Silkman, Executive Summary CBHomes, Inc, A Nevada Corporation A Real Estate Solutions Company Executive Summary Overview CBHomes is a Real Estate liquidation, investment, and management company (operating under the parent company of Cal-Bay International, Inc.) specializing in real property investment (single family dwellings), investment property management (rental and lease option to buy properties), and sales and loan acquisition seeking a $ 5.45 million investment. Actively creating investment partnerships in Real Estate in the Southwest portion of the United States, CBHomes invests in under market value properties (in some cases under replacement value), currently occupied property of homeowners nearing foreclosure or Real Estate currently positioned in a market that is oversold and where demand is still high. CBHomes expects to sell 5% - 20% of its inventory every six months to other institutional investment firms or ‘A’ credit individuals and to lease or rent the remaining 80% - 95% of the properties for 3 years. During that 3 year transition time from purchase to liquidation, CBHomes will be its own property management and contractor services firm. At the end of the investment cycle and at the time of sale, CBHomes will offer loan and mortgage services. Capital Requirements CBHomes will use the $5.45 million investment to purchase 30 to 38 homes in preselected Las Vegas neighborhoods for a three-year lease program while additionally purchasing and selling 2 foreclosed properties at a time (up to 12 total annually) using the remaining funds. The allocation of Proceeds of the Investment may vary significantly depending on numerous factors, including the success of the Company’s marketing and production efforts. Description Maximum Placement Total Proceeds: 1 $ 5,450,000 Less Placement Expenses2 $ 30,000 Net Proceeds: $ 5,420,000 Inventory, property $ 5,000,000 General Working Capital $ 420,000 Total Expenditures $ 5,000,000 (Intentionally left blank) 1 This amount assumes the entire Investment amount of $5,450,000 is realized. 2 This amount includes $30,000 for the Company’s attorney’s fees, accountant’s fees, filing fees and cost associated with the investment. Executive Summary Section 1 – Page 2 of 5 CONFIDENTIAL – NOT FOR DISTRIBUTION Financial Plan/Goals Exit / Payback for Internal Investment Projections indicate that an internal investment of capital from within the company would have a payback period of 36 months with an estimated Total Return (in the form of gross increase in assets) of $8,849,699 (or $3,399,699 with capital investment excluded). Costs are estimated to be no greater than $1,124,774 for the three year period (or 75% of the revenue from the lease program and foreclosure sales). The investment capital of $5,000,000 would again be available at the end of this period for reinvestment and Total EBITDAR would be an estimated $2,274,925 over three years. Net Income would be allocated toward dividends, retained earnings, and additional capital investment at the discretion of the management. Quick Facts about the CBHomes Investment Package: - Length of Investment: 3 years - Estimated Total Gross Return on Investment: 62.4% - Estimated Annual Return on Investment: o First Year: 11.6% o Second Year4: 9.2% o Third Year: 41.6% In the CBHomes $5.45 million investment package, there will be two sources of return for the company: 1. Homeowner Lease Program a. Homes purchased in a discounted bank sale b. Homes leased back to original homeowner c. Homes sold at the end of the lease term back to the original homeowner 2. Sales of Foreclosed Homes Goals CBHomes is expected to invest in a mix of up to 50 single family residential homes by December of 2009 with up to 38 units under active management, 12 units sold and another 60 units listed as top candidates for purchase/lease in 2010. CBHomes is expected to invest in a mix of up to 120 single family residential homes by December of 2010 with up to 152 units under active management 6 units sold and another 120 units listed as top candidates for purchase/lease in 2011. CBHomes is expected to invest in a mix of 360 single family residential homes by December of 2011 with up to 512 units under active management up to 38 units sold and another 200 units listed as top candidates for purchase/lease in 2012. At the time of sale of the homes purchased with the initial capital investment, CBHomes will offer loan and mortgage services to each of its clients earning it a high quality reputation for its services and management of real property and people. Offices will be located in CA, AZ & NV. 4 The return on foreclosure revenue for the second year is less than the first year due to the anticipation by the management that the price of foreclosed properties in the market will increase dramatically during the second year due to inflation and an increase in housing prices. We do not anticipate foreclosure Executive Summary Section 1 – Page 3 of 5 CONFIDENTIAL – NOT FOR DISTRIBUTION Lease and Foreclosure Program Lease Program Each month tenants will be required to pay a lease payment equivalent to the 30-year fixed mortgage payment for a house sold at the discounted bank sale price. The lease payment for a $125,000 average home5 is estimated to be $917.21 with an 8% interest rate. The lease payment will be distributed in the following proportions after expenses have been paid: • Homeowner - $114.03 (12.43%) of the lease payment6 will be reserved in a retainer fund for the homeowner to use at the terms end toward the purchase of the house • CBHomes - $803.18 (87.57%) will be allocated to the corporation as lease revenue As terms of the lease, the homeowner’s retainer fund will be forfeit upon any default, abandonment, or other breach in the lease program rules. In the event of a breach, the home will also remain property of the corporation to be sold at a later date. At the end of the lease term, the homeowner will have the option to purchase the home at a fixed mark-up of 40% from the original bank sale price. They will be required to agree to this markup at the signing of the lease. They may use their retainer toward a down payment, home improvements, or the purchase of another unoccupied house in the CBHomes inventory. The mark-up price will be the minimum final sale price of any home chosen without causing a breach of the lease terms and a resultant forfeiture of the retainer. Total return on investment from the lease program will be $2,998,749, or $78,914 per unit, with 75.6% occurring in the last year when properties are sold. Foreclosure Properties Two foreclosure properties will be purchased at any given time. This foreclosure inventory will be sold immediately after staging7 and preparation. This cycle of purchase, preparation, and sale of properties is estimated to take approximately 2 months with current market conditions. Up to six of these turnover cycles will be completed within the first year with a total of twelve properties being purchased and sold during the first year. We anticipate only three foreclosure cycles and six properties bought and sold during the second year. Due to maintenance and staging costs and the difficulty of resale, foreclosure properties will be carefully chosen and thoughtfully improved to maximize return. At the current market value estimate8 of $180,000, we anticipate a foreclosure price of $81,000 or 55.0% below the market value. We assume that we may only receive a 50% return on the property9 (or $121,500 total sale price) due to the continuing fall of the market. That puts the return on each foreclosure property at an estimated $30,500. After higher fees and expenses due to commission on the sale, CBHomes estimates the final return amount for each property to be $22,275. Total annual return for the foreclosure program will be between $44,550 (for two properties) and $267,300 (for up to twelve properties). revenue during the third year. While foreclosures will likely continue indefinitely, our exit from the foreclosure market will be voluntary as prices, risk, and opportunity cost increase. 5 Average purchase price of the home as discounted by the bank from the original sale price (Bank Sale Price). 6 The equivalent of 90% of the principal that would be accumulated by making payments on a 30-year fixed mortgage for an identical property over three years. 7 “Staging” includes repair of damage, replacement of missing appliances, and temporary interior decorating of the property with the intent to sell as quickly as possible for the best price. 8 We are currently searching for homes in foreclosure with a market value near this price range. The foreclosure price will be heavily discounted. 9 After fees, closing costs, and sales related expenses. Executive Summary Section 1 – Page 4 of 5 CONFIDENTIAL – NOT FOR DISTRIBUTION Market Analysis Las Vegas Overview Prediction: Las Vegas home-price decline will hit 52 percent By Brian Wargo Fri, Jan 30, 2009 (2 a.m.) Las Vegas, NV (Metro Area) http://www.zillow.com/static/images/quarterlies/2008-Q4/Graph-Quarterly-Homes-Sold-For-Lossplus- Foreclosures-LasVegas-NV.png Zillow.com Reports Feb. 3, 2009 Las Vegas, NV Average home value $179,000 One year change -28.6% Las Vegas Suburbs North Las Vegas, NV Average home value $177,000 One year change -25.1% Henderson, NV Average home value $206,000 One year change -26.8% Boulder City, NV Average home value $230,000 One year change -21.8% Opportunity As consumer confidence still falls and house prices plummet, investors who can control the overall process of buying, maintaining, managing, selling and financing properties have a clear advantage. CBHomes is just that company, offering complete Real Estate Solutions to its partners, its investors, its customers and its communities. Executive Summary Section 1 – Page 5 of 5 CONFIDENTIAL – NOT FOR DISTRIBUTION Management Team CBHomes President Stuart G. Graves has 18 years of residential investment experience, licensed contractor and certified mortgage and loan specialist in both the Automotive and Real Estate industries combined with his Real Estate license and expected Broker certification in 2009. Stuart and CEO Shaun Bailey will head the CBHomes Executive staff. Stuart and Shaun are the two chief officers and two of the four board members in the company. Shaun Bailey - Founder / CEO / Co-Chairman, CBHomes - Shaun Bailey has a Bachelor of Science degree in Business Management from Brigham Young University. He has seven years of marketing and information systems experience and over four years in operations management having served as operations manager of a residential construction company and operations analyst for a multi-billion dollar resort and entertainment company. - Perform Active Outside Sales and Marketing of the Corporation - Active Board Member - Some Day to Day Management Responsibilities - Shareholder, CBHomes Stuart G. Graves - President / COO / Co-Chairman, CBHomes - Stuart Graves has 18+ years of residential investment experience as a licensed contractor and certified mortgage and loan specialist for both the Automotive and Real Estate industries. He also has his real estate license and is expecting his broker certification. - Perform Active Outside Sales and Marketing of the Corporation - Active Board Member - Active day to day Management Responsibilities - Shareholder, CBHomes Troy Ternes - VP of Investment and Operations - Troy Ternes graduated from the University of Colorado with a Bachelor of Arts degree in Psychology. He spent two years in Germany running the day-to-day office functions of a heating and plumbing company. He has also handled communications for over 250 companies. - Active day to day Management Responsibilities - Shareholder, CBHomes Penny Stowe - Controller - Penny Stowe has a Bachelor of Science in Accounting & Finance and strong health related experience. She worked as Financial Director/Controller for hospitals for 18 years. Additional duties included Controller of a publicly traded corporation, and her responsibilities included preparing filings for the Security & Exchange Commission, working directly with auditors and maintaining records of stock issuances and ownership percentages. - Active day to day Management Responsibilities - Shareholder, CBHomes
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