INVESTOR PRESENTATION | JULY 2021
ESSENTIAL GROWTHACQUISITION PROPERTIES FUND I
TABLE OF CONTENTS
2
3 eGap’s POINT OF DIFFERENCE4 LEADERSHIP5 eGap FLYWHEEL6 FUND OVERVIEW & FEE STRUCTURE8 WHY ESSENTIAL / GROCERY10 ACQUISITIONS: FILTERING, DEAL FLOW, PROCESS12 EGAP FUND STRATEGY15 CASE STUDIES18 CONTACT
eGap’s POINT OF DIFFERENCE
3
COMPANY OVERVIEW
Essential Growth Acquisition Properties, Inc. (eGap), founded in Cincinnati, OH in 2021, is a full-service real estate acquisition, ownership & management company focused on the grocery-anchored shopping center space. Formed as a partnership between a 20-year grocery real estate executive at The Kroger Co. and principals from Kroger’s integrated property management and real estate business services company (1045, LLC), eGap is uniquely positioned to create value through the ownership and operation of high-quality grocery anchored shopping centers.
Grocery customers are shifting channels between brick & mortar and eCommerce, but they remain committed to the in-store experience offered by the best retailers. Change in the grocery industry is accelerating at a rapid pace, and it is critical for investors to remain a step ahead. eGap’s experienced and diverse management team has a 360-degree view of the business, uniquely positioning them to navigate the impacts of these industry changes on the real estate community. This can drive long-term value creation through the ownership of grocery anchored centers.
1045, LLC has provided property management and other integrated services for Kroger and other retailers for over 40 years. They have 2,900 shopping centers under management, totaling 74.5 million square feet in 45 states. Their 78 professionals are located in 17 states, performing full-service property management, landlord dispatch, lease restructuring, CAM auditing, brokerage and specialty leasing services for these retailers. These workstreams each generate visibility and touchpoints into unique opportunities to acquire assets and create investor value. eGap’s assets and investors will benefit from this tremendous scale, integration and relentless obsession with the retail customer.
The grocery anchored sector has never been hotter. eGap has a true point of difference to win in this changing space.
eGap LEADERSHIP
MICHAEL MARGIOTTA | PrincipalMr. Margiotta has been in commercial real estate for close to 20 years. Prior to forming 1045 Real Estate, he worked as the Sr. Dir. ofManagement for Priority Properties managing both finance and operations. He currently sits on the 1st Advantage Bank’s Board ofDirectors, on their Legal Board & ALCO committee. His strengths include business development, implementation of new technologiesand financial acumen. He holds both a BA and an MBA from the University of Tulsa.
RICHARD WEBB | PrincipalRichard Webb has been working in the commercial real estate arena since the 1980’s and is a licensed commercial real estate broker. In1982, he began managing large portfolios of commercial real estate assets. His experience is in the banking, finance, leasing, propertymanagement and acquisition/dispositions area of the real estate industry. Richard is involved in the transaction side of 1045 and managesthe leasing and due diligence operation teams. Richard is a graduate of the University of Texas Tech and holds a Bachelor of Sciencedegree in Business Administration.
MATT PRICE | CPA, PrincipalMr. Price has been working in the commercial real estate industry since 1997. Prior to forming 1045 Real Estate, he worked as the CFOfor Emersons Commercial Management, overseeing both the financial and operational aspects of the company. He is a Certified PublicAccountant and has experience with all facets of commercial real estate transactions. His strengths include business development,financial aspects of commercial real estate and real estate management. He holds both Bachelor and Master’s degrees in accounting fromthe University of North Texas.
4
NICHOLAS HODGE | Chief Executive Officer, Fund Manager and PrincipalMr. Hodge has been in commercial real estate for 25 years, including 20 years with The Kroger Co. where he most recently served asVice President, Corporate Real Estate (Head of Real Estate), covering nearly 3,000 retail, industrial & manufacturing assets. In addition todeploying over $2 Billion per year in brick & mortar capital for Kroger and serving on their Capital Committee, he also had direct P&Lresponsibility for 200 company owned shopping centers. Mr. Hodge is on the Board of Trustees for the International Council ofShopping Centers (ICSC), the Downtown Cincinnati Improvement District Board and serves on the Financial Committee for theDowntown Cincinnati Development Corporation (3CDC). He holds both a BA from Washington & Lee University and an MBA inFinance from The Ohio State University.
eGap’s unique virtuous circle is a competitive advantage in a competitive market.
• Management has unique insights & 360-degreeexperience in changing environment.
• 1045 LLC provides scale and efficiencies at theasset & property management level.
• Specialty Leasing Infrastructure in place to createincremental value (outparcel carveouts, cell towers,EV Chargers, e.g.)
• Strong/Integrated Management relationships withretailers in the industry.
THE eGap FLYWHEEL
Investor Value
Diverse Management Expertise &
Proven Track Record
Property & Asset Mgt at
Scale
Integrated Value-Add Services
(Specialty Leasing)
Integrated Industry
Relationships
5
ESSENTIAL GROCERY ANCHORED PROPERTIES FUND I OVERVIEW
FUND STRATEGYSource and acquire stable, grocery-anchored shopping centers, leveraging deep asset and property management relationships, nationwide
– Leverage longstanding relationships andmanagement of elite grocery brands
– Target brands and banners from elite, proven brandfamilies such as The Kroger Co., Albertson’s, andDelhaize, among others
– Seek double net+ leases: Tenants responsible forproperty taxes, insurance, and most maintenance
– Create value via lease restructuring, tenancyoptimization, advantageous sales
– Fund managed by eGap Fund I Manager, LLC– Fund seeks to raise a maximum of $50,000,000– Offered on a non-commission basis to accredited
investors and via Registered Investment Advisors(RIAs)
– $500,000 per unit, 100 units available for purchase– 6% preferred return– Target IRR of 15-19% net of fees and expenses– Fund has option to recycle capital during the
investment period– Target 60-70% leverage, fund-wide
THE OFFERINGClosed-end limited partnership structure
6
CAPITAL CALLS
INITIAL DEPOSIT10% of capital commitment, paid at time of subscription submittal
SUBSEQUENT CALLSAt Manager’s discretion to finance Fund’s operations
FEE STRUCTURE & CAPITAL CALL PROCESS
7
FEE STRUCTURE
COMMISSIONS None
ORGANIZATIONAL EXPENSES & EQUITY RAISING $350,000
ASSET MANAGEMENT 1% per annum on committed capital
PROPERTY AQUISITION/SALE 1% of transaction price
CARRIED INTEREST 20%
Please see EGAP PPM for detailed schedule of fees
Please see EGAP PPM for detailed capital call process overview.
GROCERY: THEN & NOW
NOWGrocery remains the epicenter of the shopping and
commerce experience for humans, and other necessities are intentionally located in close
proximity to grocery markets
THENGrocery markets are some of mankind’s longest
standing institutions, and have long served as gathering places for humans to socialize and
participate in trade
Grocery has always been essential
8
COVID-19 AND THE TWO TRACK PATH
– Grocery Anchored Shopping Centershave navigated COVID-19 on a two-track path
– Certain shopping center tenants thatrequire in-person interactions andface-to-face contact remain wellbelow pre-pandemic foot traffic andrevenue levels due to risks ofinfection
– Grocery stores are eminently essentialfor all US consumers, and haverequired in person visits or onlineordering
91%of shoppers say
they miss shopping in
stores1
79%of consumers have bought groceries
online duringthe pandemic2
88%of consumers expect
their community connections to stay
intact long afterthe virus is contained.4
80%feel more or as connected
to their communities than they did before
the pandemic3
40%of U.S. consumers are
becoming more mindful of where they spend their money5
69%and say COVID-19 hasmade them morefocused on managingtheir mental healthandwell-being6
Source: 1Incisiv 2Inmar Intelligence 3Accenture 4Accenture 5McKinsey 6PwC
– This duality serves asturnkey diversificationand risk mitigation forthe EGAP investor
9
ACQUISITIONS: DEAL SOURCING | PROPRIETARY DEAL FLOW
ROBUST, EFFICIENT, PROPRIETARY DATA PIPELINE, ENABLING MANAGER TO:
Massive focus on supremely high touch relationships with targeted, elite grocery brands
Track owner/sponsor, master servicer, special servicer and directing certificate holders of assets leased to elite grocery brands
Track all newly defaulted CRE loans in US across all real estate asset classes
Output from decades of relationship building with professional brokers with significant deal flow
MONITOR DETAILED INFORMATION ON ELITE, GROCERY-RELATED ASSETS INCLUDING:
Debt maturity data-points
Corresponding lease expiration
Tenant Credit Rating/Health Ratio
Account for every elite grocery asset in the market for sale including assets housed on all loan servicer auction platforms
Receive automated real-time notifications via email when any loan with a target brand goes into default
Additional platforms data include: TREPP, Reonomy, First American Title Research Portal, Costar Suite & Argus
10
ACQUISITIONS: FILTERING, UNDERWRITING, DUE DILIGENCE, & CLOSING
FILTERING
Sourced deals are filtered via information gleaned from sellers, brokers and servicers to narrow pipeline of prioritized transaction opportunities
EVALUATING AND UNDERWRITING
Team reviews market and property data to compile underwriting and investment overview, which establishes initial pricing
eGap consults with corporate brand management, as appropriate
DUE DILIGENCE
Site Visit: Member of deal team visits site to meet brokers, property management and contractors and confirm:
– market assumptions andmarketing plan
– building condition,occupancy and requiredimprovements
Property Condition/Capital Budget:
Team uses property condition report and on-site visit to refine and confirm capital budget
Legal Review: Title, lease, and transaction document reviews conducted
Investment Committee Approval
CLOSING
Equity capital called, as appropriate
Debt Capital secured and drawn
Transaction closes
1045/EGAP assume management of asset
11
BRANDS
WHAT WE SEEK:
eGap targets stable shopping centers anchored by premier, proven brands
Specific focus on The Kroger Company, Delhaize, and Albertson’s brands,as 1045 maintains deep, proprietary relationships with these management teams
Opportunistic, relationship-oriented investments in essential pharmacy and convenience properties
WHAT WE AVOID:
Non-anchored centers
Non-grocery anchored centersNon-stabilized grocery anchored centersNon-essential pharmacy/convenience
ESSENTIAL PHARMACY&
CONVENIENCE / OTHER
12
EGAP ECOSYSTEM
Elite Pharmacy/Convenience properties can be found in close proximity to elite grocery properties.
These brands boast the brand power and differentiation that enhances their performance by locating nearby.
ELITE GROCERY+ ELITE PHARMACY/CONVENIENCE+ NECESSITY RETAIL+ 1045 MANAGEMENT AT SCALE
= EGAP ECOSYSTEM
13
EXAMPLE EGAP FUND AT MATURITY
80%Grocery AnchoredShopping Centers
14
20%Essential Pharmacy &Convenience/Other
AT MATURITY, EGAP WILL OWN A DIVERSIFIED PORTFOLIO COMPRISED OF:
– At least 80% of the portfolio invested ingrocery anchored shopping centers withleases to elite, targeted brands
– 20% or less of the portfolio invested inessential pharmacy and convenienceproperties leased to elite, targeted brands
RESULT: ENHANCED DIVERSIFICATION FOR EGAP INVESTORS
CASE STUDY: Roundy’s | Mazo, WI
400 Walter Rd, Mazomanie, WI 53560
15
– This opportunity reflects 1045’s unique deal pipeline. We were able to source this
deal off-market on a relationship basis.
– Received through a ROFR from Kroger. Purchased this Roundy’s distribution facility
at a 9.6% cap ($5.5MM), extended the lease for 10 years of total term for $500K in
TI, sold for $8.740 MM (6.35 cap).
– Raised equity from a Dallas family office, who closed all cash.
– Sold prior to the placement of permanent financing.
ACQUISITION INFORMATION
TRANSACTION TYPE ROFR
PURCHASE PRICE $5,500,000
CAP RATE 9.6%
OCCUPANCY 100%
ANCHOR % OF INCOME 100%
STABILIZED INFORMATION
SALES PRICE $8,740,000
CAP RATE 6.35%
NEW OCCUPANCY 100%
ANCHOR % OF INCOME 100%
IRR >40%
MONEY MULTIPLE 1.40x
16
CASE STUDY: Four Kroger Sale Leaseback
CONYERS, GA1745 GA-138 SE, Conyers, GA 30013
ACQUISITION INFO
TRANSACTION TYPE Sale Leaseback
PURCHASE PRICE $10,260,050
CAP RATE 8.00%
OCCUPANCY 89%
ANCHOR % OF 61.75%
STABLIZED INFO
SALES PRICE $12,197,351
CAP RATE 7%
NEW OCCUPANCY 89%
ANCHOR % OF INCOME 55%
IRR >15%
MONEY MULTIPLE >1.2x
Purchased four Kroger shopping centers in 30 days at an 8% cap rate (15-year terms) via sale leaseback. 1045 instituted operational efficiencies andclosed new leases with Kroger, selling the properties thereafter. Kroger anchored space sold at 6% caps, Adjacent retail sold at 7.5%-8% caps.Also had offers to buy each center in full at a 7% cap (100bps of compression, + lease up value). This sale leaseback was entirely driven through1045’s relationship with Kroger.
MONROE, MI850 S Monroe St.,Monroe, MI 48161
ACQUISITION INFO
TRANSACTION TYPE Sale Leaseback
PURCHASE PRICE $12,148,265
CAP RATE 8.00%
OCCUPANCY 86%
ANCHOR % OF INCOME 70%
STABLIZED INFO
SALES PRICE $14,423,755
CAP RATE 7%
NEW OCCUPANCY 86%
ANCHOR % OF INCOME 63%
IRR >15%
MONEY MULTIPLE >1.2x
FARMINGTON HILLS, MI25780 Middlebelt Rd Farmington Hills, MI 48336
ACQUISITION INFO
TRANSACTION TYPE Sale Leaseback
PURCHASE PRICE $10,164,463
CAP RATE 8.00%
OCCUPANCY 90%
ANCHOR % OF INCOME 66%
STABLIZED INFO
SALES PRICE $12,300,000
CAP RATE 7%
NEW OCCUPANCY 91.1%
ANCHOR % OF INCOME 60%
IRR >15%
FORT WAYNE, IN125 W State Blvd Fort Wayne, IN 46808
ACQUISITION INFO
TRANSACTION TYPE Sale Leaseback
PURCHASE PRICE $6,922,838
CAP RATE 8.00%
OCCUPANCY 91%
ANCHOR % OF INCOME 69%
STABLIZED INFO
SALES PRICE $8,967,555
CAP RATE 7%
NEW OCCUPANCY 95%
ANCHOR % OF INCOME 69%
IRR >15%
MONEY MULTIPLE >1.2x
CASE STUDY: Kroger | “DELCHAMPS”
1829 Hwy 45 N, Columbus, MS 39705
17
– 1045 purchased a retail shopping center (at an 8.8% cap rate) adjacent to a wellperforming, Kroger-anchored center with expansion possibilities. 1045 subsequentlyacquired the Kroger center via sale leaseback on a 15-year master lease at a 6.5%cap rate. The combined center will likely attract a marketplace premium and is anexample of 1045’s ability to leverage its relationships and marketplace knowledgeto creatively deliver value.
– The transaction was funded by 1045 and private capital.
ACQUISITION INFORMATION
TRANSACTION TYPE Sale Leaseback
PURCHASE PRICE $11,164,292.31
CAP RATE 7.36%
OCCUPANCY 100%
ANCHOR % OF INCOME 76%
STABILIZED INFORMATION
EST SALES PRICE $13,313,000
CAP RATE 6.18%
NEW OCCUPANCY 100%
ANCHOR % OF INCOME 76%
IRR >17%
MONEY MULTIPLE >1.40
CONTACT
18
This summary does not constitute an offer tosell securities nor a solicitation of offers to purchase securities. The information presented herein was prepared by the Manager and does not purport to be all inclusive,does not purport to provide cash distribution projections that are necessarily predictive of actual results,and does not contain all of the information that a prospective investor may desire in investigating the Company. Any offering of securities will be made pursuant to the disclosures,terms,and conditions contained in a private placement memorandum distributed to prospective investors. Generally,only accredited investors will be permitted to become investors.
Any requests for additional information and/or the private placement memorandum should be directed to:
Nicholas HodgeChief Executive Officer & Fund Manager
513.713.0702
www.egapfunds.com