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BACKGROUND

Open Source Capital is a real estate advisory firm with significant industry experience in facilitating the financing of commercial real estate transactions.  Our management team, in conjunction with our relationships with general contractors, developers, specialized portal provider RealConnex.com and FINRA Member Broker/ Dealer RCX Capital Group provides a comprehensive platform for institutional quality due diligence, deal structuring and marketing of Regulation D 506c Private Placement Offerings.  We design capital campaigns that promote a company’s brand and help them engage with capital providers.  We believe that investors are more inclined to invest in projects that have been structured and vetted by our management team and that investors and lenders will view these projects as superior to other similar investments.  OSC has extensive experience in:

  • Structuring and executing customized real estate syndications for developers of commercial real estate projects.
  • Developing comprehensive financing campaigns utilizing online investment portals

OSC is a leading expert in both institutional and private, debt and equity offerings, including assisting in the identification and evaluation of various capital structures and solutions, assessment of optimal sources of capital, preparation of investor materials, management of due diligence, and proper communications with potential investors.

In addition, we offer clients innovative and timely advice that covers all aspects of capital raising, from financial modeling, project underwriting, deal underwriting, investor targeting, waterfall distributions, price strategy and proper documentation to efficiently close transactions.

The members of our management team have extensive experience in many aspects of the real estate business, including construction and development, institutional investment management, construction lending, debt and equity structuring and syndication. We have a strong background in underwriting, asset management and creditors’ rights, risk management and corporate governance. Overall, our management team has an average of more than 40 years of experience and provides us with access to a broad referral network and significant practical knowledge of real estate investment, development and capital markets.

 

We believe that we have significant competitive advantages relating to our experienced management, our existing pipeline and market relationships, the strength of our underwriting and asset management capability, and in our structuring flexibility and speed of closing.

 

Open Source Capital is building a global investment network by:

  1. Providing Sponsors- an outsource solution to specifically engage in the capital raising process.
  2. Providing Investors- vetted real estate deals.
  3. Providing Real Estate Portals – consistently high quality and vetted deal flow
  4. Providing Registered Investment Advisors and Broker/Dealers- alternative real estate investment options

 

Our Strategy

 

The JOBS ACT allows general solicitation of accredited investors to participate in online syndications.

This promises the makings of a massive trend, which is just now starting to take place.

As a result, we believe that an entire industry is poised for explosive growth and can be one of the most significant solutions to help private equity and accredited investors invest in quality off-market deals.

This may sound like a bold statement, but it’s not if you understand entrepreneurs the way we do. The reality is, online syndication is the way of the future.

Targeted Sponsors:

Companies developing projects costing between $15 to $200m

We believe that our company provides a way for firms to start shifting their focus from working with gatekeeps to new and open markets.  By working with us, sponsors, private equity funds, and retail investors can benefit from off-market investments that:

1.      create value

2.      are located in strong markets

3.      provide consistent cash flow

4.      have a high probability of rent increases

5.      have a history of management’s performance

6.      have a market-oriented management team

7.      have sponsors with the ability to develop, manage and lease

8.      have the proper capital stack

9.      are not correlated to the stock market

10.  have a realistic return on invested capital

11.  have a realistic exit strategy

 

Targeted Investments:

 

We focus on working with firms that have a competitive advantage in their market and that can offer solid risk-adjusted returns to our investors.  Our targeted investments include:

  • Multifamily

  • Single Family

  • Townhouse

  • Retail

  • Hospitality

  • Self-Storage

  • Student Housing

  • Senior Housing

  • Mixed Use

 

Targeted Investors:

 

  • UHNW Individuals
  • HNW Individuals
  • Family Offices
  • Small Balance Real Estate Funds

  

Our Competitive Strengths

We believe our business possesses several characteristics that distinguish us from our competitors, including:

  • Experienced management. Our primary competitive advantage comes from our senior management team, which has operated in the lending business for over thirty Each member of the senior management team has at least 20 years of relevant experience in high yield debt structuring, debt capital markets, origination, underwriting, credit, risk management, loan servicing, real estate development and construction, and corporate governance.
  • Market Niche. The Company has successfully targeted the segment of the real estate market occupied by builders and developers. These companies operate on a scale that allows them to acquire mid-size, in-fill sites in strong growth markets. Currently, and for the foreseeable future, we believe that small and medium-size developers will struggle to find equity and bank loans to acquire and improve projects.
  • Transaction pipeline and relationships. Our existing client relationships provide us access to a unique pipeline of opportunities. Our reputation with brokers for a prompt response, creative structuring and reliability results in many new investment opportunities. We continue to develop mutually beneficial relationships within the communities in which we

 

  • Strong deal structuring, underwriting, and asset management capabilities. We have developed industry-leading expertise in underwriting the types of investments we have successfully employed. Our management specializes in deal structuring, credit agreements and loan participation agreements that protect our rights, mitigate losses and enhance

 

We believe that investors are willing to finance projects that have been vetted by our management team and will view their investment as an alternative to other short-term income-producing investments.

 

Targeted Returns

Investments are typically underwritten to yield internal rates of return of between 16-33%. Investor revenue is generally derived from both cash-flow and profit participation.

 

Each investment finances a discrete project through a special purpose entity. Investments are senior to the borrower’s equity and the non-commoditized nature of the product allows for investors to obtain favorable terms including preferred returns and profit participation.

 

Liquidity

We believe that over time investors will be able to resell their private securities on markets like the CFX http://cfxinvesting.com/ when seeking liquidity for their direct investments.

 

Vast Market Opportunity Enhanced by Highly Underserved Client Base

 

Management believes that the Company’s focus on helping medium-size private companies raise capital provides for the potential to serve a large customer base currently underserved by banks and other institutional lenders. Management believes there has never been a better time to be in this business. Many lenders, unregulated private secured lenders, and structured joint venture equity providers have consolidated into a small group of very large institutional investors with little appetite for mid-size real estate deals with unique requirements. The capital inefficiencies placed upon developers and homebuilders have been exacerbated by the 2008 downturn that has led many banks – large and small – to dramatically tighten credit standards, if not withdraw from the market altogether. This contraction in the traditional capital supply to developers and homebuilders has only increased the need for the company’s service.

Industry Overview

Serving the under-banked population is a target rich environment capable of producing rapid growth opportunity for the Company and its clients. Management anticipates that online syndication could become the primary credit provider for many more real estate companies in the future. The Company has the flexibility to structure and provide financial solutions that address this underserved market.

 

Our Investment Strategy

We believe that given the risk and time involved, ground- up and value-add income producing property will obtain superior returns. To achieve this goal, investors must be willing to provide capital to sponsors at a time when conventional financing sources are non-existent or extremely limited. This generally applies to sponsors that are too small to access the public debt or equity markets, conventional bank lending is not available, or the company needs funds quickly in order to capture a special opportunity.

Approaching the Market

The internet has made the company more prepared to serve its clients than ever before by being able to easily access information about demographics, market trends, comparable sales and other information related to real estate. The key to unlocking potential investments lies largely with our ability to recognize trends and acquaint ourselves with qualified builders and developers who are capitalizing on those trends. Opportunities are everywhere; we read, watch, and listen. We look for news articles reporting companies financial and sales forecast and annual reports, as these are often signs of companies that are selling assets in a distressed market and may have a need for additional cash. Market disruptions often produce meaningful opportunities. We avoid the herd approach and instead focus on the individual value of each opportunity. We also look for opportunities when markets are trading on emotion rather than logic. We believe that markets create virtuous cycles on the upside that tend to lead to overvaluation and vicious cycles on the downside that can lead to undervalued assets. This contrarian approach relies, in part, on fads and herd mentalities that lead to fundamental differences between price and value.

Sourcing Investments

Origination, the process of sourcing and initiating new deals, requires reviewing as many potential development opportunities as possible.  It requires not only screening deals that don’t have the potential to be profitable but having the discipline to pass on deals where our management does not have the expertise to correctly evaluate and underwrite the opportunity. There is no shortage of good deals; however, it is important to understand early on, which deals have a high probability of ultimately closing. As a value to our sponsors and investors, time is their most valuable asset and being able to quickly identify bad deals, marginal deals, or deals that require a lot of due diligence with little chance of getting completed is tremendously important to all stakeholders.

We source our deals using the relationships that we have developed over the past 40 years, as well as new relationships with pre-screened brokers. Other referrals come from commercial bankers looking to reduce their LTC.  OSC also works closely with CPA’s and attorneys to acquaint them with regard to the types of deals that OSC will consider and how we structure and underwrites deals. This provides referral agents with the necessary information and tools to quickly evaluate requests, to see if they fit the profile for OSC and increases OSC’s efficiency by eliminating spending any time on deals that we are not interested in doing.

 

Due Diligence- The Mother Of Every Investment

Due diligence is as much an art as it is a science. Due diligence starts by both asking questions and gathering information.

When performing due diligence, our experienced team of associates and other third-party consultants will not only be assessing risk but will also be evaluating the opportunity. It is very important during the due diligence period to become deeply involved in understanding every major aspect of the proposed project. This includes understanding the competition, understanding the project’s cost structure, and learning how the company will prices and market the project. Due diligence includes site visits, inspecting comparable ventures or properties, meeting directly with management, talking with other investors, lenders, and other stakeholders, performing credit underwriting, and engaging with various third parties on legal or other technical matters. One thing we cannot stress enough is the need to continually be expanding our circle of close advisors by aligning ourselves with seasoned executives in the industry that our investors are investing in.

In simple terms, the goal of our due diligence is to use the best available information to arrive at a valuation of our investment in the venture. The method best suited is to work backward, by starting with amount and timing of revenue, then evaluating costs and, finally, subtracting costs from revenue to determine the company’s ability to make payments to us. The investment decision then is based upon the price that we can acquire our assets, how much we can sell them for and the proportional share of the cash flow we retain from the financing.

The importance of due diligence, its quality, and the importance of its integrity, cannot be overstated. This is the blue collar, detailed-oriented, unglamorous, but disciplined approach that separates the professionals from the hacks.  We take pride in establishing and using industry’s

best practices, sources and methods to independently verify all assumptions with the highest quality and most relevant data, in addition to our ability to organize and present both data and results into a concise and logical presentation. This is a capability we have built over time by researching and following some of the best institutional professionals in the business.

 

 The 60 to 120 Day Capital Campaign