Gelt 2018 Year End Review - Celebrating 10 Years Of Success

Los Angeles, California

Dear Friends:

This past year, 2018, was a year for the record books. We celebrated our first decade of existence, and are excited for what the next decade will bring. Since our humble inception in 2008, with the acquisition of a single four-unit building in Bakersfield, California, we have acquired approximately $1.33 billion of real estate. This portfolio spans across ten states in the US and consists of over 9,500 apartment units, mobile home and RV park sites, self-storage units, and apartment units under development.

From inception to date, we have exited 12 apartment communities totaling 2,462 units valued at $191,780,000, that have produced an average annual yield to investors of 27.34%.

Multifamily: Acquisitions and Dispositions:

We acquired four apartment communities, totaling 1,079 units, valued at $116,000,000 in Seattle, WA and San Antonio, TX.

We disposed of a 247 unit apartment community valued at $40,000,000 in Salt Lake City, resulting in an average annual yield of 33% to our investors. A 2.41X equity multiple was achieved during this four year hold period cumulative of all cash flow and sale proceeds.

Mobile Home & RV Parks Acquisitions:

We acquired a mobile home park consisting of 113 pads valued at $6.8 million via our Happy Home Communities in Reno, Nevada.

We acquired an RV park consisting of 87 pads (this includes the additional 22 pads we are entitling and building out on the expansion land) in Monterey, CA valued at $18 million.

Multifamily Development Acquisition:

We acquired three contiguous land parcels off market in Los Angeles (East Hollywood) valued at $7.3 million, and are in the early stages of entitlements for a 92 unit residential project.

Self-Storage Acquisition:

We acquired a 667 unit self-storage facility in South Pasadena, CA. We are going through an extensive rebrand and rehab of the facility bringing rents in the process to market. At acquisition, the average rents at the facility were approximately $1.50 a foot while market is +/- $2.40 a foot. Our business plan is to refinance or sell this asset once we bring the property to market with more efficient operations.

Financing Events:

In early 2018 we added a $8.55 million supplemental financing to our Monterra Ridge project in Santa Clarita. This represented a 46% return of equity to investors in only a year and a half of ownership. The funds were distributed to investors with a portion held back in reserves for additional capX to further enhance the property and increase NOI and property value.

A $13.8 million supplemental financing was achieved on our Tamarac project in Denver. This represents a 60% return of equity to investors in only two years of ownership. Funds were distributed to investors with a portion held back in reserves to further invest in the property and increase NOI and property value.

A $14.25 million refinance was conducted on Moxie + Clover in Highland Park. This amount equaled our purchase price of the asset in only one and a half years of ownership. This loan was a 10 year fixed rate loan with 5 years of interest only at a rock bottom rate of 3.6%.

Over $75 Million Raised From Our Loyal Investor Base:

Collectively, all Gelt companies have raised over $75 million in investor equity in 2018, enlarging our investor base to almost 600 individual investors with whom we are proud and honored to have personal relationships. We appreciate your trust and investment with us, along with your valued investor referrals.

Outlook for 2019:

We remain extremely bullish on the manufactured housing, multifamily, and self storage spaces, due to the industries' strong fundamentals. We are cautiously monitoring new apartment deliveries and projects in the pipeline, as well as tracking absorption of new units coming online in our target markets. Although we have seen a recent surge of new deliveries we remain cautiously optimistic and have underwritten moderate rent growth and rising potential vacancy rates in all of our underwriting. We want to stay true to the adage of "under promising" and "over delivering" to our investors.

Our goal is to continue to provide clean, affordable housing by repositioning older apartment stock. We accomplish this by fixing deferred maintenance items, renovating, and breathing new life into interiors and exteriors of the property, and adding desirable community enriching amenities. We utilize new technologies to run the communities more efficiently, and identify where costs can be reduced and revenue increased.

New Development:

We broke ground on Watermark, our 250 units apartment project in Reseda, CA. Since our acquisition of this site in June of 2016, the value of the land has soared. Additionally, rents have climbed significantly, and we believe once the units are delivered, we will achieve significantly higher rents than originally projected. The subterranean parking structure and deck are completed and we are in the process of framing the project. It is coming out of the ground fast!

We are close to completing our entitlements for our 170 unit Tarzana development on Reseda and Clark, and expect to break ground by the end of 2019.

Venture Capital:

We are beginning to see our seed investments flourish. We have multiple portfolio companies that have raised additional rounds of Venture Capital from top tier VCs at significantly higher valuations. Unrealized returns of the portfolio are already approximately 2X - 3X. We continue to believe in the benefits of this alternative asset class to our investors overall well-rounded portfolios. We have invested approximately 15% of the fund into one of our top performing companies, Lambda School. We began investing at a $15 million valuation in the seed round. The company is now valued at $150 million due to its most recent $30 million round of financing from top Venture Capital firms, with no signs of slowing down. We are proud to support our tenacious and visionary entrepreneurs who are changing the world and reaping strong returns for us at the same time.

Financial Technology:

Domuso, our financial technology company led by Damian Langere and Michael Lightfoot continues to bring new innovation to the multifamily rental business displacing legacy payment providers on multiple properties. Domuso has unearthed a whole new financial industry revolving around the payment of rent, which is a $550 billion a year industry in the US. Empowering the renter while bringing them new financial solutions, ease of use, and flexibility has been a win/win for residents and their respective property management companies. We are in the midst of our Series A Capital Raise to capitalize this company for the torrential opportunity for growth we are seeing. The Founding Partners of Domuso are personally investing $1 million into this capital raise.

Philanthropic Endeavours:

Resident Relief Foundation (RRF) is the newest entrepreneurial endeavor led by our Executive Director, Tina Oswald. In the ethos of giving back to the industry that has done such amazing things for the growth of our company, we established a 501(c)(3) non-profit organization called Resident Relief Foundation, whose mission is to keep responsible individuals and families at risk of eviction due to the non-payment of rent. The partners of Gelt remain committed to funding 100% of the overhead of this nonprofit so that all funds raised are delivered directly to those in need.

We believe our innovative solution of providing rental assistance in the form of grants deployed through the property management companies will allow responsible renters that have temporarily fallen on hard times or have a short pay gap remain in their homes. Recent studies report that over 70% of Americans have less than $1,000 in savings and 78% live paycheck-to-paycheck. Most renters can make the monthly rental payment but if there is any unexpected expense such as a medical bill, an auto accident, etc. they can be at risk of missing their rent payment and subsequently evicted or being forced to move.

During our first year of operation, we delivered financial assistance to 50 individuals and families and kept them in their homes.

We are working diligently with property managers and owners across the country to ensure that we cast a wide net in regards to providing assistance to those in need.

Skya Ventures Focuses on Southern California Ground-Up Apartment Construction and Deep Renovations:

Skya Ventures, led by Gelena Skya-Wasserman continues to aquire heavy value add apartment communities throughout Southern California that are near transit and are walkable. Skya Ventures is completing ground up construction on a 9 unit townhouse style apartment community in Los Feliz, and a 21 unit apartment community in Highland Park. Additionally, renovations are nearing completion at the 93 unit apartment community in Pasadena and pre-leasing will begin this month. Entitlements have started on the three land parcels that were acquired in Quarter 3 of 2018 for a 92 unit ground up apartment community located in an Opportunity Zone.

Skya and Happy Homes have a joint venture on an 87 site RV park in Monterey, CA. We have added glamping tents, tiny homes, and permanent RVs which have dramatically increased our NOI. We received a beer/wine license and have refreshed the store onsite. We are going through the entitlement process to begin construction on the extra pads on the adjacent land next door which will add the most significant value to our property.

It Takes A Village:

Through all of our entrepreneurial endeavors I want to thank all of the individuals that work at Gelt, Domuso, Gelt Venture Capital, Happy Home Communities, The Resident Relief Foundation 501(c)(3), and Skya Ventures, along with our respective investors and stakeholders in each of these ventures. We realized early on that the success of our businesses revolve around having meaningful relationships and working for a common cause, which I firmly believe we are achieving.


Keith Wasserman Chairman of the Gelt Family of Companies

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