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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.


Strategy


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


Pooled Capital

Blue Chip Tech Companies


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


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 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


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

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

Legislation is accelerating and bringing incentives and economics to the strategy

Why Now?


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

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


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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


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

https://www.realtyhop.com/blog/realtyhop-housing-affordability-index-january-2020/

https://datausa.io/profile/geo/los-angeles-ca#:~:text=19.1%25%20of%20the%20population%20for,the%20national%20average%20of%2013.1%25

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


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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


Appendix


Ground Lease Model Output - Atlantis


~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


~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