Regenerative Real Estate Fund I Investment Memorandum
Chen Zhao
Juan Huicochea Mason
Mia Zhao
Mihir Menda
Ravisara Lertpunyaroi
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Index 1. Overview 2.Product 3.Case study 4.Financial information
1.Overview Section Investment Highlights
Regenerative Real Estate Fund is a closed-end private equity fund that provides innovative solutions to their time's ecological crises while delivering long-term returns to investors The fund achieves a 15% targeted IRR by capitalizing on mispositioned land use and developing unique products in a scalable market.
Executive Summary
The Gap
Once a sought-after leisure activity endorsed by corporate America, golf is losing the support of younger generations As a result, golf courses have fallen into deep distress after decades of market oversupply Golf courses, however, amass 2 2 million acres of land in the United States and use 5 billion gallons of water every day. Due to mass deforestation, extensive consumption of freshwater resources, and ecosystem degradation from pesticides, golf courses are among the least sustainable land uses today
The Opportunity
The fund invests in distressed golf courses adjacent to some of the most scenic nature reserves in the country, including national and state parks. The fund restores more than 90% of land occupied by golf courses, transforming it back into natural habitats that have been native to the land's bioregion and repositioning the remaining 10%, which initially comprised the clubhouse and parking lots, into ecological hospitality facilities
The Regenerative Approach
Our team seeks to create profit with a purpose The fund focuses beyond maximizing financial return, as conventionally practiced A key differentiator of the fund compared to other sustainability-focused funds is the focus on increasing the planet's ecological capacity. As evidenced by science, overshooting the earth's biosphere integrity by carbon emission poses one of the most significant dangers to humanity. By restoring ecological habitats, the fund aims to give our over-exploited nature another chance to bounce back and sustain itself to allow future generations to survive on a healthy planet
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Team Overview
We are a diverse team of investment professionals with proven track records in real estate investment, development, and capital markets. The team has deep exposure to the hospitality asset class, having built, operated, and exited a platform
The management team includes the following members:
Chen Zhao, Director of Sustainability
Juan Huicochea Mason, Director of Development
Mia Zhao, Director of Investment
Mihir Menda, Director of Business Development
Ravisara Lertpunyaroi, Director of Investor Relations
2. Product Section
Golf Courses
According to a study by the Waseda Institute for Advanced Study of Japan, it is estimated that around 35,000 golf courses currently exist globally, of which the top five countries (USA, UK, Japan, Canada, and Australia) account for 76% of them These golf courses cover an area of approximately 17,238 km2, an area equivalent to the size of Kuwait (Saito, 2010)
The golf course industry is in the mature phase of its life cycle Over the next 5 years to 2026, the industry’s contribution to the overall economy is expected to increase by 1 2% annually, below the projected 2.3% annual GDP growth rate during the same period (Thomas, 2021).
According to the National Golf Foundation, there was an overbuilding of golf courses in the 1990s – 2000s, which exceeded consumers’ demand for golfing (Golf Industry Facts, 2022) Therefore, the industry faces the long-term challenge of broadening its market share and attracting new players today Golf courses have struggled to increase their demand And the growing demand for competing for outdoor sporting activities is expected to continue to pressure the market for golf.
Since the cost of maintaining a golf course remains constant regardless of customer participation, modest growth or declines in the number of individuals paying club fees threaten the industry As a result, 800 golf courses have closed in the last ten years (Jacob, 2018)
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Golf Courses have many negative impacts on the environment. Golf courses must be green-free of weeds and pests that harm the grass Maintaining a green golf course requires a lot of watering. Audubon International estimates that a golf course in the U.S. uses 312,000 gallons of water each day Fairways typically do not have bushes or trees Natural resources have to be removed Deforestation is a common practice that causes animal habitat fragmentation and loss. Courses harm wildlife and the ecosystem not only during the development but also during the operational phase Many animals that cause a nuisance to players, like burrowing animals, must be removed from the course Pesticides used in the golf courses to keep the land free of pests and weeds contain over 50 chemicals. Pesticides pose health risks and environmental risks According to a study by the University of Berkeley, over three golf courses in California, agricultural chemicals, predominantly fertilizers and pesticides, accounted for the largest annual source of carbon emissions with an average emission of 577 MT CO2/yr (Valenti, 2010) Overall, golf courses are estimated to have a net CO2 footprint of 450 tons a year
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Eco-Hospitality; an option
Ecotourism is a form of tourism that unites communities, conservation, and sustainable travel It involves traveling to remote and pristine destinations where the fauna, flora, and cultural heritage are the centers of attractions. The ecotourism worldwide compounded annual growth rate (CAGR) is forecasted at 14 3% from 2019 to 2027, and is expected to gross 333 8 billion USD in 2027 (Lock, 2021) In North America, the CAGR of ecotourism is projected to grow by 16.2% from 2020 to 2027 (Vig, 2021).
Due to the COVID-19 pandemic, travel embargos and the strict enforcement of stringent health protocols to contain the virus highlighted the limitations of volume tourism. Many travel and tourism businesses joined the UN Sustainable Development Goal to declare a climate emergency (Sustainable Travel Index, 2021) Eco-hospitality or sustainable hotel is an environmentally sustainable hotel or accommodation that focuses on preserving and minimizing the negative impacts on natural ecosystems 56% of Americans aged under 50 and 28% of American aged above 50 searched for eco-accommodation as an alternative to travel (Glamping Market Size & Growth Report, 2022). This showed the strong eco-consciousness of post-pandemic Americans In addition, Millennials, Gen X, and Gen Z are willing to pay to offset their carbon footprint.
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Glamping or glamorous camping is a type of eco-hospitality It has gained popularity around the world, especially in the U.S. market. It grew 28.8% from 2021 to 2022 (Glamping Market Size & Growth Report, 2022) The influence of social media among consumers has been creating awareness about eco hospitality and its benefits. Moreover, travelers have been looking for memorable experiences close to nature while maintaining luxury comforts According to Virtuoso’s 2019 Luxe report, there is an increase in demand for unconventional settings and accommodations. These factors have made glamping a popular travel experience instead of the niche segment it was in the last decade
The RV and Camper Van market expanded from 2015 to 2020 due to favorable economic conditions, including rising disposable income levels and more lavish spending on travel and leisure IBIS World, 2021) Traveling via RV was seen as one of the safest ways to travel after COVID-19. As a result, there was a massive influx of new campers in 2020 compared to 2019. According to Kampgrounds of America, the total number of North American RVs and trailers was 86 1 million in 2020, representing a 20 4% increase from 2015 Millennials are attracted to the RV lifestyle and take more vacations than other generations, prioritizing unique, value-added excursions On the contrary, the older generations are willing to camp at a higher rate
Carbon Credits; an opportunity.
Carbon credits, also known as carbon allowances, work like permission slips for CO2 emissions Trade-in carbon credits began as part of the 1997 UN Kyoto Protocol, the first international agreement to cut CO2 emissions. Its Clean Development Mechanism (CDM) allowed industrialized countries to reduce emissions abroad where that might be cheaper than at home, such as by planting trees in the tropics But in practice, most trading has been in “voluntary” markets, in which companies buy credits, some originating under the CDM. A sizable industry has grown up around certifying and marketing these credits The number of credits issued each year is typically based on emissions targets. Credits are frequently issued under what’s known as a “cap-and-trade” program. Regulators set a limit on carbon emissions– the cap That cap slowly decreases over time, making it harder and harder for businesses to stay within it.
Carbons can be labeled as carbon credits and carbon offsets There are two types of global carbon markets: voluntary and compliance. Carbon credits are generally transacted in the carbon compliance market, whereas carbon offsets are transacted in the voluntary market For simplicity, our transaction vehicle will be referred to as “carbon credits ”
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The voluntary carbon market for offsets is smaller than the compliance market but is expected to grow significantly in the coming years Moreover, while compliance markets are limited to specific regions, voluntary carbon credits are substantially more fluid, unrestrained by boundaries set by nation-states or political unions. Every sector of the economy can access them instead of a limited number of industries Transactions of the voluntary market are also gradually becoming more sophisticated In contrast, most of the transactions are currently happening in private conversations and over-the-counter deals, some exchanges are also emerging Among the most prominent sales for carbon credits are the New York-based Xpansiv CBL and Singapore-based AirCarbon Exchange (ACX). When it comes to the regulatory market, each company operating under a cap-and-trade program is issued a certain number of carbon credits each year Some of these companies produce fewer emissions than the number of credits allotted, giving them a surplus of carbon credits On the flip side, some companies (particularly those with older and less efficient operations) produce more emissions than the number of credits they receive each year can cover. These businesses are looking to purchase carbon credits to offset their emissions because they must
Though not a comprehensive list, here are some popular practices that typically qualify as offset projects:
● Investing in renewable energy by funding wind, hydro, geothermal, and solar power generation projects or switching to such power sources wherever possible.
● Improving energy efficiency worldwide, for instance, by providing more efficient cookstoves to those living in rural or more impoverished regions
● Capturing carbon from the atmosphere and using it to create biofuel makes it a carbon-neutral fuel source
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● Returning biomass to the soil as mulch after harvest instead of removing or burning This practice reduces evaporation from the soil surface, which helps to preserve water. The biomass also helps feed soil microbes and earthworms, allowing nutrients to cycle and strengthen soil structure.
● Switching to alternate fuel types, such as lower-carbon biofuels like corn and biomass-derived ethanol and biodiesel
● Promoting forest regrowth through tree-planting and reforestation projects. Carbon credits can also be grouped into two large categories: avoidance projects (which avoid emitting GHGs altogether, reducing the volume of GHGs emitted into the atmosphere) and removal (which remove GHGs directly from the atmosphere). The removal category includes projects capturing carbon from the atmosphere and storing it They can be nature-based, using trees or soil, for example, to remove and capture carbon Examples include reforestation and afforestation projects and wetland management (forestry and farming). They can also be tech-based and include technologies like direct air capture or carbon capture and storage Removal credits tend to trade at a premium to avoidance credits, not just because of the higher level of investment required by the underlying project but because of the high demand for this type of credit They are also believed to be a more powerful tool in the fight against climate change. Beyond the type of the underlying project, the price of carbon credits is also influenced by: the volume of credits traded at a time (the higher the volume, the lower the price, usually), the geography of the project, the credit's vintage (typically, the older the vintage, the lower the price), and the credit's delivery time.
Our project is considering avoidance credits for the first year by substituting the golf course for an environmentally friendly project and removing its credits to reforestation CO2 sequestration in future years.
Carbon Credits Valuation
Today's voluntary carbon market lacks the liquidity necessary for efficient trading because carbon credits are highly heterogeneous. Each credit has attributes associated with the underlying project, such as the type of project or the region where it was carried out For example, community-based projects – which are usually localized and typically designed and managed by local groups or NGOs – tend to produce smaller volumes of carbon credits. It is also often more expensive to certify them However, they usually generate more additional co-benefits and meet the UN's SDGs, contributing, for instance, to improved welfare for the local population, better water quality, or the reduction of economic inequality
Another problem is measurability, like offsets that promote green tourism or seek to offset the damage of international travel, which can be more challenging to measure. Moreover, the reputation of the organization issuing the credit also contributes to determining the credit's value. Reputable carbon credits organizations choose carbon projects carefully and report on them meticulously Third-party auditors can help ensure such projects measure up to strict standards like those established by the UN's Clean Development Mechanism According to Gold Standard (GS), an asset can be valued from 4 different perspectives: intrinsic value,
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market value, price and cost, and economic value
It is not surprising to find a wide range of pricing for carbon credits for all these reasons. GS's holistic standard has published the basis of their valuation model and assessed a "fairtrade minimum price," which still variant on a range between 21 and 465 USD a ton. Like GS, University College London, Standard & Poors, and the United States Environmental Protection Agency have published their price ranges On the other side, other institutions, such as Yale University, have exposed specific prices as carbon-tax, which could work as a reference for carbon credit standard per USD/CO2/ton. These ranges are summed up below
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To do a conservative analysis,our project is considering Yale University Professor William Nordhaus’ carbon tax price per CO2 Ton: 30 USD, which reflects the economic cost of carbon. However, we should ideally charge 200 USD to ensure achieving the 2-degree mitigation scope for 2050, which already has a corrective nature on todays’ environment harm
Finally, its worth mentioning the high expectations allocated toward carbon credit future demand The Taskforce on Scaling Voluntary Carbon Markets (TSVCM), sponsored by the Institute of International Finance (IIF) with knowledge support from McKinsey, estimates that demand for carbon credits could increase by a factor of 15 or more by 2030 and by a factor of up to 100 by 2050. Overall, the market for carbon credits could be worth upward of $50 billion in 2030 Other institutions share optimism on such a
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soaring increase: University College London estimates a 2-20x growth by 2030 scaling to 20 to 130 times by 2050, ad S&P suggests prices would likely escalate following the increase in demand
https://wwwmckinseycom/business-functions/sustainability/our-insights/a-blueprint-for-scaling-voluntary-carbon-markets-to-meet-the-climate-challenge
Carbon Sequestration
Computing the precise amount of carbon absorbed each year is a difficult task The calculation is even more challenging if considering the diversity of locations where projects could be allocated: plants' rate of CO2 consumption varies with the crop, light intensity, temperature, stage of crop development, and nutrient level, and these are bound to the nature of their environment An average consumption level is estimated between 0 12–0 24 kg/hr/100 m2 The higher rate reflects the typical usage for sunny days and a fully-grown crop. Fast-growing, native, and low-maintenance species have historically been the best option for carbon sequestration. Trees typically sequester between 10 and 40 kg of CO2 per year, but some species perform far better, reaching over 150 kg a year. Also, plantation density affects the rate of acreage sequestration: variables across this distribution oblige the proforma to consider the base range.
For conservative analysis, we are considering 2 5 tons sequestered CO2 tons in dry environments and 15 tons in wetlands; discretionary would be allocated in the nuance of each specific environment to be intervened An average of 7 tons of absorption per year per acre,
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depending on its geolocation, is reasonable compared to the average 3 76 CO2 tons sequestered by current golf courses in Japan (Saito, 2010.) According to the Winrock International Forest Landscape restoration, planted forests and goods should convey a range of net sequestered CO2 between 4.5 and 40,7 tons. On the other hand, assuming an average of 200 to 500 trees fitting an acre, each reforested acre should absorb between 2 and 15 tons
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A key consultant and contractor to be added to our business model are Landgate They analyze the site where a reforestation project is intended to be developed; a scenario for optimal CO2 absorption is sketched with different species and landscape strategies They also monitor your asset's performance during the operation. A beneficial long-term relationship with Landgate is highly desirable
Competitive Landscape Market Positioning
Bhumi & Club Camp is a luxury eco hospitality glamping brand that blends contemporary design with the environment. Designed by legendary architect Bensley, each site has minimal intervention to preserve nature and is built with sustainable materials to reduce energy consumption and carbon footprint. A site has solar panels installed to generate power for self-consumption, creating a net-zero environment
Bhumi & Club Camp provides alternative work for the locals in the community and long-term employment opportunities. We have community outreach and environmental programs to
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ensure that the employees, communities, and guests understand the importance of wildlife protection, conservation, deforestation, and the ecosystem.
Bhumi & Club Camp is better positioned than its glamping peers with high-level services, amenities, facilities, and designs. Bhumi is set as more environmentally friendly than traditional hotels with its ecological focus
Luxury Eco-Hospitality- Bhumi Amenities:
● Wi-Fi
● Electricity
● Electricity Outlet
● King Size Bed
● Air Conditioner
● TelevisionTV
● Mini Fridge
● Coffee Maker
● In-Room Running Water (Shower, Toilet, Sinks) –Collect Rainwater
● Hot Tub
● Organic Bath Product (Reduce Packaging)
RV Parking Station- ClubCamp Amenities:
● BBQ
Shared Facilities
● Farm To Table Restaurant
● Spa and Fitness
Onsite Activities:
● OnsiteTrailing/ hiking
● Biodynamic Wine Tasting
● Yoga
Offsite Activities:
● Animal Interaction
● Archery
● Firepit
● Hairdryer
● Towels
● Hammock
● Kettle
● Housekeeping
● Kitchenette
● BBQ Grill
● Candles
● EV Charger
● Jacuzzi
● Clubhouse
● Fireplace
● Happy Hour
● Chef Table
● Sustainable farming
● BBQ & Grill
● Front Desk
● Dry Clean Service
● Cycling
● Stargazing
● Trees-planting
● Bird Watching
● Mountain Biking
● Wildlife Observing
● Zip-Lining
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● Guided Tours (Local)
● Offsite Hiking
● Paddle Boarding
● Rafting
● Canoeing
● Skiing/ Snowboarding/ Snow Tubing
● Snowmobiling
● Ice Skating
Target Customers
Bhumi’s target customers are domestic and international travelers based on the ecotourism market 85% of the customers are Gen X, Gen Y, millennials, and Gen Z They enjoy the best of nature without compromising their comfort, valuing luxury, adventure, and the close-to-nature experience. The remaining 15% are corporate clients going for company retreats Clubcamp’s target customers are domestic Gen X, Gen Y, and millennial RV renters/owners.
Famous designers design bhumi & Club Camp with many instagrammable spots for organic marketing. Social media such as YouTube, TikTok, Twitter, Instagram, and Facebook can be utilized to capture this market Bloggers are invited to post pictures, vlogs, and blogs periodically In addition, we will outsource an online marketing team to target customers on social media to maximize reach and engagement.
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The website is the direct channel for guests to make a reservation. The website includes Experiences at Bhumi & Club Camp, Gallery, About Us, Contact Information, and Location Google Ads will be used to optimize the website
For indirect marketing, online hotel booking platforms, online camping platforms, travel agents, and an in-hous e sales team will increase international and domestic customer exposure and sales
The Bhumi brand is part of the umbrella fund: a company focused on having an up-close experience with nature. The customer will embody the concept of "doing good by traveling" and live a unique experience in a new ecological sanctuary, an encounter with indigenousness and perpetuity. The product is thought for a tight niche of people over 21, primarily couples, looking for an elevated experience with nature with some luxury services and privacy Uniqueness and luxury are Bhumi's most descriptive labels
The Club Camp brand is part of the umbrella fund: a company focused on having an up-close experience with nature. The brand is for a broader market than that of Bhumi. The customer will embody the concept of “doing good by traveling” and live a unique experience in a new ecological journey motivated by curiosity and inspiration to get closer to nature. The product is thought for a broad niche of people over 21, primarily couples and families, looking for an elevated experience with nature Adventure and wildlife are Club Camp's most descriptive categorization
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3: Case Study
Only specific assets can be picked as desirable investments for the fund. Among over 17,000 golf courses across the country, the 152 7 acres of Red Wolf Texas asset caught our eye for its valuable location relatively close to downtown Boston, its proximity to the Lake Houston Wilderness Park, and the aesthetic value of the west river Luce Bayou.
1) Transaction and preconstruction assessment development (0-9 months), 2) followed by reforestation and development (10-23 months), 3) staff training (24-26 months). Regarding the development process, the first step would be reforestation; next, infrastructure development; third, the deployment of 40 Bhumi's glamping units and 60 Club Camp's RV units; and finally, the development of facilities and restaurants.
As noticed, parking is proposed at the southern entrance of the project contiguous to the all-day Dining and the 40 Camp Base VR units, and the 60 Premium RV sites Farther to the north are the glamping units of Bhumi, surrounded by the Bar&Shop, SPA, River Pavilion, Bike Station, Hiking Trail, and Forest Pavilion. All these facilities are spread within the dense reforestation area
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Visitors would have a wide range of activities taken on-site: from SPA services forest yoga and fitness studio; they will find different means to approach nature. Offsite activities will also contribute to that: visitors will always find a way to occupy themselves, from trekking
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to Kayaking at Luce Bayou river This scheme is critical to complement the Campbase business model.
3. Fund Strategy
Current Stage of Business
The fund includes acquiring golf courses and converting it to wetland, RV Park and glamping. The fund is opportunistic.
Sustainable both environmentally and financially
We plan to employ green bonds bonds designated to raise money for climate and environmental projects, which we are.
Our exit strategy is green! By monetizing our efforts with the sale of carbon credits, we have created the most sustainable investment life cycle in the world for every investor in our fund
Sustainable development life cycle
1. Sustainable Land Use we demonstrate sustainable land use by conservation and/or preservation of ecologically significant land
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2 Biodiversity Conservation we demonstrate attributes regarded as preserving habitat biodiversity.
3 Sustainable Construction Materials we use sustainable materials like soil cement bricks created from the excavated land on-site, bamboo shoots, reclaimed corks and steel, and mycelium
4 Energy-efficient net-zero development for electricity and water consumption
5. Clean water and sanitation we mindfully use on-site resources and have our own rainwater harvesting and water purification plant that provides a clean on-site water cycle for our community
6 Clean transportation we have incorporated green infrastructure to support EVs We only permit EVs on-site
7 Climate change resiliency our design makes our asset resilient to the forces of nature by absorbing green gas and reducing temperature.
8 Renewable energy we have on-site renewable energy generation powering our community.
Business Model SWOT Analysis:
Strengths
● Reputable designers
● First mover advantage
● Close to natural park/ natural resources
● Low energy consumption
● Low development cost
Opportunities
Weaknesses
● Unstable cash flow (hospitality)
● High cost of acquiring distressed golf courses
● Seasonality
● Talents acquisition due to location
Threats
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● Strong market demand for close-to-nature hospitality
● Carbon market
● Increasing eco - consciousness consumers
● Low barrier to entry
● Government permitting
● Traditional hotels moving toward eco-hospitality
● Vulnerable to climate risk
Collaborations:
Our fund will collaborate with Biohabitats and Land Life Company to restore the natural habitat at our site and nearby sites if needed. We will partner with Bensley and Terrapin to design our properties, including the landscape, clubhouse, and glampsite Landgate is our data solution to support development and reforestation We signed a pledge to join the UN environment program. Regenerative Travel and Eco Resort are our eco-room reservation networks
Asset Identification:
Asset Criteria:
Tier 1 (12 golf courses):
● Next to a national park or natural resources
● 10 miles driving range from a natural attraction
● RV parking permit issued nearby
Tier 2 (113 golf courses):
● 2 hrs a drive from the town
● 1.5 hrs drive from the airport
● 2 hrs drive from ski/snowboarding mountain (Northeastern Region)
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Tier 3 (8,142 golf courses):
● Distressed golf course
● Potential for forestation (ecosystem with carbon sequestration impact)
We filtered locations into three tiers as criteria for asset identification The criteria for the lowest tier are distressed golf courses for sale across the US with the potential for forestation The soil and climate in this tier are where tree seedlings can grow and absorb carbon dioxide from the atmosphere For our second tier, we filtered locations with potential for hospitality development. These would be golf courses that are a 2-hour drive from the nearby town and a 1 5-hour drive from the airport The golf courses in the Northwestern, Central, and Northeastern regions must be positioned within a 2-hour drive from the winter sports slopes to minimize the risk of a high vacancy rate during the winter season The golf courses must be located next to a national park or natural resources within a 10-mile driving range from a natural attraction for the highest tier RV parking permits issued nearby will be preferred.
Other potential golf courses:
Target Investors
The target investors are family offices and companies with ESG goals given the fund size (152M USD) and long period (10 years) of wetland restoration
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For a family office, the fund is a solid investment, including both physical hospitality and wetland/reforestation, as the opportunities are rare on the market.
For companies with ESG goals, Regenerative Real Estate Fund I is reducing the golf course carbon and providing carbon emissions which helps them to fulfill ESG goals better
4. Financial Information
Term Sheet
Fund Type
General Partner
Fund Manager
Regenerative Real Estate Fund is an opportunistic fund that targets golf course conversion to RV park and glamping. .
Regenerative Management LLC
Regenerative Management LLC
Fund Size $160M
General Partner’s Commitment
The General Partner and its Affiliates shall make and maintain an aggregate Commitment by subscribing for an Interest equal to at least 20% pari passu of the aggregate Commitments of the Limited Partners, which equals to $32M
Minimum SIze $10M
Term
10 years from the Initial Closing Date, subject to two one-year extensions by the General Partner and with the prior consent of the Advisory Committee to the first extension and with the prior consent of a Majority in Interest to the second extension
ESG
Preferred Return
The Fund will invest in accordance with the General Partner’s environmental, social and governance policy.
Such amount as is equal to an annual rate of return of 8% compounded annually and calculated daily on the Capital Contribution made a Limited Partner, calculated from the date of receipt of such Capital Contribution by the Fund and accrual of the Preferred Return until the date of distribution or deemed distribution to such Limited Partner.
Distributions/ Waterfall Fund as a whole waterfall.
Distributable Proceeds from any Portfolio Investment shall be initially apportioned among the Partners in proportion to their participation in that Portfolio Investment. Amounts apportioned to
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Management Fee
Affiliated Partners will be distributed to that Affiliated Partner
The amounts apportioned to all other Partners shall be distributed as follows:
(1) first, 100% to such Partner until such Partner has received cumulative distributions equal to such Partner’s aggregate Capital Contributions;
(2) second, 100% to such Partner until the cumulative amount distributed to such Partner hereunder is equal to the Preferred Return for such Partner;
(3) third, thereafter, 20% promote to the General Partner. .
The Management Fee is payable from the date the Fund acquires its first permanent Portfolio Investment to the earlier of the last day of the initial term of the Fund and the appointment of a liquidator other than the General Partner.
Until the termination of the Commitment Period or, if earlier, when a management fee begins to accrue in respect of a Successor Fund, the Management Fee will be 1.5% per annum of the Commitment of each Limited Partner
Thereafter (and during any period of suspension of investments) the Management Fee will be 1.5% per annum of the Capital Contributions made by such Limited Partner to fund the acquisition cost of Portfolio Investments (other than Temporary Investments), less an amount equal to the Acquisition Cost of Portfolio Investments (other than Temporary Investments) that have been realized (in whole or in part), written off, or permanently written down as of the end of the most recent financial quarter
Management Fee is payable in quarterly installments in advance
Phasing Plan
- 3 months for fund rising (May - August)
- Acquire 5 golf courses in September
- Apply permits, design Property Year 1 (2023)
- Restore nature habitat
- Build all infrastructure including water, electricity, sewage
- Build amenities including spa and common area
Time Project
Project Time
Year 0 (2022)
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- Build RV sites and Glamping
- Staff Training
Year 2 (2024) - Open in May/June 2024
Year 3-9 (2025 - 2031) - Management and stabilization of the asset
Year 10 (2032) - Exit
Cost
Assumption table:
● Wetland: $30,000 per acre
● RV Site: $8,000 per site (market average is $5000)
● Glamping: $200,000 per site (15% premium on high quality glamping, FF&E $25,000)
● Infrastructure & Landscape: $7-10M
● Permitting & Consultant: $500,000
● Soft Cost: around 20% (include development fee)
● Contingency: 5%
The main cost is for the first two years. Year 0 island acquisition including 5 identified assets mentioned above which is $14M for total land cost
Total construction cost is $32M in 2022, which is mainly for permitting, and $132m for 2023, including main infrastructure, landscape, and amenities which is about $10m per campus and $50m in total. The RV site cost is $8,000 per spot and provides 60 sites per campus Glamping cost $200,000 which is $175,000 in construction and $25,000 in FF&E
Revenue
Assumption Table:
● ADR RV Site: $100/night
● ADR Glamping Site: $400-$500/night
● Vacancy Rate: 40%
● Operation, Marketing, Management: 40%
For each campus, it is about 3M USD NOI annually
Other Income
Spa, restaurant revenue: Average spending is about 40% of the room rate For example, if the room is $400, the customer spends $160 on other services like a spa.
Carbon credit revenue: as mentioned before 27
Exit Strategy
In year 8, we will start considering an exit strategy aiming to exit in Year 10.
Option 1:
● Sell the asset to a passive investor and keep the management and operation part as the glamping branding, marketing and management are important
● Asset part estimated cap rate is 6%.
Option 2:
● Get Green Loan refinancing, the green bond interest rate is usually less than a traditional bank loan and easier to get for such a project
Option 3:
● Sell each glamping site individually at a 7% cap rate
Investment
The estimated fund is $160M, including $151M invested in development costs and $9M miscellaneous GP will contribute 20% of the total amount, which is $32M LP contributes the rest, which is $128M
The main investment commitment will be made in the first two years The first year from LP is $25M and GP is $6M These will be invested in land acquisition and permitting applications. The second-year amounts are $100M from LP and $24M from GP, which will be spent on-site construction according to the phasing and cost plan (as the Waterfall Model in Appendix).
Dividend Policy
Investors expect to have dividends from Year 2, which is $6M for LP and $1 5M The ROC is about 10% which means investors will get their investment back in 10 years
There is also a big upside from the sale of the site and carbon credit from reforestation
Capital Sell
As mentioned in the exit strategy, the fund is exiting at Year 10. At this time, the optimal approach is to sell the physical part to a passive investor The exit cap rate is about 8% which makes the sell price of the whole portfolio $327M with cap rate at 6%, and different scenarios are considered at sensitivity analysis. Regenerative Real Estate Group will keep the management and branding after selling the land to a passive investor
Sensitivity Analysis
The return highly depends on the glamping price and exit cap rate The sensitivity analysis is as below:
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Promote
As mentioned in the Term Sheet, the preferred return is 8%, and promote is 20% after that With the 10% ROC, investors expect to get full return back within 10 years. (Details see Waterfall Model in Appendix)
Risks and Mitigation
Zoning
RV park/glamping zoning is usually different from golf courses and subject to different state regulations The contract can be signed to mitigate this risk as contingent on zoning approval.
Management
As our site is far away from the city, acquiring talents can be challenging. However, sustainability and well-being as a selling point would attract like-minded people to work and improve service quality
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References
Deford, F (2008, June 11) Water-thirsty golf courses need to go green NPR Retrieved April 27, 2022, from https://wwwnprorg/2008/06/11/91363837/water-thirsty-golf-courses-need-to -go-green#:~:text=Audubon%20International%20estimates%20that%20the,a%20million%20gallons%20a%20day Glamping Market Size & Growth Report, 2022-2030 (2022, March) Retrieved April 30, 2022, from https://wwwgrandviewresearch com/industry-analysis/glamping-market
Golf Industry Facts National Golf Foundation - Golf Industry Facts (n d ) Retrieved April 27, 2022, from https://wwwngf org/golf-industry-research/ IBISWorld (2021, August) Industry market research, reports, and Statistics Campgrounds & RV Parks Industry in the US - Market Research Report Retrieved May 1, 2022, from https://wwwibisworld com/united-states/market-research-reports/campgrounds-rv-parks-industry/
Jacobs, S (2018, May 8) These eerie photos of deserted golf courses reveal a new normal in America These Eerie Photos of Deserted Golf Courses Reveal a New Normal in America Retrieved May 1, 2022, from https://wwwbusinessinsidercom/inside -two-abandoned- golf-courses-2017-6
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Virtuoso (2018, October 30) 2019 is the Year of Ultra-Personalized Travel according to Virtuoso Report New York
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Carbon pricing: What is a carbon credit worth? CARBON PRICING: What is a carbon credit worth? | The Gold Standard (n d ) Retrieved May 2, 2022, from https://wwwgoldstandard org/blog-item/carbon-pricing-what-carbon-credit-worth
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Appendix
Texas Case Study Cost & Return
31
Fund Acquisiton Financial Model Cost & Return
Fund Waterfall
32
33
Lertpunyaroi, Juan Huicochea Mason, Mihir Menda, Mia Zhao, Chen Zhao
