Foss Fields Phase 1

Both Caleb (lead of construction), and Dusten (developer) have been successfully operating in the local market for over a decade and have deep business, family and community ties in Sioux Falls.

We have two premium developments in Sioux Falls (Blu on Lorraine and The Velthuis) that have an amenity-rich design. Blu opened at the end of August 2023, and Velthuis started leasing in December 2023 — despite building during Covid, international supply chain breakdowns, and the fastest rising interest rate environment in US history.

In terms of the No Frills “Reserve style” projects, we have successfully executed this strategy on four other South Dakota developments: the Reserve Flats in Brookings, Washington Crossing in Sioux Falls, Briarwood Reserve in Sioux Falls, and Jefferson Reserve in Sioux Falls. In addition we also have two other Reserve projects in the early construction stage — Maple Rock Reserve and Aspen Ridge Reserve.

This approach builds faster, gets rents faster, and feeds the starving local demand for quality-yet-No-Frills Class A shelter.

Rising rates have made it harder to qualify for a home loan. This comes on top of the existing housing shortage in the local market. Further, the higher interest rates have forced less qualified developers out of the market.

Our (successful) policy is to develop if inventory is needed, regardless of the rising or falling of interest rates. When the rates drop back down we refinance, because the price to construction is always cheaper today than tomorrow (with few exceptions).

We have 2 distinct advantages:

1. Ability to secure debt at below-market terms due to our deep relationships with local banks.
2. In-house development and construction team that helps us drive efficiencies throughout the development process.

This helps us to cater to the ravenous demand while being financially prudent. The lack of competing products provides additional leverage post-construction as we will be able to move rents and push occupancy quicker than underwritten.

Foss Fields Phase 1 will be a series of 12-36 plexes for 100 units in this phase. This quality but no-frills wellness design reduces construction costs and allows significant operating efficiencies pre- and post-construction.

Each building will be built one after the other, leasing up as they are complete. This will allow us to have the phase cash flowing during construction. The taxes and interest are typically paid from this additional income, which leaves more in the reserve account and further reduces risk.

Upon the completion of each building, the cash flow stream will be seasoned earlier versus the typical development where the entire development has to be constructed before cash flow begins. The earlier seasoning of cash flow allows for a potential earlier refinance (not included in the underwriting for conservatism).

There is only one exit strategy in any real estate investment — sale.

The unique, no-frills approach can allow for a quicker refinance due to income seasoning earlier, but we are not hinging on it.

We are targeting a holding period of four years.

Favorable population growth and job growth along with supply-demand imbalances and an “under the syndication radar” baseline make the Sioux Falls metro an obvious target for the savvy real estate investor.

Beyond that, our developments here keep working, coming in on schedule, and leasing up fast. We have tons of penetration and experience in this market — all “unfair” advantages that investors need to lean on.