 acres of the East Palo Alto Community Church parking lot
● Based on East Palo Alto AMI of $127k● Assumes 35% OpEx cushion and 5% vacancy
allowance● Affordable units assume rent at the target of
30% of AMI