5Pack Funding Logo

5Pack Funding, LLC

Texas & SE US Multifamily Real Estate Co-Investment Opportunity

Up to $2,512,500 with a minimum of $25,000

Common Equity Interests

  • 5Pack Funding, LLC (“5Pack Funding” or the “SPV”) is a special purpose vehicle formed to participate in Leste Real Estate US (IA) LLC’s (“Leste”) recently completed acquisition of 5 multifamily apartment properties (the “Properties” or the “Portfolio”) totaling 1,670 units across the Southeast that are currently being leased below market rate and are prime for value-add renovations.

  • Recent demographic trends have seen a substantial increase in population and jobs in Texas and the Southeast, leading to apartment rental rates rising to unprecedented levels. The acquired multifamily units are in these markets and poised to participate in long-term growth.

  • Leste has partnered with the experienced sponsor, developer, and operator GVA Real Estate Group (“GVA”) to manage operations of the Properties. Founded in 2015, GVA is an Austin, TX-based real estate company committed to creating value in the multifamily real estate sector that currently owns 24,132 units across 125 properties, mainly in the Southeast.

  • The portfolio is diversified across a mix of growing markets, balanced nicely by large, institutionally liquid Texas markets (44% of equity) and complimented by smaller, rapidly growing markets Nashville-TN (27% of equity) and Greenville-SC (29% of equity), where governments are pro-business and employers are locating high-earning jobs.

5Pack Funding, LLC, (“5Pack Funding”, “The Company”, or the “Issuer”) is issuing up to $2,512,500 in Common Membership Units (the “Units” or “Securities”) to recapitalize a recently acquired portfolio of five multifamily residential apartment properties in partnership with Leste and GVA.

Further Inquiry

By registering with Carofin, Members have access to more extensive due diligence materials, additional private investment opportunities, and can proceed with making an investment.

Briefcase Icon

Business Opportunity

The Opportunity

Opportunity to participate in immediate and long-term growth of multifamily apartments in the Southeastern US through value-add renovation alongside GVA, an established real estate management company, and Leste, a reputed global investment manager.

  • Leste and GVA have acquired five multifamily units in Greenville, Nashville, Dallas and Houston for value-add renovation, lease, and eventual sale. Both Leste and GVA have a strong track record of success in identifying and executing similar projects.

Migration

  • The Properties are ideally located in regions which have seen substantial positive net migration over the past years, trends which are expected to continue as high-paying jobs enter the region spurring economic growth.

  • There is currently a shortage of over 5 million homes, and new construction rates are at their lowest since 1995, leading to an increase in demand for the multifamily real estate asset class.

The Solution

Invest in a partnership managed by Leste and GVA, which have used their decades of experience to choose five ideally located properties for value-add renovation, which are primed for growth in rental leases and asset value.

  • The recent increase in demand that the Greenville, Nashville, Dallas and Houston rental markets are experiencing has already led to an increase in rent prices, a trend which is expected to continue over the coming years.

  • Leste and GVA have identified two primary ways of increasing rental incomes and the net operating income (“NOI”) associated with the Properties: (i) increase annual rents in the near term, based on analysis of recent market trends and ii) execute simple value-add renovations that will take place in the first 3 years post acquisition increasing rents and asset value.

  • This Portfolio has been specifically tailored (5 properties chosen out of 12 offered) to be diversified across large institutionally liquid markets in Dallas and Houston, as well as smaller rapidly growing markets in Greenville and Nashville, representing a balanced risk return profile.

Think Icon

Investment Considerations

Strong Apartment Market Fundamentals

  • The Portfolio is geographically diversified across Dallas and Houston, TX, Nashville, TN and Greenville SC, all strong multifamily markets featuring positive migration, population and job growth, as well as lower relative costs of living and perceived higher quality of life. Rents across the portfolio are low relative to their surrounding income demographics (15.6% rent to avg. household income), indicating rental rates can continue to rise without financially exhausting current and prospective residents.

Value-add Renovation Plan

  • Leste and its partners plan to renovate most of the units, investing $12.7M ($7.6k/unit) on interior renovations with a focus on functional use items like appliances as well as cosmetic enhancements like paint, kitchen and bathroom modernization and lighting. In addition, they are planning to invest an additional $2.9M on exterior renovations and amenity enhancements. Based on these upgrades, they are projecting a rental rate increase of approximately $292 per unit per month, bringing the Portfolio rents in-line with recently renovated peers.

Robust Demographic Trends

  • Located in four of the highest performing rental markets in the U.S., the Properties are well situated to benefit from the continued growth that Texas and the Southeast experienced since the beginning of COVID. Within a 3-mile radius of the Properties, the average household income is US$93,977, and the 5-year population growth is 6.3%. Each Property is proximate to major employment centers, suburban retail corridors, and is located within some of the best school districts in their respective areas.

Top Tier Sponsorship & Property Management

  • GVA is recognized by the industry as a best-in-class apartment owner and operator. GVA is based in Austin and owns 24,132 units across 125 assets. Throughout its history, GVA has been very well capitalized and owns a significant share of its portfolio. The sponsor has invested 10% of the total equity required for acquisition, and Leste, both from its own balance sheet, and from third-party syndication, has contributed 90%.
Papers Icon

Investment Overview

1) Purpose of the Financing

  • 5 Pack Funding will use the capital invested (i) to purchase ~3.19% of the equity in Leste’s recently acquired portfolio of five multifamily residential apartment properties and (ii) to fund administrative costs of forming and managing the special purpose vehicle.

2) Issuer – 5Pack Funding, LLC

  • 5Pack Funding, LLC (“5Pack Funding” or the “SPV”) is a special purpose vehicle organized in North Carolina created to recapitalize Leste Real Estate US (IA), LLC’s (“Leste Real Estate”) position in Leste 5P Multifamily US Feeder, LP (the “Leste Feeder”). 5Pack Funding will be managed by Carolina Financial Group, LLC. The Leste Feeder is a Delaware limited partnership created by Leste Real Estate that has recently acquired 5 multifamily apartment properties totaling 1,670 units across the Southeast (Greenville, SC, Nashville, TN) and two in Dallas, TX, and Houston, TX that are currently being leased below market rate and are prime for value-add renovations.

  • Founded in 2014, Leste Real Estate has extensive experience successfully managing real estate investments across diverse asset classes ranging from multifamily housing to rental single-family homes, healthcare, hospitality and industrial real estate.

Map of the properties

3) Security Description – Common Membership Units (the “Units”)

  • Common Membership Units in 5Pack Funding: Investors will purchase common membership units in 5Pack Funding, LLC which, in turn, will use these funds to purchase limited partnership interests in a Delaware partnership, Leste 5P Multifamily US Feeder, LP (“Leste Feeder”). Leste Feeder is the holding company for the Properties contemplated in this investment. Distributions received by 5Pack Funding will be forwarded to common unitholders pari-passu with their investment amounts in 5Pack Funding.

  • Limited Partnership Interests in Leste Feeder: The full set of terms for the purchase of Limited Partnership Interests in Leste Feeder can be found in the Summary of Terms section. Investors will receive 100% of their invested capital and an 8% annualized IRR prior to Leste participating in distributions, and an annualized 14% IRR prior to GVA participating in distributions.

    • Distributions: Leste will make current income distributions based on rental income received from leasing the property on a quarterly basis.

    • Capital Gains: Common unitholders will participate in the capital gains associated with the sale of the properties, projected for years 4 and 5 post financing.

    • Amount: Up to $2,512,500 of common membership units will be offered, representing up to ~3.19% of the portfolio’s fully diluted, as converted, ownership.

4) Repayment

  • 5Pack Funding: Distributions will be made at the election of the Manager from Distributable Cash (as defined below). Distributable Cash will be the net of received distributions from Leste Feeder less administrative expenses of 5Pack Funding. These distributions will be made quarterly, within 48 hours of 5Pack Funding receiving distributions from Leste Feeder as described below.

  • Leste Feeder: Distributions received by 5Pack Funding from Leste Feeder will be made from the lease and eventual sale of the Properties. Distributions are anticipated to be on a quarterly basis and in the following order: (i) pari-passu to Members, on a quarterly basis until each member receives 100% of its original investment plus an 8.0% IRR on such capital, after which point residual cash flow will be split 80% to the Members and 20% to the Manager.

5) Investment Risks

  • Forecasted Growth: The compound annual growth rate projected over the 5-year hold period is 8.2%, or a total of $9.8 million across the Portfolio. If demographic or geographical trends vary, these assumptions may not come to pass.

  • Exit Uncertainty: Real estate assets are illiquid which presents hold term and exit uncertainty.

  • Inflation: The U.S. economy is experiencing an inflationary environment which could adversely impact the sales price of the Properties.

  • Leverage: The joint-venture has utilized 75% loan-to-cost financing to acquire and renovate the Properties.

Building Icon

Company Information

Background

Founded in 2014, Leste Group is a global independent alternative investment platform purpose-built to identify and execute unique investments across a diverse range of strategies including real estate, credit, venture, and liquid markets. Leste Group has a proven track record of success and has over $1.6B in AUM. When engaging in real estate investments Leste often utilizes a value-add renovation strategy and prefers to work closely with nationally recognized, real estate industry leaders who possess state-of-the-art management and operating teams to mitigate risk for investors. Leste Real Estate has extensive experience managing a diverse array of assets from multifamily apartment units to commercial healthcare offices.

Sponsor Overview (GVA Real Estate Group)

Founded in 2010, GVA Real Estate Group is an Austin-based vertically integrated real estate company committed to creating value in the multi-family real estate sector. GVA specializes in conventional as well as affordable opportunities, paying particular attention to expanding sub-markets. GVA targets functional assets that offer unique design features but have underperformed due to a lack of management oversight or ownership capital constraints. As of April 2022, GVA owns 24,132 units in 125 assets of various sizes. GVA’s portfolio is mainly based in Texas, South Carolina, North Carolina, and Tennessee. Through the course of its history, GVA has purchased over 28,000 units worth $3.85 billion, achieving excellent results for investors along the way.

GVA Photo

Lifetime Average IRR: 40.9% Lifetime Average EM: 3.51x

Note: Properties acquired in 2011, 2012 and 2013 were acquired by GVA’s principal, before the formation of GVA.

GVA Track Record

GVA Dispositions

Leste Multifamily Track Record

Leste Track Record

  1. Presented as gross property level returns, net fund returns were approximately 300-500 basis points lower.
  2. Presented as net investor level returns.
  3. Past performance is no guarantee of future results.

The Properties

Bluffs at Vista Ridge

Overview

Bluffs at Vista Ridge is a garden-style community located within the Lewisville suburb of Dallas. The Property encompasses 272 units and features a resort-inspired pool with sundeck and cabanas, fitness center, poolside kitchen, dog park, package room, coffee bar, onsite storage and dog spa.

Residents of the Bluffs at Vista Ridge enjoy backdoor access to International Business Park, Cypress Waters, and Legacy Business Park – three of the premier corporate parks in suburban Dallas-Fort Worth. The corporate offices of Mr. Cooper, Ally, TIAA, Caliber Collision, and UWM sit on the other side of Sam Rayburn Tollway.

Bluffs

Lewisville / Flower Mound

The area benefits from top-notch schools, plentiful retail options, and its location near several major highways. I-35E offers access to employment centers in Las Colinas and the Downtown/Uptown, while the Sam Rayburn Tollway (Highway 121) makes commuting to Plano and Frisco an option as well. Lewisville is also served by two stations on the A-train commuter line, which connects Denton with the end of the DART Green Line in Carrollton. Supply growth has been steady in the past decade, but the submarket has not seen a surge in construction like that in other fast-growth suburbs such as Plano and Frisco. Demand in the area has surged, like other areas across the metroplex, allowing vacancy rates to compress to their lowest rate since 2015. As a result, rent growth is accelerating, after weak growth last year due to widespread economic disruption from the pandemic. Lewisville/Flower Mound has long served as a destination for investment, with many national and institutional investors acquiring value-add assets in the submarket.

Dallas / Fort Worth

A flurry of economic development wins has defined growth in the region over the last decade. North Texas has attracted over 150 new corporate headquarters during this period. In 2017, Toyota moved into its 2 million-SF North American headquarters at the Legacy West development in Plano. The company relocated its sales, engineering, and financial services operations from California, bringing about 4,000 jobs. It has plans to add thousands more. State Farm finished its regional expansion in 2016 and now occupies 2 million SF in Richardson's City Line development. Another major headliner is Liberty Mutual Insurance, which has added around 5,000 jobs in Legacy West. Existing employers like AT&T, 7-Eleven, JPMorgan Chase, USAA, and Fannie Mae are expanding their local footprints, as well.

Rent Growth

With rents of about $1,500/month, Lewisville/Flower Mound is affordable compared with other northern suburban submarkets like Frisco and Las Colinas, where average rents exceed $1,600/month. Rents have flattened out over the past few months and trailing 12-month growth in the submarket has trended closer to the metro norm, which is treading water. Rent growth is accelerating in 2022 into double-digit territory, after slowing in 2020 due to economic uncertainty from the recession and heavier competition from recently delivered properties. The Bluffs at Vista Ridge’s current below market rate rents will raise NOI in the short term and Leste predicts that post renovation, the property will rent at slightly above market rate for the area.

Bluffs Rent Analysis

Spring Pointe

Overview

Spring Pointe is a garden-style community located within the Richardson suburb of Dallas. The Property encompasses 208 units and features direct access garages, a fitness club with cardio and weight equipment, resort-style pool with sundeck and cabanas, pet spa, dog park, and clubhouse. Residents of the area are acquainted with a built-in amenity base and an excellent quality of life with access to over 30 retail and dining options including a Whole Foods Market.

Spring Pointe is also within walking distance to Cityline Bush Dart Station, providing residents superior accessibility to the Dallas Urban Core, and DFW International Airport. Additionally, the planned Cotton Belt Silver Line will provide east/west access and interface with the Cityline Bush DART Station, providing direct access to Cypress Waters and DFW International Airport. Spring Pointe's strategic location off President Bush Tollway, just east of U.S. 75, allows residents convenient access to all points of the DFW Metroplex including the Dallas Urban Core and Legacy West. The two highways are major transportation arteries in the DFW Metroplex and provide quick connections to adjacent thoroughfares including Dallas North Tollway, Sam Rayburn.

Spring Pointe

Plano

The Plano submarket is outperforming with record setting leasing activity and rent growth. Leasing activity has accelerated at the same time construction has declined, enabling vacancy rates to compress to their lowest level since 2014. With robust leasing activity, the submarket was reporting double-digit growth in 2021, the best performance on record. Meanwhile, investors continue to pursue deals as the multifamily segment has proven resilient. Plano is the epicenter for corporate headquarters in Collin County and has benefited from recent corporate relocations over the past decade. Plenty of land and easy highway access has transformed the area into a bustling suburban-CBD to the north.

J.P. Morgan, Toyota, and Liberty Mutual are some of the largest new entrants, while Frito Lay and Ericsson, JCPenney are existing well-known companies. The eastern side of Plano is home to several technology and telecommunications companies also. The impact of these new jobs cannot be overstated. CityLine and Legacy West are entirely remaking the areas near the North Central Expressway/President George Bush Turnpike and Dallas North Tollway/Sam Rayburn Tollway interchanges, respectively, and demand for housing in those areas is booming. While demand will likely remain strong, there is still plenty of pending supply, both here and in neighboring submarkets like Frisco and Allen/McKinney, which should cause vacancies to stay elevated in the near term. However, groundbreakings in the northern suburbs have slowed in the past year, allowing vacancy rates some breathing room to recover.

Rent Growth

Rent growth in Plano is on track to post the best performance on record. As the local economy is recovering and leasing activity picked up, so too is rent growth in Plano. The area was enjoying newfound rent as a result of demand from Toyota, Liberty Mutual, and JPMorgan Chase employees moving to the area. Growth was bolstered by mid-tier, 3-Star properties in the area. However, as new, higher-end properties stabilized, multifamily owners and operators were not shy about pushing rents. Relative to peer submarkets in Collin County, average asking rents are in mid-range. Rents average near $1,350, above Allen/McKinney and below Frisco/Plano.

SP Rent Analysis

Retreat at Stafford

Overview

Retreat at Stafford is a garden-style community located within the Sugar Land / Stafford submarket of Houston, TX. The Property encompasses 264 units and features a 24-hour fitness center with cardio and weight equipment, resort-style pool with sundeck and cabanas, picnic areas with grills, private dog park, Luxer One package lockers, clubhouse with billiard table, business center, fire pit lounge, and attached private garages. Residents of Retreat at Stafford can grab a drink, watch the game, or listen to great music at The Pub - Fountains. Other amenities near the Property include the Grid, a mixed-use retail and office destination in Stafford proper with 10 restaurants, and Fountains on the Lake, a shopping center between Stafford and Sugar Land with over 30 retail and dining options.

Retreat at Stafford is strategically located in the Houston metro within the Sugar Land / Stafford submarket (1.5-mi northeast of Sugar Land-proper). The Property is situated directly off the Sam Houston Tollway, which makes a loop around Houston and provides easy access to all the MSA's major employment centers. Stafford serves as an outlying community of Sugar Land, which is the MSA's premier suburb. Sugar Land is Houston's preeminent aspirational suburban destination, and the area is popular with a wide range of age groups while attracting an affluent and well-educated population. Sugar Land boasts an average household income of $154,000, among the highest in the city.

Retreat

Houston

Houston, as one of the fastest-growing cities in the U.S., has seen the recent opening of several large discount stores. Houston is also the largest homebuilding market in the U.S. in terms of new single-family permits, and the U.S. has experienced brisk homebuying activity during the pandemic; home improvement stores have benefited as a result. The Houston metropolitan area is the fifth largest in the U.S. Its young population, affordability, warm climate, low taxes, generally pro-business environment, diversity, and culture continue to attract new residents. Nearly 1.2 million new residents were added from 2010–2020. Only Dallas-Fort Worth and Phoenix topped the Houston metropolitan area in terms of population growth in 2020. Houston has also shifted away from being an economy solely reliant on oil and gas and continues to foster other sectors such as commercial life sciences (Houston is home to the world's largest medical center). The TMC3 project currently under construction is the linchpin in the Texas Medical Center's plan to establish Texas as the "Third Coast" for commercial life sciences and biotechnology research to compete directly with Cambridge, Massachusetts, and Mission Bay in San Francisco. TMC3 is expected to create 26,000 jobs and generate $5.2 billion in economic benefits in Houston. In addition, there are several million SF of new life science-oriented mixed-use projects either under construction or planned along a 2-mile stretch of Holcombe Boulevard in the Texas Medical Center.

Southwest Houston

Southwest Houston appeals to residents for its affordability and is fortified by an inelastic base of renters-by-necessity. The western and northern portions of the submarket are home to large, young, diverse immigrant populations and some of the highest population densities in the metro, especially in areas such as Gulfton, Sharpstown, and Fondren Southwest. A record demand surge over the past three quarters, spurred by an improving health situation and the continuing economic recovery, has compressed vacancies in the submarket to a five-year low.

Rent Growth

Apartment rents in Houston have witnessed a remarkable rebound in 2021. Robust demand and tightening availabilities have supported strong rent growth as the year has progressed and, as of 21Q4, not only have all pandemic effects been erased, but new record highs in both average asking and annual rent growth rates have been reached. Rent growth is now pervasive across nearly all Houston submarkets. From a quality perspective, the strongest asking rent growth over the past 12 months has been in assets rated 4 & 5 Star with effective rents increasing by an impressive 13.7%. Meanwhile, asking rents in Houston's 3 Star segment have increased by 9.0% during that time.

Stafford Rent Analysis

1070 Main

Overview

1070 Main is a garden-style community located within the Hendersonville suburb of Nashville. The Property encompasses 364 units and features two resort-style pools, poolside fire pit, 24-hour cardio fitness center, BBQ and picnic areas, two lighted tennis courts, fenced-in dog park, business center, playground, coffee bar, and clothes care center. 1070 Main offers an exceptional lifestyle location with multiple access points to the Cumberland River, park areas and a low cost of living. Surrounded by convenient suburban retail, 1070 Main benefits from numerous grocery-anchored shopping centers and the Target-anchored Rivergate Mall.

Located 15 miles from downtown near the banks of the Cumberland River, 1070 Main offers convenient freeway access via US-31 and 1-65 to Nashville hotspots and beyond. Hendersonville benefits from a high concentration of healthcare employment with Xtend Healthcare and TriStar Medical delivering over 2,000 jobs.

1070Main

Nashville

Nashville continues to attract major corporate relocations and expansions, helping boost office-using employment growth in the region. Alliance Bernstein recently relocated from Manhattan to Nashville, adding more than 1,000 office jobs at average salaries ranging between $150,000 and $200,000 per year. Additionally, Amazon is building out its 1 million-SF Center of Excellence project in the Nashville Yards development. The e-commerce giant is in the process of hiring 5,000 employees at the campus, with average annual incomes close to $150,000. In 2021, Oracle confirmed that it will build an 8,500-job megacampus across the river from Downtown that will deliver in phases over the next few years and IT consulting firm Capgemini announced that it was adding more than 500 jobs at the Broadwest development in Midtown. The metro continues to grow its presence as an automotive hub. GM, Nissan, Mitsubishi, and Bridgestone Americas all operate sizable offices here to go along with large manufacturing plants for the former two companies. According to the Nashville Health Care Council, the healthcare industry contributes over $45 billion into the local economy annually and supports 275,000 jobs, directly and indirectly, through its 500 healthcare companies. These companies include large, nationally focused hospital operators such as HCA, support service organizations, accounting firms, national insurers, and healthcare REITs. The sector should continue to play a prominent role in the long-term economic growth of Nashville.

Annual household formation in Nashville typically far outpaces the national average. Nashville contains a handful of major universities, including Vanderbilt University, Belmont University, Tennessee State University, and Middle Tennessee State University. These schools have a collective enrollment of about 50,000 students. Many companies are choosing to locate high value operations in Nashville, thanks to the large base of highly educated graduates from these universities. As a result, many college students are now choosing to stay in Nashville to begin their careers after graduation.

Rent Growth

High occupancies and a resilient local economy have created tailwinds for rent growth here. Property managers in Sumner County have been able to raise rents by 17.1% over the past 12 months. This figure is not only outperforming the submarket's historical average by a large margin, but it also marks one of the best rent performances in the Nashville metro during this time.

1070 Main Rent Analysis

Plantations at Haywood

Overview

Plantations at Haywood is a garden-style community located within the Central Greenville submarket of Greenville, SC. The Property encompasses 562 units and features three resort style pools, two tennis courts, outdoor entertainment kitchen, fitness club with cardio and weight training areas, dog park, walking paths, playground, car wash, multiple clothing care centers, and proximity to restaurant, retail and entertainment.

Residents of Plantation at Haywood can enjoy live music at Smiley's Acoustic Café, a peaceful walk on the Swamp Rabbit Trail, or award-winning brunch from Stax Omega Diner within a few minutes of their doors. The Property is less than one mile from Haywood Plaza, one of Greenville's major retail locations offering 92,000 square feet of retail space.

The Property is centrally located between I-385, I-85, and Highway 276, allowing residents ease of access around the greater Greenville area. The Property is less than a mile from Greenville Downtown Airport and 11 miles from Greenville-Spartanburg International Airport. The Property sits 14 miles from the 84,000-square-foot BMW Manufacturing facility, which provides over 11,000 jobs in fields including IT and research.

Plantations

Greenville-Spartanburg

The Greenville-Spartanburg region, also known as South Carolina's Upstate, is the state's largest consolidated metro area and its manufacturing hub. More than 14% of the workforce here is employed in manufacturing, with competitive strengths in automotive and advanced textiles, according to an analysis by the Upstate SC Alliance. A growing metro of around 1 million on the I-85 corridor, Greenville and neighboring Spartanburg have benefited from a boom in industrial employment surrounding the automotive industry. As a result, the population here grew by about 13% in the 2010s, adding more than 100,000 people over the decade. Job announcements continued in early 2021 with TTI Floor Care investing $93 million in a new distribution center in Greer, DHL Supply Chain adding 200 new jobs in nearby Cherokee County, and electric vehicle-maker Oshkosh Defense announcing plans for more than 1,000 new jobs in Spartanburg after winning a U.S. Postal Service contract to build the federal agency's next generation of delivery vehicles.

Rent Growth

Year-over-year rent growth is outpacing national averages at 14.2%. At $1,180, rents remain lower than the national average. With employment and population growth projected to continue outpacing national averages, multifamily demand is likely to remain strong.

Haywood Rent Analysis

Book-inspection Icon

Industry Overview

Geographical Trends

Increased Migration to the Southest

Net migration over the last year during COVID (where many Americans have made the decision to move) has resulted in significant positive migration to the Southeast and Texas, away from the West, Midwest and Northeast. Leste expects this trend to continue into the near future as more economic growth and job creation occurs in the region.

Migration

Dallas/Fort Worth

With 25 Fortune 500 companies headquartered in the market, Dallas attracts companies due to its low-cost relative to coastal markets, pro-business environment, and sizable talent pool. Notably, during 4Q’20, CBRE- a Fortune 500 company Ȋ announced it is moving its HQ to Dallas from LA. Nearly a third of the labor pool is composed of degrees in finance, engineering, computing, and other technical fields. In 2Q’20, Dallas accounted for roughly 5% of the nation’s tech labor pool, ranking it 4th nationally. DFW Airport stimulates the local economy with over $37B of economic activity each year. With nearly half a million college students, restaurants, outdoor activities, and professional sports teams, Dallas is a desirable market for the younger, working age population with growth in the 25-34 year old cohort expected to outpace the national average by ~100 bps in the intermediate term. The local government maintains a robust pipeline of initiatives for the metro such as the city’s D2 project: a second light rail alignment that will increase capacity and new destinations for public riders.

DallasFW ProsCons DallasFW Market Metrics DallasFW Market Grade

Houston

The oil and gas town felt the impact of the pandemic quickly as its prized industry faced rapidly declining crude prices in ‘20. Local energy giants such as Shell, BP, Chevron, and Exxon have announced plans of massive workforce reductions in ‘20 and ‘21. Though the near-term energy-related concerns are significant, Houston remains a strong hub for distribution partly due to the 247M tons of international cargo moving through the Port of Houston each year. Strategically situated along the Gulf Coast, the local economy benefits from international trade with all continents. The metro is prone to flooding as previous hurricanes have caused significant property damage for at-risk submarkets leading to above-average cap-ex requirements. Rapid supply growth, especially in the apartment sector, also dampens M-RevPAF growth expectations. A conscious and active local government brightens the outlook for Houston as initiatives such as the NHHIP aim to improve the city's infrastructure.

Houston ProsCons Houston Market Metrics Houston Market Grade

Nashville

Nashville’s vibrant culture, attractive cost of living, and diverse employment opportunities continues to attract young talent. “The Music City” has been singing a song of employment growth and economic expansion since ‘14, led by the business services and FIRE sectors. Oracle announced major news in early ‘21 with the expansion of a $1.2B office complex. Oracle’s move is set to bring ~8,500 jobs to the city (~3% growth of Nashville’s office-using job population). Employers have sought after the region’s educated population base and business-friendly environment. Millennials seek the city’s entertainment and high paying jobs relative to regional peers. The health care sector also has a meaningful presence in the market (~15% of local GDP) and HCA, a health care facility operator, employs >10k in the area. The economic boom has been recognized by developers who have taken advantage of low barriers to supply across most sectors. While future supply growth is an issue, the tailwinds from population growth, and overall high levels of economic growth offer attractive investment opportunities.

Nashville ProsCons Nashville Market Metrics Nashville Market Grade

Greenville

Greenville metro entails a growing population of one million residents along the Interstate 85 corridor. The market benefits from the boom in industrial employment, specifically in the automotive industry. Revitalization efforts are concentrated in Downtown Greenville as office-using jobs and retailers grow. The recent population boom has drawn in developers, which have expanded inventory by 30 percent since 2015. Surprisingly, demand has kept up with these record levels of supply, with the vacancy rate at 5.7 percent. Rents have grown 13.6 percent in the last 12 months but remain affordable as they lie below national averages at $1,170 per month. Mixed-use and adaptive reuse projects are popular in the market, particularly those with turn-of-the-century-20th-century textile mills. National investors are active in Greenville as they hunt out mid-tier assets with higher-than-average cap rates.

*(https://www.matthews.com/multifamily-market-report-greenville-sc/)

Puzzle Icon

Company Financial Information

Pro Forma Financials

Pro Forma Financials

Model Assumptions

  • The preceding financial projections show 5 Pack Funding’s participation in limited partnership interests in Leste Feeder. The projections above were prepared based off of information provided by Leste.

  • Leste is planning to increase rental rates for each unit at each property in year 1 and again as renovations are completed. The model assumes that occupancy rates for available units (not undergoing renovation) will remain above 94% despite the increases in rental rates.

  • The model assumes that the value-add renovation budget of $17.84M will be sufficient and adhered to.

Associated Risks

  • Real estate assets are illiquid which presents hold term and exit uncertainty.

  • The joint venture has utilized 76% loan to cost financing to acquire and renovate the Properties representing substantial leverage on the properties. An unforeseen decline in market fundamentals could lead to difficulty in meeting the obligations associated with the debt.

The preceding financial projections reflect the estimated forecasts prepared in good faith by the Company’s Board of Directors and members of management and are not guaranteed to be accurate. The timing of performance is estimated post-funding, and assumes the sale of the maximum amount of Series A Preferred Stock offered for sale by the Company, which cannot be guaranteed. These figures are forward-looking statements and reflect the Company’s views about various future events or expectations. These figures take into account known and unknown risks, uncertainties and other factors and assumptions which may cause the Company’s actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by this forward-looking financial projection. Please see the note regarding forward-looking statements. A full version of this pro-forma financial model is available through carofin.com

Use of Proceeds

Use of Proceeds

Papers Icon

Security Terms - 5Pack Funding, LLC

Carofin, LLC (“Carofin”) is offering up to $2,512,500 of Common Units (the “Offering”, “Securities” or the “Common”) by 5 Pack Funding, LLC. (“5Pack Funding” the “Company” or the “Issuer”). Proceeds from this Offering will be used to (i) purchase limited partnership interests in Leste 5P Multifamily US Feeder, LP (“Leste Feeder” or the “Underlying Partnership”), the limited partnership established for the acquisition and ownership of 5 multifamily properties (collectively, the “Properties”) in the Southeastern United States and Texas and (ii) pay administrative set-up fees associated with this Offering.

The Offering

Issuer

5Pack Funding, LLC (“5Pack Funding” the “Company” or the “Issuer”), a single purpose North Carolina limited liability company established by Carolina Financial Group, LLC, formed specifically to participate in the rental lease income and eventual sale of 5 multifamily properties in the Southeastern US and Texas through the purchase of partnership interests in Leste Feeder.

“Investment Manager” Leste Real Estate US (IA), LLC, acts as Leste Feeder’s “Investment Manager”, and is an experienced real estate management company.

Renovations, construction and leasing activity for the properties are being implemented by the “Sponsor” GVA, a vertically integrated real estate company, further defined below.

5Pack Funding will be acquiring Limited Partnership Units currently held by Leste Real Estate US (IA), LLC, the Underlying Partnership’s initial limited partner.

Securities Offered

Common Units (the “Offering”, “Securities” or the “Common”) of the Issuer, offered privately in accordance with S.E.C. Regulation D, Rule 506(c).

Offering Amount

Up to $2,512,500 provided that simultaneously with this Offering, Leste Real Estate US (IA), LLC is offering some of its LP Units to institutional investors (the “Institutional Offering”). The offering amount may be reduced by the amount of LP Units purchased by institutional investors in the Institutional Offering. The Closing of this Offering may be delayed until an investment decision is made in the Institutional Offering.

Use of Proceeds

Proceeds from this Offering will be used to (i) purchase limited partnership interests in Leste 5P Multifamily US Feeder, LP (“Leste Feeder”), the limited partnership established for the acquisition and ownership of 5 multifamily properties in Greenville, Nashville, Dallas, and Houston, and (ii) pay fees and expenses associated with this Offering.

Investors

Investors qualified as an “Accredited Investor” as defined within Regulation D as promulgated by the U.S. Securities and Exchange Commission (the “Investors”). Holders of Common Units offered hereby will also be Members of the Issuer (collectively, the “Members”).

Manager

Carolina Financial Group, LLC (“CFG”) a North Carolina based limited liability company, shall serve as the Manager of the Issuer (the “Manager”).

Investment Manager

Leste 5P Multifamily GP, LLC (“Leste RE”) will serve as the general partner of Leste Feeder and in its role as General Partner will handle administrative and accounting responsibilities for Leste Feeder.

Leste Group, though its multiple affiliates, has a proven track record of success and has over $1.6 in AUM. Leste Group also has extensive experience managing vehicles across a diverse array of real estate asset classes including multifamily unit apartments. As part of its investment philosophy, Leste Group works closely with nationally recognized, real estate industry leaders such as GVA who possess state-of-the-art management and operating teams.

Sponsor

GVA Real Estate Group (“GVA” or “The Sponsor”) an Austin-based vertically integrated real estate company committed to creating value in the multi-family real estate sector. As Sponsor of the transaction, GVA will be responsible for the value-add renovations of the Properties.

GVA has contributed 10% of the equity required by the partnership to acquire and renovate the Properties and as Sponsor of the transaction has an alignment of interests in the successful lease and sale of the Properties.

GVA is an experienced real estate investor and property manager that as of April 2022, owns 24,132 units in 125 assets of various sizes. GVA specializes in adding value to functional assets that offer unique design features but have underperformed due to a lack of management oversight or ownership capital constraints. Through the course of its history, GVA has purchased over 28,000 units worth $3.85 billion and it’s portfolio is mainly based in Texas and the Southeastern US.

Minimum Subscription Amount

The minimum subscription amount for an investor to directly invest in the Offering will be $25,000, subject to exception by the Company.

Termination Date

The termination date for this Offering is set at August 15, 2022 but can be extended up to 60 days at the sole discretion of the Issuer.

Flow of Funds

Issuer Cashflows

All costs and expenses of the Issuer will be funded using proceeds of this financing, including but not limited to, (i) the acquisition of partnership interests in Leste Feeder and (ii) administrative expenses as defined below.

The SPV will receive a pari pasu share of rental income, generated from leasing of the Properties, from Leste Feeder on a quarterly basis and a pari pasu share of sale proceeds upon the sale of the Properties, currently anticipated for Years 4 & 5 post-financing. A term sheet describing the terms and conditions of the Underlying Partnership’s LP Units is available later in this document.

Distributions to Investors

The Issuer will make quarterly distributions of Distributable Cash, using funds received from Leste Feeder and generated from the rental income earned from leasing the multifamily apartment properties, if the Manager determines, in its sole discretion, that Distributable Cash is available to be distributed to the Investors. For these purposes, the following definitions shall apply:

“Distributable Cash” is defined in the Operating Agreement as gross cash received by the Company from all sources other than Capital Contributions and reduced by the portion used (i) to pay Company operating expenses.

“Liquidation Event” is defined in the Operating Agreement as the final sale of the Properties.

“Management Fee” is defined in the Operating Agreement as an amount equal to $7,500 per year, paid in four equal quarterly installments from proceeds received from rental income.

In the event that the Manager makes a distribution of Distributable Cash, the Operating Agreement provides that the proceeds will be distributed to the Members in the following order of priority, with no distribution being made in any category set forth below until each preceding category has been satisfied in full:

first, to the Manager to the extent of its Management Fee; and,

second, to the Members on a pari passu basis.

Investor Rights

Allocation of Income, Expense, Gain and Loss

Income, expense, gain and loss generally will be allocated to the Members and the Manager in a manner consistent with the proceeds from the Issuer’s sale of the Properties and collection of rent payments.

Information Rights

So long as a Member holds Common Units in the Issuer, the Member will receive standard financial reporting, including monthly, year-to-date, and annual income, balance sheet, and cash flow statements as compared to the current budget and compared to results for the comparable period for the prior year, and annual audited financial statements and his/her/its Schedule K-1 to the Issuer’s tax return.

Other Matters

Indemnification

The Issuer will indemnify the Manager, its principals, employees, officers, directors, and agents, as well as its advisors, accountants and attorneys to the fullest extent permitted by law against any cost, expense, judgment or liability reasonably incurred by or imposed upon it in connection with any action, suit or proceeding, except in the case of fraud or gross negligence.

Withdrawals and Transfers

Except as provided in the Operating Agreement, no Member may withdraw as an investor or sell, assign or transfer its referred Interests in the Issuer. The Common Units are also subject to resale restrictions under applicable securities laws.

Management Fees

The Management Fee, of $7,500 per year, is paid in equal quarterly installments, from income received by the Issuer from the receipt of rental income distributions from Leste Feeder.

Proceeds of this financing will be used for a one-time setup fee of $12,500, also considered a Management Fee.

Placement Agent Fees

The Placement Agent shall receive a “phantom” or “synthetic” carry, paid from the GP as described in the term sheet for the underlying partnership, equal to 1.5% of the gross funds raised in this Offering and the Institutional Offering. 5 Pack Funding LLC will not incur any other fees other than the Management Fees.

Governing Law

North Carolina

Papers Icon

Security Terms - Leste 5P Multifamily US Feeder, LP

*The following summary is qualified in its entirety by other information contained elsewhere in the Memorandum describing the Underlying Partnership and by the amended and restated limited partnership agreement of the Partnership (the “Limited Partnership Agreement”), which should be read carefully by each prospective investor prior to investing. Each prospective investor should pay particular attention to the information under the headings “CERTAIN RISK FACTORS,” “CONFLICTS OF INTEREST” and “FEES AND EXPENSES” and should consult its own advisors in order to fully understand the consequences of an investment in the Partnership. All references to the Partnership used herein mean the Partnership acting through the General Partner (as defined below). All capitalized terms used herein and not otherwise defined herein will have the meanings ascribed in the Definitions section of this “SUMMARY OF THE OFFERING.” Capitalized terms used but not defined in this Memorandum have the meanings set forth in the Limited Partnership Agreement.

The Offering

The Partnership

Leste 5P Multifamily US Feeder, LP, a Delaware limited partnership.

General Partner

Leste 5P Multifamily GP, LLC, a Delaware limited liability company, is the general partner of the Partnership (in such capacity, the “General Partner”) and the Offshore Partnership (as defined below). The General Partner is wholly owned by an affiliate of Leste (as defined below).

Investment Manager

Leste Real Estate US (IA), LLC, a Delaware limited liability company (“Leste” or the “Investment Manager”), serves as the investment manager of the Partnership.

Leste is registered with the SEC as an investment adviser under the Advisers Act under the umbrella registration of Leste Capital Partners (Florida), LLC, under which Leste is a relying adviser.

Investment Strategy and Objectives

The Partnership has been formed for the purpose of directly or indirectly acquiring, developing, managing and holding real property and real property related investments (the “Portfolio” or the “Investments” and each such real property, an “Asset”). See “Investment Objective and Program – Investment Program” below for a description of the Assets.

The Holdcos, the JVs, the Offshore Partnership and the Opportunity Fund Co-Invest

The Partnership expects to invest substantially all of its assets indirectly in the Assets. The Partnership expects to invest in each Asset through a separate holding company (each, a “Holdco” and collectively, the “Holdcos”), established as a Delaware limited liability company, formed for the purpose of investing all of its investible assets in and making an Investment in such Asset through a joint venture (each, a “JV” and, collectively, the “JVs”) formed between such Holdco and GVA PRO LLC or one of its affiliates (“GVA”). Each of the Holdcos has invested in its portfolio investment directly or indirectly through the respective Propco (as defined below). As the context requires, references herein to the Holdcos, or to investments in or by the Holdcos, should be read to include reference to the respective JVs and Propcos through which each of the Holdcos indirectly will invest in the respective Asset.

The Holdcos are managed by Leste 5P Multifamily GP, LLC (i.e., the General Partner) (in such capacity, the “Leste Holdco Manager”). The JVs are managed by GVA, in its capacity as the managing member of each JV (in such capacity, the “GVA Portfolio Manager”). Leste 5P Multifamily Offshore Feeder, LP, a Cayman Islands exempted limited partnership (the "Offshore Partnership"), was formed for the benefit of non-U.S. investors and certain tax-exempt U.S. investors. The Offshore Partnership will also indirectly invest substantially all of its assets in the Holdcos through blocker corporations.

Further, Leste US Properties Limited, a Bermuda limited company whose investment manager is Leste or one of its affiliates, has invested $250,000 in the aggregate alongside the Partnership in the Portfolio through investments in the blocker corporations. Leste US RE Opportunity Holdco, LLC (“Leste Opportunity Holdco”), an investment vehicle managed and advised by Leste, has invested $10 million in the aggregate alongside the Partnership in the Portfolio through investments in the Holdcos. Such co-investments are described in “Co-Investments by Leste US Properties Limited and Leste Opportunity Holdco” below.

Target Capital Raise

The Partnership and the Offshore Partnership have collectively invested an aggregate capital of $79,528,500.

Minimum Capital Commitment

The minimum initial capital commitment (a “Capital Commitment”) of a Limited Partner was US $250,000, subject to the sole discretion of the General Partner to accept a lower amount.

Initial Closing Date

The initial closing of the Partnership took take place on around February 20, 2022 (the “Initial Closing Date”).

Duration of the Offering; Final Closing Date

Although it is anticipated that the Partnership will only conduct one closing, the Partnership’s offering period may continue at the sole discretion of the General Partner until the expiration of the six-month anniversary of the Initial Closing Date (the “Final Closing Date”) or as otherwise determined by the General Partner. In addition, the General Partner may terminate the offering at any time.

Subsequent Closings

The General Partner may, in its sole discretion, hold additional closings after the Initial Closing (each, a “Subsequent Closing”) until the Final Closing Date.

Each Limited Partner admitted at a Subsequent Closing and each Limited Partner increasing its Capital Commitment to the Partnership will be required to contribute capital (but in the case of a Limited Partner increasing its Capital Commitment, only the extent of such increase) to the Partnership (“Capital Contribution”) in an amount which represents such Partner’s (i) pro rata share (based on the respective Capital Commitments of the Partners at such time) of all capital contributed to the Partnership, when taken together with all Capital Contributions previously made by other Partners and (ii) allocable share of Management Fees (as defined below) as if such Limited Partner had been admitted to the Partnership (or had such increased Capital Commitment) on the Initial Closing Date.

The portion of the Capital Contribution described under clause (i) above with respect to each Subsequent Closing will be (a) distributed on a pro rata basis to those Limited Partners that were admitted on the Initial Closing Date or at a prior Subsequent Closing based upon their respective funded Capital Commitments and added back to the unfunded Capital Commitments of such Limited Partners, which may be redrawn by the Partnership or (b) retained for purposes of the Partnership in the sole discretion of the General Partner; and the portion described under clause (ii) will be paid to the Investment.

Capital Commitments

Each Limited Partner’s Capital Commitment will be drawn down and payable within four (4) business days of a capital call notice from the General Partner (the “Capital Call Notice”). It is anticipated that 100% of each Limited Partner’s Capital Commitment will be drawn down at the closing at which such Limited Partner is admitted to the Partnership; provided that the General Partner may call capital at other times as permitted under the Limited Partnership Agreement.

Each Capital Contribution made by a Limited Partner will be deemed to have made on the date provided in the Capital Call Notice, except as otherwise determined by the General Partner in its sole discretion. Failure to meet a capital call when due may result in the General Partner being entitled to exercise various significant default remedies. See “Defaulting Partners” below.

No Contributions in Excess of Capital Commitments

Except as required by applicable law, in no event will any Partner be required to fund Capital Contributions in the aggregate in excess of its unfunded Capital Commitment.

Investment Period

The investment period of the Partnership will commence on the Initial Closing Date and end on the three-month anniversary of the Final Closing Date (the “Investment Period”); provided that the Investment Period may be suspended or terminated at any time in the General Partner’s discretion.

Additional Capital Calls

Following the expiration of the Investment Period, the General Partner will no longer draw down capital from the Partners’ Capital Commitments, except (to the extent of any undrawn Capital Commitments) to the extent required by the Partnership to (i) pay amounts owing or that come due under any credit facility or other borrowing arrangement obtained by the JVs or the Propcos, (ii) satisfy obligations under guarantees, indemnities, covenants or other undertakings, (iii) fund investments in the Portfolio with respect to which a JV and/or a Propco has entered into a written letter of intent, option, agreement in principal, definitive agreement or other written commitment prior to termination of the Investment Period, (iv) fund additional investments in assets already acquired by a Holdco or its subsidiaries, (v) enable the Partnership to acquire a Defaulting Partner’s interest (each defined below), (vi) pay Operating Expenses (as defined below), the Management Fee, Organizational Expenses (as defined below) and all other costs and expenses of the Partnership, the Holdcos or the JVs, including, indemnification costs and/or (vii) establish reserves for the payment of any costs or expenses described in in clause (vi) above

Return of Unused or Distributed Capital

Capital Contributions which remain unused for at least 180 days will be promptly returned to the Limited Partners and subject to recall. Capital calls also may be made to the extent of any unpaid Capital Commitments plus any distributions previously made to the Partners and their affiliates at any time (including after termination of the Investment Period) for the purpose of paying operating costs and other expenses of the Partnership, the Holdcos or the JVs, including, indemnification costs and Management Fees, or establishing reserves for the payment of such expenses at any time prior to the final termination and liquidation of the Partnership and for a period of two years thereafter.

Term

The term of the Partnership will continue, unless sooner dissolved, until the fifth anniversary of the Final Closing Date, subject to two consecutive one-year extensions in the General Partner’s discretion.

The affairs of the Partnership will be terminated and the Partnership will commence to be wound up upon the first to occur of any of the following events: (a) expiration of the term, as provided in the preceding sentence, (b) a determination by the General Partner that the continuation of the Partnership is unlawful, impracticable or inadvisable due to a change of law and should be dissolved; (c) upon the agreement of at least 75% in interest of the Limited Partners and the General Partner, (d) within one hundred and eighty (180) days of the disposition by the JVs of all of the Investments and the distribution of all of the proceeds therefrom in accordance with the governing documents of the JVs (if this occurs after the end of the Investment Period); or (e) the insolvency, bankruptcy, dissolution or termination of the General Partner (unless a replacement General Partner is appointed and the Partnership is continued in accordance with applicable law).

The Offering - Eligible Investors and Suitability

Admission as a Limited Partner in the Partnership is not open to the general public. Interests in the Partnership will be offered to persons who qualify as “accredited investors” (within the meaning of Rule 501 of Regulation D under the U.S. Securities Act of 1933, as amended) and “qualified clients” (as defined in Rule 205-3 under the Advisers Act). The General Partner may, in its sole discretion, decline to admit any prospective investor for any reason or for no reason. An investor admitted to the Partnership will become a “Limited Partner” (together with the General Partner, the “Partners”). The General Partner is authorized, in its sole discretion, to accept or reject subscriptions from investors either in whole or in part.

Defaulting Partners

If a Partner defaults (a “Defaulting Partner”) on the first capital call, the Defaulting Partner may, at the discretion of the General Partner, lose the opportunity to participate in the Partnership and forfeit up to 100% of the Defaulting Partner’s interest in the Partnership. Upon any other capital default (a “Capital Default”) by any Partner, the Partnership may, in the discretion of the General Partner, cause the Defaulting Partner to forfeit up to 100% of its interest in the Partnership or have the Defaulting Partner pay interest at a rate equal to the lesser of the rate of twenty percent (20%) per annum, compounded monthly, and the maximum rate permitted by applicable law (the “Default Rate”) until the default is cured.

If the General Partner permits a Defaulting Partner a cure period, the extent of which will be determined by the General Partner in its sole discretion, and the Defaulting Partner fails to cure a Capital Default prior to the expiration thereof, the General Partner will be entitled to exercise significant additional default remedies in respect of the Defaulting Partner, including (i) continuing to charge interest at the Default Rate on the outstanding unpaid balance until the date of payment to the Partnership, (ii) causing any distributions otherwise payable to the Defaulting Partner to be set off or withheld from such Defaulting Partner, (iii) suspending all voting rights and rights to distributions, (iv) diluting the Defaulting Partner’s Interest from two to one and the additional capital required will be offered to the non-Defaulting Partners at a favorable pro rata interest, (v) offering the Defaulting Partner’s Interest for sale to the other Partners at a price and on such terms as determined by the General Partner, (vi) causing the Defaulting Partner’s Interest to be sold to a third party 5 at such price and on such terms as determined by the General Partner, and/or (vii) causing the Defaulting Partner to forfeit up to 100% of its interest in the Partnership.

Distributions

As provided in the Limited Partnership Agreement, net cash available for distribution (i.e., proceeds derived from the disposition of Investments after satisfaction of all expenses, liabilities and establishment of reserves), will be distributed quarterly or, in the discretion of the General Partner, more frequently, to the extent available. Net cash flow will be allocated among the Partners (including the General Partner in its capacity as a Partner) based on their respective aggregate Partnership Percentages, taking into account the Partners’ participation in the Investments. The “Partnership Percentage” of each Partner is arrived at by dividing such Partner’s Capital Contributions by the Capital Contributions of all Partners in the aggregate, as set forth in the Limited Partnership Agreement.

Transfers and Withdrawls

Without the prior written consent of the General Partner (such consent not to be unreasonably withheld), any sale, assignment, transfer, conveyance, pledge, charge, hypothecation or other disposition or encumbrance of Interests will not be valid. Further, a Limited Partner generally may not withdraw any amount from the Partnership. Without the prior consent of a majority-in-interest of the Limited Partners, the General Partner may only transfer its general partnership interest in the Partnership to an affiliate.

Compulsory Withdrawl

The General Partner may, at any time, in its sole and absolute discretion, cause the Partnership to distribute to a Limited Partner all or any portion of its capital, thereby withdrawing all or any portion of a Limited Partner’s Interest, upon not less than two (2) calendar days’ notice in writing to the Limited Partner.

The General Partner may do so in its sole and absolute discretion including, without limitation, where the General Partner has reason to believe that (i) the Limited Partner made a misrepresentation to the General Partner in connection with its purchase of the Interest, (ii) the Limited Partner is not or ceases to be an eligible investor or (iii) such Limited Partner’s ownership of an Interest would result in the violation of applicable laws or regulations by the Partnership, the General Partner, the Investment Manager or a Limited Partner.

In addition, if making a cash payment to a withdrawing Limited Partner would be materially adverse to the Partnership, as determined by the General Partner in its sole discretion or as otherwise agreed upon between the Partnership and the withdrawing Limited Partner, the General Partner may affect the withdrawal of an Interest by the distribution of Partnership portfolio investments in kind with a value determined in accordance with the procedures set forth in this Memorandum, to be equal to the amount withdrawn.

Management Fee

The Holdcos will each pay the Investment Manager a quarterly management fee (the “Management Fee”) equal to 0.375% per quarter (i.e. 1.25% per annum) of the aggregate amount of capital contributed by the Partnership and the Offshore Partnership (indirectly, through blocker corporations) to the Holdcos relating to each Investment that has not been sold, otherwise disposed of, or written off for U.S. federal income tax purposes (regardless of the amount of distributions returned to a Partner relating to such Investment) and will be prorated for periods of less than a quarter. The Management Fee paid at the level of the Holdcos will be 6 appropriately allocated (indirectly) between the Partnership and the Offshore Partnership, and a proportionate share thereof will thus become an Operating Expense borne by the Partnership and, ultimately, the Partners. For purposes of clarity, any reference in this Memorandum to the Management Fee payable by the Partnership or the Partners shall be understood to be a reference only to that portion of the Management Fee that is allocated to the Partnership.

The Investment Manager, in its sole discretion, may waive or reduce the Management Fee with respect to certain Partners, including, but not limited to, principals, partners, directors, officers and employees of the General Partner, the Investment Manager (and their family members) or their affiliates, without entitling any other investor to such waiver or reduction and without notice to, or the consent of, the other Limited Partners.

In the discretion of the General Partner, the Management Fee may be structured as a priority profit share to the Investment Manager, which will be entitled, to the extent permitted by applicable law, to elect to receive profit eligible for capital gains or ordinary income treatment or to receive a loan on account of future profits, and the Partners’ distribution rights will be adjusted accordingly.

Promote at the Holdco Levels

There is no promote distribution to the General Partner at the Partnership level. However, each Holdco will be subject to a promote distribution (the “Leste Promote”) to its manager, Leste 5P Multifamily GP, LLC (i.e., the General Partner) (or any Affiliates), which will be 20% of any distributable cash of the Holdco after satisfaction of a cumulative, annually compounded preferred return of 8% on the unreturned capital contributions by its members (i.e., the Partnership, the Offshore Partnership (indirectly, through a blocker corporation) and Leste Opportunity Holdco).

The application of the waterfalls in the respective Holdco agreements with respect to each Investment will be crossed such that the economic performance of the Investments taken together, and each of the respective capital contributions and distributions in respect thereof, are taken into account in determining the aggregate Leste Promote to the Leste Holdco Manager.

Promote at the JV Level

In addition to the Leste Promote, each JV will be subject to a promote distribution to its manager, the GVA Portfolio Manager (the “GVA Promote”), which is expected to be: (i) 20% of any distributable cash of the JV after satisfaction of a cumulative, annually compounded preferred return of 10% on the unreturned capital contributions by its members; (ii) 40% of any distributable cash of the JV after satisfaction of a cumulative, annually compounded preferred return of 14% on the unreturned capital contributions by its members; and (iii) 50% of any distributable cash of the JV after satisfaction of a cumulative, annually compounded preferred return of 18% on the unreturned capital contributions by its members. The GVA Promote may be changed by unanimous consent of the members of each JV. The GVA Promote will be determined separately with respect to each JV and not be netted.

Property Diligence Fee

The Holdco will pay to Leste (or its affiliates) a one-time Property Diligence Fee in an amount equal to approximately 0.50% of the total capitalizations of the Investments (the “Property Diligence Fee”).

Propcos – Fees, Expenses and Promote at Property Level

It is anticipated that the JVs will each invest in the Assets directly or indirectly as a limited partner or member in one or more special purpose vehicles (the “Propcos”) that have been established for the purpose of making the Investments. As the context requires, references herein to the Holdcos, or to investments in or by the Holdcos, should be read to include reference to the respective JVs and Propcos through which each of the Holdcos indirectly will invest in the respective Asset. Each JV will each bear such Asset’s fees and expenses related to the acquisition, development, operation, ownership and disposition of such Asset.

The foregoing fees and expenses relating to the Assets, together with the promote to be borne by the JVs, are in addition to, and will in no way offset, minimize or reduce the Management Fees and/or the offering, organizational and other expenses of the Holdcos or the JVs. The Partnership shall bear a pro rata share of such expenses.

Consequently, the fees and expenses described above will reduce the amount of net assets allocable to the Partnership, and, therefore, to the Limited Partners

Operating Expenses

The Partnership will pay, or reimburse the Investment Manager and/or the General Partner for advancing, the Partnership’s operating expenses, including, without limitation, the following: (i) external (i.e., third party) custodial, administrative, legal, accounting, auditing, record-keeping, appraisal, tax form preparation, compliance and consulting costs and expenses (including costs and expenses associated with obtaining systems and other information designed to facilitate Partnership accounting or record-keeping, including related hardware and software); (ii) fees and expenses of Atlas Fund Services (USA) LLC (the “Administrator”); (iii) an allocable portion of Leste’s and/or the General Partner’s, as applicable, costs relating to providing bookkeeping, fund accounting, legal and other services for the benefit of the Partnership in addition to those provided to the Partnership by the Administrator; (iv) costs associated with regulatory filings on behalf of, or arising as a result of the management of the Partnership; (v) a pro rata share of all costs and expenses of the Holdco, the JV and the Propcos, including but not limited to their and the Partnership’s activities with respect to directly or indirectly (including, without limitation, making capital contributions to any entity that directly or indirectly owns an Investment) developing, negotiating, structuring, organizing, acquiring, financing, refinancing, bidding on, owning, holding, managing, operating, renovating, servicing, monitoring, leasing, valuing, hedging, dissolving, winding up, liquidating, restructuring, taking public or private, selling or otherwise disposing of, as applicable, any actual or potential Investment, including any follow-on investments, or in seeking to do any of the foregoing (including any associated legal, financing, commitment, transaction, real estate brokerage expenses, or other fees and expenses payable to attorneys, accountants, investment bankers, lenders, third-party diligence software and service providers, consultants and similar professionals in connection therewith and any fees and expenses related to transactions that may have been offered to co-investors), whether or not any contemplated transaction or project is consummated (i.e. excluding any “broken deal” costs and expenses relating to potential Investments, which will be borne by the General Partner or its affiliates) and whether or not such activities are successful; (vi) travel and administrative costs associated with the research activities of the Investment Manager and its employees to the extent dedicated to the Partnership; (vii) all fees, costs, expenses and obligations related to 8 the indebtedness of, or guarantees made by, the JV or the Propcos, including interest with respect thereto and the cost of seeking to put in place any such indebtedness or guarantee; (viii) custodial fees and bank service fees; (ix) withholding and transfer fees; (x) taxes and other governmental charges; (xi) clearing and settlement charges; (xii) fees for data and software providers; (xiii) other expenses related to the purchase, sale or transmittal of Partnership assets; (xiv) insurance premiums (including but not limited to directors and officers (D&O) insurance for the General Partner, the Investment Manager, and/or their respective affiliates); (xv) all expenses incurred in connection with any threatened, pending or anticipated litigation, examination or proceeding; (xvi) costs and expenses associated with preparing investor communications and printing and mailing costs and expenses; (xvii) fees and taxes imposed by any governmental entity or self-regulatory organization, including licensing, filing, registration and exemption fees and withholding, transfer and franchise taxes; (xviii) the Partnership’s indemnification obligations under the Limited Partnership Agreement and other agreements to which the Partnership may be a party; (xix) items similar to any of the foregoing related to the Partnership; (xx) any fees, costs, expenses or compensation paid or payable to third party joint venture partners, operating partners and other similar Persons, (xxi) the Management Fee, (xxii) all costs, fees and expenses associated with the Holdco, the JV, the Propcos and the Investments, and (xxiii) any extraordinary expenses as will be determined by the General Partner in its sole discretion (collectively, the “Operating Expenses”). Where the General Partner determines in its sole discretion that certain Operating Expenses are directly attributable to a particular Investment the Investment Manager may charge such expenses solely to the Limited Partners participating in such Investment.

Each of Leste and the General Partner will be responsible for the costs incurred in otherwise managing the Partnership, including all salaries, bonuses, and employee benefit expenses of employees of Leste and the General Partner and any of their respective affiliates involved in the management and conduct of the Partnership’s business and affairs and related overhead (including rent, utilities, office supplies, secretarial services and other similar items).

Organizational Expenses

The Partnership will bear all expenses incurred in connection with the offering and the formation and organization of the Partnership (excluding any placement fees, which will be borne by the General Partner or its affiliates) and a pro rata share of the formation and organization expenses relating to the Holdcos, the JVs and the Propcos, including all legal, accounting, regulatory compliance and other expenses (“Organizational Expenses”) up to a maximum of US $500,000. Organizational Expenses in excess of this amount will be paid by the Partnership but borne by the Investment Manager or its affiliates (i.e. not by the Limited Partners) through a 100% offset against the Management Fee otherwise ultimately payable by the Limited Partners.

Other Fee Income and Reimbursements

Further, the Investment Manager or GVA, directly or through affiliates, may provide services customarily provided for in property management agreements (or similar services) to some or all of the Partnership’s investments and/or properties. There is no current intention for the Investment Manager or any affiliate to do so, but if the Investment Manager or affiliate does provide such services, in no event will the aggregate fees paid for such services exceed fair market rates, as determined by the General Partner in good faith. To the extent the Investment Manager or its affiliates provide other services to the Partnership, fees for any such other services, including the Property Diligence Fee (the “Other Fee Income”), will be charged at competitive rates not in excess of fair market rates, as determined by the General Partner in good faith. Any Other Fee Income received by the Investment Manager or its affiliates will not reduce or offset the Management Fee payable by the Holdcos or any other fees payable by any Partner.

The General Partner, the Investment Manager and their affiliates may also be reimbursed for the costs of services that could be performed directly for the Partnership, the Holdcos, the JVs, the Propcos and/or the Assets by independent parties, including legal, accounting, reporting, consulting, transfer agent and data processing services but which are in fact performed by the General Partner, Investment Manager and their affiliates, but not in excess of the actual costs of providing such services; which in no event will exceed amounts which the Partnership would otherwise be required to pay to independent parties for comparable services.

Debt Financing

The JV or the Propcos obtained five (5) credit facilities totaling $272.4 million, in order to fund the acquisition of Assets in the Portfolio, representing a 75.1% loan-to-cost financing. The loans are forecasted to have a 2-year term with 3 year extensions for 1 year each, for a total 5 year term and to carry SOFR plus 3.2% interest with 60 months of interest only payments and a bullet principal payment on maturity, although the actual terms of such credit facilities may differ from the foregoing anticipated terms.

Removal of the General Partner

A vote of at least 75% in interest of the Limited Partners may remove the General Partner for “Cause” under the Limited Partnership Agreement.

Cause” means a final, non-appealable judgment by a court of competent jurisdiction that, in connection with the performance of its duties under the terms of the Limited Partnership Agreement, the General Partner (i) has engaged in conduct that constitutes intentional fraud, willful misconduct, or gross negligence, or (ii) has committed any material breach of the Limited Partnership Agreement that has not been cured within forty-five (45) days of receipt of written notice of such breach.

Tax Distributions

The Partnership may in the sole discretion of the General Partner make tax distributions to the Partners, pro rata, with respect to the cumulative net tax amount owed by such Partner for federal tax purposes in connection with the activities of the Partnership.

Limited Partner Reports

The Partnership will provide Limited Partners with the following: (i) audited financial statements (prepared in accordance with U.S. Generally Accepted Accounting Principles) of the Partnership for each Fiscal Year as soon as reasonably practicable after the end of each Fiscal Year, (ii) a report containing information that will enable each Limited Partner to prepare its federal income tax return, within 90 days of the end of each tax year or as soon as reasonably practicable thereafter, (iii) a Partnership net asset value report within 45 days of the end of each quarter, or as soon thereafter as practicable, and (iv) other reports as determined by the General Partner, on the advice of the Investment Manager, in their sole discretion.

Risk Factors

An investment in the Partnership involves special risks and the purchase of the Interests should be considered only by persons who can bear the economic risk of their investment for an indefinite period and who can afford a total loss of their investment. There can be no assurance that the Partnership will achieve its investment objective. 10 Each prospective investor should carefully review the section entitled "Risk Factors" below

Conflicts of Interest

There are several potential and actual conflicts of interest that potential Partners in the Partnership should be aware of. See, “Conflicts of Interest,” below. The General Partner, Leste, the GVA Portfolio Manager and/or their respective affiliates, principals, managers, members and employees manage and render services to other private investment entities and accounts (including, without limitation, the Offshore Partnership, Leste US Properties Limited, Leste Opportunity Holdco and the Propcos) (collectively, the “Other Accounts”), including those with investment programs that are substantially similar to the Partnership’s investment program. As a result, the General Partner, Leste, the GVA Portfolio Manager and their respective affiliates, principals, managers, members and employees may need to allocate their time, as well as investment opportunities, among the Partnership and such Other Accounts. The General Partner, Leste, the GVA Portfolio Manager and their respective affiliates, principals, managers, members and employees are required to devote only such amount of their time to the Partnership as they, in their sole discretion, deem necessary in good faith, and intend to also devote a substantial portion of their time and attention to other entities, accounts, investments and activities.

Indemnification

To the fullest extent permitted by applicable law, the Partnership will indemnify and hold harmless each of the General Partner, Leste and any of their respective affiliates, members, directors, officers, employees and agents (each, an “Indemnified Party”) from and against any costs, losses, claims, damages, liabilities, expenses (including reasonable legal and other professional fees and disbursements), judgments, fines or settlements (“Indemnified Losses”) suffered or sustained by such Indemnified Party by reason of any act or omission arising out of, or related to, the Partnership except for Indemnified Losses that are judicially determined to be attributable to the bad faith, gross negligence, actual fraud or willful misconduct of such Indemnified Party.

Co-Investments by Leste US Properties Limited and Leste Opportunity Fund

Leste and its affiliates also act as investment manager and/or manager of Leste US Properties Limited, a Bermuda limited company, and Leste US RE Opportunity Holdco, LLC, a Delaware limited liability company (“Leste Opportunity Holdco”), through which certain other pooled investment vehicles or accounts managed and/or advised by Leste and its affiliates make investments.

Leste US Properties Limited has co-invested approximately $200,000 in the aggregate alongside the Partnership in the Portfolio. This co-investment was made indirectly through blocker corporations.

Leste Opportunity Holdco has also co-invested approximately $10 million in the aggregate alongside the Partnership in the Portfolio. This co-investment was made indirectly through the Holdco.

Leste and its affiliates receive compensation such as management fees and other incentive compensation in connection with their activities related to Leste US Properties Limited and Leste Opportunity Holdco. Any direct or indirect participation by a Limited Partner in Leste US Properties Limited or Leste Opportunity Holdco will not be considered a capital contribution to the Partnership and 11 will not reduce such co-investing Limited Partner’s Capital Commitment.

Fiscal Year

The Fiscal Year of the Partnership ends on 31 December of each year.

Side Letters

The General Partner may in its sole discretion enter into one or more side letters or similar agreements with Limited Partners that may alter certain terms and conditions contemplated hereby or as may be set forth in the Limited Partnership Agreement and Subscription Agreement.

Tax

The Partnership will be treated as a partnership and not as an association taxable as a corporation for U.S. federal income tax purposes. As such, it generally will not be subject to U.S. federal income tax, and, subject to each prospective investor’s particular tax treatment, each Limited Partner may be required to include in computing its U.S. federal income tax liability its allocable share of the items of income, gain, loss and deduction of the Partnership, regardless of any distributions by the Partnership to such Partner.

Prospective tax-exempt investors should be aware that the Partnership is expected to generate income treated as “unrelated business taxable income” (“UBTI”) for U.S. federal income tax purposes due to the nature of its investments and the potential use of leverage in the acquisition of investments. Prospective foreign investors should be aware that proceeds from the disposition of Partnership properties generally will be subject to U.S. tax withholding, and U.S. tax filing and tax payment obligations for foreign partners.

The taxation of partners and partnerships is extremely complex. Each prospective investor is urged to consult its own tax advisor as to the tax consequences of an investment in the Partnership.

All investors, including investors who are not United States persons, should consult their own advisors as to the filing and the tax liability consequence attendant upon their investment in the Partnership, including, but not limited to, the possible application of the “FIRPTA” rules under Sections 897 and 1445 of the Internal Revenue Code.

Administrator

Atlas Fund Services (USA) LLC

Legal Counsel

DLA Piper LLP (US)

Cayman Counsel

Conyers Dill & Pearman LLP

Auditor

KPMG

Puzzle Icon

Investment Returns

How Investment Returns are Generated by this Investment

This investment represents participation in rental income, and sale proceeds for five properties in the Southeastern United States and Texas (the “Project”) Investment returns are generated by the Project in two ways:

  • Current income - quarterly distributions based upon the availability of cash (reserves less planned renovations) plus lease revenues minus the operating expenses of the apartments.

  • Capital Gains – If the properties are sold for values greater than they were purchased less:

    1. depreciation claimed in any annual tax filings.
    2. any amortization of bank debt during the period the properties were owned by investors.

Current Income

Apartments enter one-year leases with tenants who agree to make monthly rent payments to the apartment owner. These rents represent the income of the apartments.

The apartments will incur several regular and ongoing expenses including real estate taxes, insurance, maintenance, lease, general and administrative expenses, and interest payments on loans.

The difference between rental income and operating expenses results in funds which are available to distribute to investors. These funds, usually computed on an annual basis, are called "NOI" or Net Operating Income.

Capital Gains

Capital gains for investments in apartment projects are generated when the future sales price of the project exceeds the original purchase price less 1) depreciation claimed during the owner’s tax filings and 2) all amortization of bank borrowings used to acquire the project.

Apartments are valued by dividing the annual “NOI” of the Project by a “Cap Rate” applicable to the project in each economic environment. The Cap Rate equals the net annual return an investor may expect to generate when he buys the property without incurring financing costs.

Net Operating Income (“NOI”) Gross revenues minus operational expenses (maintenance, insurance, real estate taxes, renovations).

Capitalization Rate (“Cap Rate”) = NOI divided by the property value.

Total Return

The Total Return, therefore, is the combination of the Current Return plus any Capital Gains generated upon the sale of the property.

This investment contemplated the purchase of limited partnership interest with certain preferences wherein investors receive a 100% return of their investment and a realized IRR of 8% (the “Hurdle Rate”) before the General Partner participates in subsequent distributions. After the Hurdle Rate is reached, additional distributions are split 80% to the investors and 20% to the general manager.

For this Project, the CAP Rate is forecasted to be 4.75%, the NOI $21,608,758 and the sales price $454,921,221.

The total net return projected to investors is a function of the CAP Rate, and the NOI, in the following manner, if:

NOI = $21,608,758

CAP RATE = 4.75%

SALES PRICE = $21,608,758 / 0.0475 = $454,921,221

Assuming the NOI is constant, the sales price will vary according to the CAP Rate, if the CAP rate is lower, the sales price will be higher, if the CAP Rate is higher the sales price will be lower. The higher the sales price the higher the investment’s return. The same is valid for the sales price as a function of the NOI. Assuming a constant CAP Rate, if the NOI is higher the sales price will be higher and if the NOI is lower, the sales price will be lower. The lower the sales price the lower the investment return.

There is no guarantee that the exit CAP Rate will not be higher than 4.75%, although most professional consensuses estimate the CAP Rate to increase from 25% to 33% of interest rates increase. In other words, if the properties are being purchased today at an average CAP Rate of 4% and if interest rates are forecasted to increase by 3% in the next 5 years, expected exit CAP Rates could increase from 0.75% to 1%, to between 4.75% and 5%. Again, these projections are just forecasts which may or not be correct.

Unless the properties are sold for a loss, and taking into consideration depreciation and amortization, investors will generate additional capital gains upon the sales of the properties, which will be added to the quarterly distributions to calculate the investors' total return or IRR (internal rate of return).

Question Icon

Frequently Asked Questions

What is Carofin?

Carofin a trade name of Carolina Financial securities, LLC, a FINRA broker dealer, an investment bank headquartered in Brevard, North Carolina, that specializes in financing smaller businesses. Carofin’s parent company Carolina Financial Group, LLC, was established in 1995 and its affiliates have privately placed over $1.2 billion of debt and equity securities.

Is this security registered with the Securities Exchange Commission (S.E.C.)?

No. It is being privately placed under Rule 506c of Regulation D of the S.E.C.

Must Investors in the Company be Accredited Investors?

Yes. They must have a household income of $300,000 for married couples, or $200,000 for individuals, OR a net worth of $1,000,000, excluding the value of their primary residence, OR qualify for an institutional category of investor.

Will Investors Continue to Receive Information About the Security After Issuance?

Given its role as the administrative agent, CFG Financial Services is able to keep Investors informed about any unexpected changes in the Issuer's business and general operational updates.

What if I have questions in the future about the Business’s performance?

Carofin will distribute updates to investors at least quarterly, including account statements. You should feel free to also email Carofin at [email protected] or telephone us at 828.393.0088

Company Specific FAQ can be provided upon request.

Exclamation Icon

Risk Factors

AN INVESTMENT IN THE SECURITIES IS SPECULATIVE AND IS SUITABLE ONLY FOR PERSONS OF SUBSTANTIAL FINANCIAL MEANS WHO CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT AND HAVE NO NEED FOR LIQUIDITY IN THIS INVESTMENT. AN INVESTMENT IN THE SECURITIES OFFERED HEREIN SHOULD NOT BE A MAJOR PART OF YOUR INVESTMENT PORTFOLIO. YOU SHOULD REVIEW THE RISKS OF THIS INVESTMENT WITH YOUR LEGAL OR FINANCIAL ADVISORS.

THIS OFFERING INVOLVES SUBSTANTIAL RISKS. THESE RISKS INCLUDE, BY WAY OF ILLUSTRATION AND NOT LIMITATION, THE FOLLOWING: RISKS ASSOCIATED WITH THE FACT THAT THE MEMBERS WILL NOT HAVE THE RIGHT TO VOTE ON OR APPROVE MOST DECISIONS REGARDING THE BUSINESS AND, AS SUCH, WILL NOT BE IN CONTROL OF THEIR INVESTMENTS IN SECURITIES OF THE COMPANY AND THE BUSINESS; AND THE OPERATION OF THE COMPANY INVOLVES TRANSACTIONS BETWEEN THE COMPANY, THE MANAGER, AND THE OWNER WHICH MAY INVOLVE CONFLICTS OF INTEREST.

THE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT, AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM, AND WITH THE PRIOR CONSENT OF THE MANAGER, WHICH CONSENT MAY BE WITHHELD IN THE MANAGER’S SOLE DISCRETION. PROSPECTIVE INVESTORS SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.

SOME OF THE INFORMATION IN THIS PRESENTATION MAY CONTAIN “FORWARD-LOOKING” STATEMENTS. YOU CAN IDENTIFY SUCH STATEMENTS BY THE USE OF FORWARD-LOOKING WORDS SUCH AS “MAY,” “ANTICIPATE,” “ESTIMATE,” “COULD,” “SHOULD,” “WOULD,” “EXPECT,” “BELIEVE,” “WILL,” “PLAN,” “INTEND,” “PROJECT,” “PREDICT,” “POTENTIAL” OR OTHER SIMILAR WORDS. THESE TYPES OF STATEMENTS DISCUSS FUTURE EXPECTATIONS OR CONTAIN PROJECTIONS OR ESTIMATES WHICH MAY OR MAY NOT HAPPEN AS PROJECTED HEREIN. WHEN CONSIDERING SUCH FORWARD-LOOKING STATEMENTS, YOU SHOULD KEEP IN MIND THE RISK FACTORS LISTED BELOW, WHICH COULD CAUSE THE COMPANY’S ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTAINED IN ANY FORWARD-LOOKING STATEMENT.

YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS IN CONJUNCTION WITH THE OTHER INFORMATION ABOUT THE SECURITIES BEFORE PARTICIPATING IN THIS OFFERING. THE RISKS DISCUSSED IN THIS PRESENTATION CAN ADVERSELY AFFECT THE COMPANY’S OPERATION, OPERATING RESULTS, FINANCIAL CONDITION AND PROSPECTS FOR SUCCESS. THIS COULD CAUSE THE VALUE OF THE SECURITIES OFFERED HEREIN TO DECLINE AND COULD CAUSE YOU TO LOSE PART OR ALL OF YOUR INVESTMENT. THE RISKS AND UNCERTAINTIES DESCRIBED BELOW ARE NOT THE ONLY ONES THE COMPANY FACES BUT DO REPRESENT THOSE RISKS AND UNCERTAINTIES KNOWN TO THE COMPANY AND THAT THE COMPANY BELIEVES ARE MATERIAL TO THE COMPANY’S FUTURE OPERATING PERFORMANCE.

A. Investment Related Risks

Speculative Investment

The Securities being offered should be considered a speculative investment. The ability of the Company to achieve its objectives may be determined by factors beyond its control that cannot be predicted at this time. Consequently, there can be no assurance that the Company’s efforts to continue its business operations will prove to be sufficient to enable the Company to generate the funds required to make distributions. Anyone investing in the Securities should do so only if they are financially able to sustain the loss of their entire investment and should recognize that such a possibility exists.

No Secondary Market for the Securities

As this security is a private transaction, there is currently no public market for the securities being offered herein. These Securities are not a publicly registered securities and will have no secondary sale liquidity.

Limited Operating History

The Company has a limited history of operations upon which an evaluation of the Company’s business and prospects can be based. No assurances can be given that the JV will ever be profitable or generate revenues sufficient to make distributions. This makes evaluating the JV’s business operations and validating its financial projections difficult. In assessing the JV’s prospects, a potential investor must consider the risks and difficulties frequently encountered by value renovation projects. These risks include the Company’s ability to: manage changing operations; implement and successfully execute the Company’s business and marketing strategies; respond effectively to competitive pressures and developments; continue to enhance the JV’s products and services; and attract, retain and motivate qualified personnel. The Company’s failure in any of these areas could adversely affect the JV’s financial condition and results of operation.

B. Industry-Related Risks

Dependence on the Industry

The JV competes with others in the industry. Competitors include companies that may have greater financial and other resources than the Company. Additionally, these competitors could use strategies to prevent the Company from achieving its objectives and may gain market share. This may have a material adverse impact on the financial position of the JV.

Competition

Any negative changes in economic conditions could have a material adverse effect on the Company’s business.

C. Management Related Risks

Reliance on Key Personell

Due to the complexity of the investment structure, the investment has a significant reliance on certain key employees, particularly Rodrigo Machado and Alan Stalcup. If Leste and GVA are unable to retain these key employees it could jeopardize the JV’s ability to implement its value-add renovation plan, its key relationships with its customers and creditors, and its financial stability.

Ability to Increase Rents

The JV expects to complete its business plan as proposed, and in turn increase rent and NOI. This may be affected by market conditions, and any inability to increase rent prices effectively would have a material adverse effect on the JV’s business.

C. Offering Related Risks

Acceptance of Investors on a First-Come, First-Serve Basis

The Issuer reserves the right to accept or reject any proposed investment in its sole discretion. Subject to this discretion, it intends to accept investments on a “first-come, first-served” basis, with the consequence that Investors will be allocated a portion of the total Offering, based upon the amounts they have committed, in the order in which such commitments have been accepted. The Borrower is not required to accept all commitments tendered to it. There is no assurance, therefore, that your commitment will necessarily be accepted in whole or in part by it should it raise more or less funds than are needed to make its investments.

Possibility of Material Differences Between Projected and Actual Results

The financial projections contained in this Offering Summary and any supplements represent the Issuer’s estimated results of operations. The financial projections have been prepared upon the basis of assumptions and estimates which may differ from actual events and/or circumstances.

C. Federal Income Tax Risks

Lack of Rulings and Opinions; Possibility of IRS Challenge of the Issuer’s Tax Position

The Company has not requested and will not request any tax ruling from the IRS regarding the tax consequences of the Company’s activities. Accordingly, there is no certainty as to the tax consequences of participating in the Security. The Company has not sought or obtained a legal opinion with respect to the tax treatment of the offering proceeds or issuance of the Security. Accordingly, Investors are urged to consult your own tax advisor with respect to the federal and state tax consequences arising from participation in this Offering.

Risk of Audit to Investors

There is a possibility that the IRS will audit the Company’s income tax returns. If the Company’s income tax returns are audited, your return might also be audited.

Future Federal Income Tax Legislation and Regulations

No assurance can be given that the current Congress or any future Congress will not enact federal income tax legislation that could adversely affect the tax consequences of participating in the Offering.

C. Inflation Related Risks

Projected Exit Cap Rate

The JV has projected the sale of the assets at a higher cap rate than what it was purchased at. While it has considered standard inflationary projections, and a non-linear correlation between cap rates and inflation rates, there is a risk that the projected exit cap rate may be higher than what has been underwritten in this document. Consequently, the higher than projected exit cap rate could adversely affect the projected returns, even if inflation drives higher NOI.

C. Other Risks

Reliance on Certain Aspects of the Offering

Potential investors should not rely exclusively on one aspect of the security structure when making an investment decision on whether or not to participate in this Offering.

Unforeseen Risks

In addition to the above risks, businesses are often subject to risks not foreseen or fully appreciated by management. Prospective investors reviewing this Offering Summary should keep in mind other possible risks that could be important to the success of their investment in the Securities.

Important Disclosures

These securities have not been registered with the Securities and Exchange Commission (the “SEC” or the “Commission”), or with any state securities commission or any other regulatory authority. The securities are being offered in reliance upon an exemption from the registration requirement of federal and state securities laws and cannot be resold unless the securities are subsequently registered under such laws or unless an exemption from registration is available. Neither the SEC nor any other agency has passed on, recommended or endorsed the merits of this offering (this “Offering”) or the accuracy or adequacy of these confidential offering documents (the “Offering Package”). Any representation to the contrary is unlawful.

These securities are offered through Carofin, LLC, Member of FINRA/SIPC. Carolina Financial Securities is an affiliate of Carofin and both Broker-Dealers are affiliates of Carolina Financial Group, LLC. Documents have been prepared by Carolina Financial Securities and have been reviewed and approved by the management of the Company. The information contained herein has not been independently verified and is dependent on information provided by the Company to Carolina Financial Securities, LLC. Our firms seek to present vital capital with meaningful investment opportunities through the fundamental analysis of the businesses we seek to finance. Such analysis is usually conducted through a First Principles approach.

When we provide you with a recommendation, we have to act in your best interest and not put our interest ahead of yours. At the same time, the way we make money creates some conflicts with your interests. You should understand and ask us about these conflicts because they can affect the recommendations we provide you. Here are some examples to help you understand what this means:

Proprietary Products: Our firms will often present investments that are only available through them, which may result in a higher placement fee. The Firms will receive the placement fee regardless of your investment performing as expected.

Administrative Agent Services: CFG Financial Services, LLC, an affiliate of our firms, will act as Administrative agent for the securities while they are outstanding. Given that our firms have an interest in providing recurring services to the Issuer, while the administrative agent looks after the interests of investors, there may be a conflict of interest between the firms and its affiliates.

Our firms offer brokerage services to accredited investors, exclusively through the sale of private placements. the offerings we bring to market are carefully selected, and any recommendation you may receive from us will be limited to these offerings. Therefore, we may be unable to adequately compare the risks and benefits of the offerings we bring to offerings presented by other financial professionals. While our firms will often present new investments and discuss such investment’s risks and benefits with you, the ultimate authority to make such investment rests solely with you.

Our firms do not hold any investor cash or securities, and securities offered by us often have no easily assessable market value, so our firms will not monitor the market value of your investment on an ongoing basis. The investments we present often require a minimum investment of $5,000 for equity offerings and $10,000 for debt offerings.

Fees and costs may reduce any amount of money you make on your investments over time. Our firms are mostly compensated through placement fees, which are payable by the issuer, meaning that the firms will be compensated by receiving a percentage of the funds raised in an offering, regardless of the investment performing as expected. Such placement fee is usually between 3% and 7% (please find the specific Placement Fee for this offering in the “Placement Agent Fees” section of the “Security Terms”. Given that different investments have different placement fees, we may often have a conflict of interest when presenting these investments to you. The Firms’ bankers are often compensated by receiving a percentage of the placement fee, and may have their own conflict of interest when presenting you with offerings they structure.

The information contained herein is for informational purposes only and is not intended for further distribution. The information does not constitute a complete description of any investment or investment performance. This document is in no way a solicitation nor is it an offer to sell securities nor is it advice or recommendation regarding any investment. The information is not directed to any person who is not believed to qualify under the definition of an Accredited Investor under the rules of Regulation D of the 1933 Securities and Exchange Act. No security listed in this document or otherwise offered through Carolina Financial Securities, LLC or Carofin, LLC may be purchased without prior receipt of a complete Private Placement Memorandum or other official offer to sell.

Due diligence materials related to this Offering are available to you through Carolina Financial Securities’ affiliated marketplace, Carofin. If you have not received your login information to access carofin.com, please contact your company representative to have access granted.

The Company will not offer, sell or issue any Securities in any jurisdiction where it is unlawful to do so or where laws, rules, regulations or orders would require the Company, in its sole discretion, to incur costs, obligations or time delays disproportionate to the net proceeds the Company will realize from such offers, sales or issuances. Neither this Offering Package nor any subscription agreement shall constitute an offer to sell or a solicitation of an offer to purchase any Securities in any jurisdiction in which such transactions would be unlawful.

Private placements are high risk and illiquid investments. As with other investments, you can lose some or all of your investment. Nothing in this document should be interpreted to state or imply that past results indicate future performance, nor should it be interpreted that FINRA, the SEC or any other securities regulator approves of any of these securities. Additionally, there are no warranties expressed or implied as to accuracy, completeness, or results obtained from any information provided in this document. Investing in private securities transactions bears risk, in part due to the following factors: there is no secondary market for the securities; there is credit risk; where there is collateral as security for the investment, its value may be imped if it is sold. Please see the Private Placement Memorandum (PPM), and the complete list of contents of this Offering Package for a more detailed explanation of the securities Summary of Terms, Investor Suitability Standards, Confidentiality, Securities Matters and Risk Factors.

Caution Regarding Forward-Looking Statements

Certain statements in this Summary Offering Material may be “Forward-looking” in that they do not discuss historical facts but instead note future expectations, projections, intentions, or other items relating to the future. We caution you to be aware of the speculative nature of forward-looking statements as these statements are not guarantees of performance or results.

Forward-looking statements, which are generally prefaced by the words “may,” “anticipate,” “estimate,” “could,” “should,” “would,” “expect,” “believe,” “will,” “plan,” “project,” “intend,” and similar terms, are subject to known and unknown risks, uncertainties and other facts that may cause our actual results or performance to differ materially from those contemplated by the forward-looking statements.

Although these forward-looking statements reflect our good faith belief based on current expectations, estimates and projections about, among other things, the industry, and the markets in which we operate, they are not guarantees of future performance. Whether actual results will conform to our expectations and predictions is subject to several known and unknown risks and uncertainties, including risks and uncertainties discussed in this Summary Offering Material.

Consequently, all the forward-looking statements made in this Summary Offering Material are qualified by these cautionary statements and there can be no assurance that the actual results anticipated by us will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, us or our business or operations. Risks, uncertainties, and factors that could cause actual results to differ materially from those projected are discussed in the “Risk Factors” section of this Summary Offering Material. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Considering these risks, uncertainties, and assumptions, the forward-looking events discussed in the Summary Offering Material might not occur.

SECURITIES MATTERS

State Securities Laws:

The Company will not offer, sell or issue any securities in any jurisdiction where it is unlawful to do so or where laws, rules, regulations or orders would require the Company, in its sole discretion, to incur costs, obligations or time delays disproportionate to the net proceeds the Company will realize from such offers, sales or issuances. Neither this Offering Package nor any subscription agreement shall constitute an offer to sell or a solicitation of an offer to purchase any securities in any jurisdiction in which such transactions would be unlawful.