North Star Group, Inc.

19901 Quail Circle

Fairhope AL 36532

701-770-9118

michaelh@nsgia.com

Serenity Village - Funding Flow & Equity

Structure

Executive Summary

Serenity Village is a HUD 221-d-4 ﬁnanced aﬀordable housing development with a multi-party

equity structure. The Public Housing Authority (PHA) will hold a 45% equity stake and provide

necessary capital for pre-development and bridge ﬁnancing. The project has a planned 5-year

hold period before reﬁnance or sale.

Key Capital Structure Elements

● HUD 221-d-4 Loan: Covers hard costs, interest, and most soft costs (developer fees

ineligible)

● PHA Capital Provision:

○ Pre-development funding for site pursuit and preliminary studies

○ Bridge ﬁnancing for studies, appraisals, legal costs, and initial developer fee

○ Financing structure to be determined by PHA (may utilize direct cash,

property-secured ﬁnancing, or other assets)

● Developer Fee Structure:

○ Total nominal fee: $1.7MM (8% of TDC)

○ Initial draw: $300k at HUD closing

○ Deferred portion: $1.4MM (remains as equity)

○ Fee allocation: NSG (64%), PHA (30%), Consulting Partners (6%)

Serenity Village Housing Model

______________________________________________

1

Equity Structure

Partner

Equity %

Cash/Value Contribution

Core Responsibilities

PHA

45%

Land ($2.7MM) + capital

contribution + 30% of

developer fee

Vouchers, stewardship, property

management, ﬁnancing

Tom (Panels)

35%

$350,000 initial equipment

investment

Cost discipline, build-team

introductions

NSG

(Developer)

14%

64% of developer fee ($1.7MM

nominal)

HUD process, design, ﬁnance,

overall delivery

Consulting

Partners

6% (3 ×

2%)

6% of developer fee

Finance, legal, construction

admin

Project Timeline

1. Seed & Pursuit (0-6 months)

○ PHA provides capital for preliminary studies

2. Pre-Development (6-12 months)

○ PHA funds pre-development costs and initial developer fee ($300k)

○ Financing structure to be determined by PHA

3. HUD Initial Closing (~12-14 months)

○ HUD 221-d-4 mortgage closes

○ Developer fee initial draw paid to NSG

4. Construction (14-38 months)

○ 24-month build plus ~2 months for cost certiﬁcation

5. Cost Certiﬁcation (Post-construction)

○ HUD releases 100% retainage on hard costs

○ Developer fees remain as equity

________________________________________________

19901 Quail Circle

Fairhope AL 36532

701-770-9118

michaelh@nsgia.com

Serenity Village Housing Model

______________________________________________

2

6. Operations (Years 1-4)

○ Cash ﬂow: PHA management fee (7% EGI) → operating reserves → distributions per

equity split

7. Exit (Year 5)

○ HUD loan retired

○ Net proceeds split according to equity percentages

○ Partners realize deferred developer fee through their equity shares

Year 5 Exit Summary

Partner

Equity

%

Rents

Collected

Rent + Exit

Land

Exit Dev

Fee

Ent Dev

Fee

Total Exit

PHA

45%

$530,397

$2,195,209

$2,700,000

$420,000

$100,000

$5,415,209

Tom

35%

$412,531

$1,707,385

$0

$1,707,385

NSG

14%

$165,013

$682,954

$0

$686,000

$0

$1,368,954

NSG

TEAM (3 ×

2%)

6%

$70,719

$292,695

$0

$294,000

$63,000

$649,695

________________________________________________

19901 Quail Circle

Fairhope AL 36532

701-770-9118

michaelh@nsgia.com

Serenity Village Housing Model

______________________________________________

3

Annual Cash Flows

Year

NOI

Cash Flow after

DSCR

PHA

(45%)

Tom (35%)

NSG

(14%)

NSG TEAM (3 × 2%)

1

$1,296,332

$177,425

$79,841

$62,099

$24,840

$10,647 (3 × $3,549)

2

$1,324,851

$205,944

$92,675

$72,080

$28,832

$12,357 (3 × $4,119)

3

$1,353,998

$235,091

$105,791

$82,282

$32,913

$14,106 (3 × $4,702)

4

$1,383,786

$264,879

$119,196

$92,708

$37,083

$15,894 (3 ×

$5,298)

5

$1,414,229

$296,322

$133,345

$103,713

$41,485

$17,779 (3 × $5,926)

________________________________________________

19901 Quail Circle

Fairhope AL 36532

701-770-9118

michaelh@nsgia.com

Serenity Village Housing Model

______________________________________________

4

IRR Analysis

Partner

Equity %

Initial Investment

Total 5-Year Return

IRR

PHA

45%

$2,700,000 + capital contribution

$5,415,209

16.5%

Tom

35%

$350,000

$1,707,385

37.3%

NSG

14%

64% of $1.7MM dev fee

$1,368,954

12.8%

NSG TEAM (2%

each)

2%

2% of dev fee

$216,565

21.5%

________________________________________________

19901 Quail Circle

Fairhope AL 36532

701-770-9118

michaelh@nsgia.com

Serenity Village Housing Model

______________________________________________

5

Beneﬁts of This Structure

1. Strong PHA Position:

○ 45% equity stake provides signiﬁcant control and upside potential

○ Projected 16.5% IRR on investment

○ Ongoing management fee revenue (7% of EGI)

2. Eﬃcient Capital Stack:

○ Direct PHA capital provision streamlines decision-making

○ Simpliﬁed ﬁnancing structure reduces complexity

3. Strategic Partner Alignment:

○ Tom's 35% stake ensures committed manufacturing partnership

○ NSG's 14% position maintains developer engagement

○ Consulting Partners retain meaningful participation

4. Long-term Value Creation:

○ PHA's signiﬁcant position reinforces commitment to long-term asset stewardship

○ All partners incentivized through meaningful equity participation

Project Notes

● 120-unit aﬀordable housing development in Mobile, AL (St. Stephens Rd & St. Charles

Ave)

● 100% Project-Based Section 8 vouchers (including FYI & VA vouchers)

● 40-year PILOT (Payment in Lieu of Taxes) assumed

● Potential 45L Tax Credits available

● Minimum 15-year Section 8 contract required

● HUD 221-d-4 mortgage: $16.3MM, 6.00% interest + 0.25% MIP, 40-year term

Note: Final ﬁnancing terms and speciﬁc capital contribution methods from PHA will need to be

determined. The PHA may utilize direct cash, property-secured ﬁnancing, or leverage other

assets in their portfolio to fund the necessary capital.

________________________________________________

19901 Quail Circle

Fairhope AL 36532

701-770-9118

michaelh@nsgia.com