A Market-Driven Solution
to the Affordable Housing Crisis
EquiShare Alliance
EquiShare Revenue Generation
The essential premise of EquiShare is to provide a profit-based program that creates value for every commercial participant, from RE Agencies to Loan Originators, from Investors to Financial Instrument aggregators. For each of those groups, the profitability of engagement with EquiShare exceeds that of their customary business or investment returns, and promotes those returns without compromising existing customers or opportunities.
EquiShare itself is also profitable… in fact, extremely so. The projected combination of fees and payments indicated for a typical $400,000 transaction should exceed $10,000, and be extended through appreciation of the Assurance equity participation. Acting in large part as facilitator rather than producer, operating margins on revenues will be extraordinary; within the operating system devised, those areas where actual production is required will find expenses a direct product of revenues, and scaled accordingly.
To project the revenues and profitability of the EquiShare company is a function not of demand – which is existing and definable – but of our capacity to provide the necessary services at scale. The demand for affordable, appropriate and sustainable housing is well understood; estimates vary, but are usually in the tens of millions of households. EquiShare programs would provide access to ownership for virtually all of that constituency, irrevocably changing the dynamics of the U.S. housing market.
As such, any projections are entirely arbitrary, and at the available scale, extreme. If we assume penetration of just around 3% of the market, it suggests some 1.3 million homes sold, transactions worth in excess of $500 billion, and direct revenues to EquiShare of over $13 billion. The organizational structure and operating systems are designed to handle that volume and significantly more; EquiShare relies on collaboration with the existing infrastructures for residential housing, directing and augmenting their efforts but not replacing them. The proprietary areas of EquiShare’s own operations are largely automated, with human intervention only episodic and specific.
EquiShare does not represent that it will, in fact, serve 1.3 million customers over its first three years of operation, simply that it is designed with that – and significantly further – market penetration in mind. The exhibits B and C provided, using that number and a graduated growth schedule, are intended to simply illustrate one conceivable outcome and the impact that would have on a financial partner. They are not intended, and should not be used, for any purposes of evaluation or commitment.
In point of fact, EquiShare offers no representation or projection at all. Instead, EquiShare offers a substantial analysis of what it will do, what it anticipates are reasonable financial agreements to be made, and the methodology that it will employ. EquiShare invites all interested parties to explore their own information and beliefs, and is ready and able to support any independent evaluations or projections.
EquiShare Business Aspects
Rationale
In order for any solution to be reliable and sustainable, it must be consistently and demonstrably profitable for not only itself, but for every constituent part. EquiShare meets that test with room to spare.
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“Why will existing industry players work with EquiShare Alliance?”
For each, we provide extraordinary returns and benefits without disrupting or changing their operating mandates and values. We generate clients that they could not engage with other than through us, and who have no impact on their existing client base. They make more money, receive more ancillary benefits, from EquiShare transactions than from their existing clientele.
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“How will EquiShare Alliance make money, and how much will it make?”
Through its role as originator, facilitator and manager of real estate transaction events for an immense, captive customer base, EquiShare provides monetizable benefits in every relationship.
Simple estimates of minimal values project EquiShare earning $8,000 to $12,000 from every $400,000 transaction. That allows for a conservative projection of $800 mm to $1.2 b in revenues per 100,000 transactions. Those revenues do not include capital gains made by the Assurance program, and assume minimal terms of agreement with both RE Agencies and Loan Originators.
Responding to the present scale, EquiShare infrastructure has been designed to efficiently promote and support the extraordinary and urgent existing national demand. Expansion models suggest intrinsic capacities of 1,300,000 to 1,500,000 transactions within the first three years of operation, with the ability to substantially exceed that total.
Note: At present levels, each sale of a home creates revenues for the various commercial participants of about $32,000 to $35,000 per $400,000 transaction. This represents RE commissions, loan origination fees and related costs, closing cost fees and miscellaneous.
“How will the various constituents benefit from EquiShare Alliance?”
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An irreplaceable opportunity for entry into home ownership
Unprecedented access to home ownership/equity development
Specifically affordable payments for appropriate and adequate housing
Financial resiliency in cases of adverse circumstances
Stability for work, lifestyle and financial development
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A vast expansion of potential markets
New, untapped captive market, potentially in the millions of homes
Pre-qualified, pre-approved customers with expanded purchasing power
Commissions/fees not subject to competitive pressures
Guaranteed, expedited closes
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The highest quality primary mortgages from hyper-qualified borrowers
New, untapped captive market, potentially in the millions of homes
Automated qualifying and document processing systems
Full rate and fee schedule not subject to competitive pressures
Customer retention and access for future transactions
Extremely attractive loan parameters on hyper-qualified borrowers
60% LTV
30-33% DTI
Substantial default protection from third party insurers
Lower cost, third party loan servicing
No cost, third party active property management
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Extremely attractive loan parameters on hyper-qualified borrowers
Rates/yield not subject to competitive pressures
Minimal cost for active loan and property management
Minimal cost for substantial third-party loan default prevention
Fractionalization of debt, allowing for crafted participation and tranches
Enhanced data, analytics and information
Highly qualified ESG investment with constructive balance sheet
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Undiluted economic representation in residential real estate virtually unlimited in scale and scope
Minimal cost for active property management and maintenance
Maximized value at sale without additional capital requirements
Targeted, precise focus or diversification
Fractionalization of asset class, allowing for crafted participation
Opportunity for tangential benefits from funding constituency purchases
Highly qualified ESG investment with constructive balance sheet impact
EquiShare Alliance Revenue
Generation Opportunities (by Source)
Financial Partner Parameters
EquiShare Alliance is seeking a financial partner or partners in order to complete development of, and to promote and operate proprietary programs for support of wide scale home ownership. Once executed, these programs will facilitate the provision and application of investment capital for private real estate transactions, and the active management of the ensuing relationships.
The specific use of acquired capital will include, but not be limited to, establishing the following functions:
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An established organizational structure incorporating three primary functions: the public expression of EquiShare from introduction to transaction; the after-market support and servicing of owner-occupant compliance and relationships; and the development, management and support of investor funding and relationships.
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Initial executive teams capable of managing development of critical capabilities, and then establishing primary verticals and supporting them in the marketplace.
Note: “Verticals” are specific, designated groups of owner-occupants; an example of a vertical would be Teachers, with potential sub-verticals designated by state or municipality, such as Dallas Teachers. In other cases, broad verticals such as First Responders might lead to sub-verticals such as Police, and further designations such as Dallas Police. -
A public facing internet portal capable of informing both general and vertical-specific populations regarding EquiShare program parameters and requirements
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An internal, secure, and largely autonomous program for pre-qualifying, qualifying, and advising owner-occupant candidates as to their appropriate allocation of income for housing purposes.
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All agreements, disclosures and documentation relating to and governing the representation of owner-occupants, both general and vertical-specific.
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Initial partners and in-place agreements for RE Agencies, Loan Originators and Investment Resources specific to the verticals represented; templates for the development of further relationships.
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In-place and operating marketing, brand-development and public relations initiatives supporting both general and vertical-specific outreaches.
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Written and published best practices and standards for the specific genre being expressed.
For these purposes, EquiShare Alliance is seeking to place up to twenty (20) $250,000 convertible notes, each having a term of 3 years and offering annual interest rates of 12.5%. Each of the notes is convertible at the discretion of the owner to 12,500 shares of EquiShare Alliance common stock.
In aggregate, if fully converted the $5,000,000 total available would represent 20% of the company’s then-outstanding 1,250,000 shares. This suggests a valuation of the company at $25.00 million.
If necessary, EquiShare Alliance will reserve the right to issue a second class of up to twenty (20) $250,000 convertible notes, each having a term of 3 years and offering market interest rates. The second class of notes are intended to offer conversion to 7,500 shares of EquiShare Alliance common stock.
In aggregate, if fully converted the additional $5,000,000 total would represent an additional 150,000 shares, or 10.71% of the then-outstanding 1,400,000 shares. At the conversion price of the second offering, the suggested valuation of the company would be $46.67 million.
The company makes no representation as to the availability of all or any of the proposed convertible notes. At all times, the company intends to seek alternative financing in forms that do not incorporate the commitment of equity, and such acquisition may eliminate any or all of the convertible notes identified herein. In particular, the company anticipates seeking commercial or private lines of credit to replace the second offering in whole or in part.
In addition, the onset of revenues from specific programs and verticals are projected to initiate during the third quarter of operations. While the broader applications will likely require longer periods of time to manifest, there are multiple opportunities that are envisioned for private or early establishment. The initiation of revenues in the third quarter could reduce or eliminate the need for the second phase of financing.
Finally, EquiShare will endeavor to create relationships with primary vendors in loan origination, investment development and real estate representation; these relationships may include payments to EquiShare that could reduce or eliminate portions or all of the required financing.
It is relevant to know that the development of the aforementioned programs over the past four years has been entirely self-funded, and that EquiShare Homes, Inc. has no existing debt or outside obligations. As a result, the existing corporate structure can be revised or re-established to most effectively reflect the circumstances of the financial partner.
Projected Use of Proceeds Table
First Offering
Payroll $ 1,425,000 (a)
Operations $ 775,000 (b)
Legal $ 600,000 (c)
Technical $ 700,000 (d)
Marketing / Brand Development $ 400,000 (e)
Acquisition of IP $ 250,000 (f)
Total Allocation $ 4,150,000
Miscellaneous and Reserve $ 850,000 (g)
Total $ 5,000,000
Second Offering
Payroll $ 1,815,000
Operations $ 530,000
Legal $ 450,000
Technical $ 450,000
Marketing / Brand Development $ 550,000
Total Allocations $ 3,795,000
Miscellaneous and Reserve $ 1,205,000
Total $ 5,000,000
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The planned organization structure establishes a base company with two orientations, defined for our purposes as internal and external. The internal structure will focus on creating, providing and supporting the various documents, agreements, tools and functions that are universal to all expressions of EquiShare, including the intake portal and all technical expressions. The external structure will focus on the identification, definition, formulation and support of the various specific public expressions, designated as verticals.
The payroll defined in the UOP represents the staffing for those two orientations for the first six months of operations. For specifics, please see the exhibit marked Projected Staffing.
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Operations refers to the costs of establishing offices and related expenses for the first six months of operations. The internal operations will be based in Washington, D.C., while the external operations will be based in Dallas, Texas.
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Legal expense refers to the costs involved in organizational constructions, and the development of the various agreements, documents and governing language of the programs. The predominance of state rather than federal laws relating to real estate practices may require substantial increases in the legal expenses incurred; these potential overages will likely occur in the second phase, after completion of base materials and during public roll-out.
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Technical expense refers primarily to the development of the public-facing intake portal, which will incorporate informational materials, a pre-qualification program and a referring mechanism for directing clients to approved real estate agents. Concerns regarding the development relating to data security and resiliency in the face of significant volume define the level of expertise required, and as such may indicate substantial increases in the actual costs. These are assumed within both the miscellaneous section, and the projected acquisition of vendor and/or commercial financing.
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Marketing / Brand Development during the initial six months will represent support on three key issues: appearance and utility (UIX and UI) of the intake programming; brand definition and expression; and public relations.
Note: Expenses relating to initial public exposure and awareness are designated in the second phase.
One challenge for Marketing is the development of program naming conventions. While EquiShare has been the internal designation for a number of years during development, and is the corporate name currently in use, there are trademark complications that will require using a different identification when the program goes public.
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The various intellectual properties relating to the EquiShare programs comprise literally decades of research and development. This payment is relating to an overarching agreement between EquiShare Alliance and Gary Adornato encompassing any and all work done relating to the programs. The agreement indemnifies EquiShare Alliance against any claims from individuals or entities, past or present, to any form of ownership in the product of that work.
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The Miscellaneous and Reserve category reflects the potential for costs in excess of those projected in
the UOP. Some aspects of the development, specifically including but not limited to legal and
technical, require creative work that is not able to be firmly priced, but will require payments based on actual time and resources allocated.
Also included in this category are any costs incurred in the acquisition of the initial financing projected, whether they are costs reflecting legal work and development, or commissions paid to outside parties for assistance.
It is anticipated that the amount available for this category will be substantially increased through the arrangement for various amounts of vendor financing, commercial financing and the potential acquisition of lines of credit. While there is no assurance of the availability of these resources, they are intended to be pursued and if acquired, might provide alternatives to some of the projected financial partner contributions.
Exhibit A: Potential Markets
As noted previously, the median household income in the U.S. is $61,937. The median cost of a home is $440,300. As a result of that growing dichotomy, large classes of Americans who have traditionally been able to purchase homes no longer are able to, leading to rapidly increasing numbers of renters despite continuing desires for the benefits of ownership.
EquiShare sees each of these groups as having a similar objective, but specific characteristics that suggest individualized handling. By dividing them into specialized initiatives (“Verticals”) EquiShare can utilize its collective programs and resources in dedicated expressions, promoting efficiencies and responsiveness.
In particular, many of the groups have advocacy or related enterprises (such as pension funds, municipal interests, private and public sponsors, etc.) that could achieve tangential but important objectives through involvement in the process, and through individualized expressions of the program that respond to unique aspects of their relationship. This could include provision of the investment portion of their constituent’s purchase, through intersecting home purchases with employee benefit programs, or through a number of other directions.
Given those opportunities, the identification and support of verticals is a primary objective of the EquiShare program.
Some potential examples of Verticals – and sub Verticals – are offered below for illustration. Other than the entrepreneur group, each class is currently ineligible to purchase homes based on their earned income levels; entrepreneurs are compromised by standard qualifying parameters:
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Verticals by State
Sub Verticals by Municipalities
Sub Vertical by Municipality
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Verticals by State
Sub Verticals by Municipalities
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Verticals by Industry and State
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Verticals by State
Sub Verticals by Municipalities
Sub Vertical by State or Municipality
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Verticals by Force Affiliation
Sub Vertical by Disability
Sub Vertical by Age
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Verticals by Affiliation
Verticals by State
Sub Vertical by Municipality
Examples
Vertical: Teachers, Public School
Sub Vertical: Teachers, State of Texas
The U.S. Census Bureau notes 344,362 public school teachers – elementary and secondary schools – in the State of Texas. A 5% penetration into that group would yield 17,118 transactions over a period of three years. At $400,000 per home purchase, that would represent $6.85 billion in real estate sales agency, and loan origination of $4.11 billion.
For EquiShare, the revenues generated would be in excess of $171.18 million. Again, that would be the product of a 5% penetration from that sub Vertical, most likely divided among a number of municipalities across the state. For the primary Vertical (Teachers, Public School) the national representation would be almost 10 times that population, and target sub Verticals in the major states and municipalities, with sub Verticals in the 20 to 30 range, and with 150 to 250 municipalities likely served.
One potential source of individual property investment capital for this group would be the Teacher’s Retirement System, their primary pension fund. With over $170 billion in assets, the TRS reports a substantial amount of investment in real estate. By linking teacher’s pension investments with their homes, the TRS could succeed on two levels: they could provide a meaningful benefit that helps in both recruitment and retention, and they could generate a predictable and sufficient income for meeting the fund’s obligations.
Vertical: Police Officers
Sub Vertical: Police Officers, State of Florida
The U.S. Census Bureau reports that there are 97,131 police officers in the State of Florida. A 5% penetration into that group would yield 4,857 transactions over a period of three years. At $400,000 per home purchase, that would represent $1.94 billion in real estate agency sales, and loan origination of $1.17 billion.
For EquiShare, the revenues generated would be in excess of $48.57 million. For the primary Vertical (Police Officers) the national representation would be 718,217 officers, and 934,699 law enforcement personnel. Based on the distribution of police officers throughout states, sub Verticals would be in the 30 to 40 range, and remain at the State level.
There are multiple potential sources for property investment capital for police officers. There are strong pension fund and advocacy groups that have been vocal about the difficulty of recruiting and retaining quality candidates, and a balance sheet positive mechanism such as EquiShare would be an extremely positive option. Municipalities have represented similar issues, and have expended significant funds in efforts to locate officers in, or adjacent to, the communities that they serve.
Exhibit B: Initial Staffing
During the initial phases, the following functions would be outsourced, and managed by specific staff:
Legal Development (General Counsel)
Technical Development (CTO)
Marketing / Brand Development (CEO / CRO)
Tax Accounting (CFO / Internal)
Internal Group
CEO
COO / Internal
CTO
CFO / Internal
SVP / Finance
General Counsel
Admin Manager
Support (Tech)
Support (Tech)
Support (Admin)
Support (General)
Support (General)
Corporate Direction / Strategic Planning
Operations Management
Website Development Oversight and Management
Financial Resource Allocation and Reporting
Relationship Development / Financial Institutions
Legal Resource Oversight
Corporate Administration / HR
External Group
CRO
COO / External
CFO / External
SVP / R&D
SVP / Business Development
SVP / Sales
Admin Manager
Support (Admin)
Support (General)
Support (General)
Support (Sales)
Vertical Development and Planning
Vertical Operations Management and Control
Vertical Finances Management and Control
Vertical Identification and Development
Vertical Relationship Development and Management
Vertical Relationship Development
Vertical Administration Supervision
EquiShare Alliance Analogy: Corporate Relocation
Amazon is moving a distribution center in Toronto across the border into Michigan. They intend to move 5,000 workers, having an average salary of $65,000. They have made a deal with a developer to build 5,000 units for them, having an average cost of $400,000 each. Amazon will provide $160,000 cash towards each purchase from its pension fund, and each worker will finance their remaining $240,000 through a captive relationship with a loan originator.
Amazon will pre-qualify the workers, provide files with their documentation and confirmation of critical aspects, and send the assembled files to the loan originator for underwriting.
In aggregate, that will mean 5,000 qualified, processed and captive individual mortgages having the following parameters:
Known, substantial source of employment and income for owner-occupants
60% LTV
33% DTI
Default protection and property management
Programmed refinancing / property sale on employee change in status
Market to above market interest rates
Points as appropriate or desired
The portfolio will total $1.2 billion collateralized debt on a property value of $2.0 billion.