Diamond Estates – Luxury Wisconsin Apartments

Industry

Financial Services / Construction / Clean Energy

Company Type

Real Estate – Residential – MultiFamily / Building Materials / Energy Efficiency

Location

U.S.

Size

$19 Million

Investment Type

Equity / Debt
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Contact: Tina Vital, Managing Director

Email: tvital@castleplacement.com

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Overview 1,2

Blue Paint Development LLC (“BluePaint”) is an environmentally-friendly (green) real estate development company. Seeking +/- $19 million of capital for the development of Diamond Estates – lakefront luxury multi-family real estate project in Somers, Wisconsin.

  • Insulated Wall Holdings, LLC (aka “Wally Walls”) is a manufacturer of proprietary light gauge insulated walls, with expertise in green building construction
  • BluePaint (along with Wally Walls) develops U.S. residential real estate projects using green building engineering and materials to reduce development time and costs, supporting energy efficiency and sustainability
  • Huge U.S. construction market – expected to top $1.2 trillion by 2025 with modular construction gaining in popularity
  • David Wallach, CEO of BluePaint/Wally Walls is the Managing Owner of Diamond Estates
    • expertise in green real estate development/construction and real estate law/finance
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Diamond Estates – Somers, Wisconsin 3

  • Seeking +/- $19 million, including $13.5 million (65% loan-to-cost) construction loan, and $5.5 million of equity ($2 million equity committed)
  • C-PACE credit facility for $3.0 million – to finance energy efficient technologies such as structural insulated panels, LED lighting and other environmentally friendly materials
  • 68-unit apartment complex located along Lake Michigan’s shores in Somers, Wisconsin ($30.8 million complete and stablized appraised value) 
    • only luxury apartment complex on Lake Michigan with spectacular views and beachfront access
  • Land site ($2.67 million appraised value) – approximately 5.4 acres with 460 feet of lake frontage – acquired in 2019; zoning changed to R-11 (highest density)
  • Shovel ready – development agreement in-place with the Village; construction is slated to start within the next 45 days
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C-PACE Financing

C-PACE financing for property owners.

  • Consumers have rapidly embraced buying online compared to visiting traditional brick-and-mortar stores
  • Financing tool for property upgrades – energy efficiency, addition of renewable energy and water conservation
  • Allows property owners to attain low-cost, fixed rate financing from private capital providers
  • Based on 3-year stabilized value – not simply a Loan-to-Cost and 30-year amortization
  • Wally Walls utilizes C-PACE funding to clients – opportunity to finance 100% of its insulated walls with no recourse (outside of project’s construction loan of 25+ years and not tied to project’s tax roll)
  • BluePaint takes advantage of C-PACE funding – eliminates mezzanine det and reduces (sometimes entirely) the equity requirement
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Opportunity 1,2 

U.S. construction industry is huge – non-residential construction is expected to reach $590 billion by 2023, and residential construction is projected to be around $600 billion by 2025.

  • Global warming has serious consequences for our environment – severe weather changes are increasing
    • historical construction materials often cannot hold up to increasing severe weather conditions (fire, wind, water)
    • construction deadlines and budgets are challenged due to increased U.S. regulations related to fire and energy codes coupled with labor costs and shortage of skilled labor
  • In response – green building solutions (such as modular construction) are increasingly popular reflecting cost-effectiveness, eco-friendliness, reduced construction waste, and custom-made fits
    • completions are 30-50% faster than traditional construction
    • rapid urbanization which boosts infrastructure activities
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Huge Modular Building Construction Market 1,2

Global modular building construction market projected to climb to $114.8 billion in 2028, from $75.9 billion in 2021, at a CAGR of 6.1%.

  • Increased infrastructure spending
  • New government initiatives to reduce construction waste and promote green buildings
  • U.S. modular construction market is projected to steadily expand at a CAGR of 4% between 2021 and 2026, driven by increased productivity, lower costs, and overall growth in the construction sector
    • faced with rising costs, cities are investing in modular and prefab construction to reduce costs and deliver multifamily residential developments
    • concerns over carbon emissions is boosting green building using prefab modular construction
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PROBLEM – Construction is Inefficient and Outdated

Real estate construction industry is fraught with inefficiencies and outdated methodologies that lead to waste and increased costs.

  • U.S. residential housing construction has remained mostly unchanged over the past 70 years – same methods, materials, heating/cooling systems despite technical advances
  • U.S. housing crisis – residential home prices have climbed above middle American budgets – U.S. land and labor costs have risen, in conjunction with outdated zoning ordinances
  • Construction methods and materials are NOT environmentally-friendly and NOT energy efficient
    • wood – over 4 billion trees per year are harvested worldwide for construction – equivalent to each 2,000 square feet of residence consuming over 1 acre of virgin timberland
    • metal and composite – NOT recyclable
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Solution/Strategy

BluePaint aims to be the market leader for affordable green housing solutions across the U.S. through its use of Wally Walls’ Insulated Wall Panels and C-PACE financing.

  • Wally Walls manufactures light gauge structural steel walls that are injected with closed cell graphite infused gaps to produce one of the most energy efficient modular walls on the market today
  • Co-development model – BluePaint partners with land-owners to develop energy-efficient residential properties
  • Acquire distressed commercial assets for adaption to mixed-use residential projects – featuring green building solutions and pre-engineered Insulated Walls Panels
  • Proprietary intellectual property – Wally Walls’ proprietary XYIP Wall Building System; and exclusive U.S. license to UltraFrame Building SystemR (from Transcon Steel of Texas)
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BluePaint – Strategic Partners

  • Altounian Construction – general contractor
  • Excel – engineering
  • Foundation Building Materials – distributor of light gauge metal
  • John James Construction, Inc – general contractor reuses product
  • Hardypond Construction – general contractor reuses product
  • Intertek – materials testing
  • Maris Construction- general contractor reuses product
  • MarinoWare – manufacturer of open web stud
  • Randolph- general contractor reuses product
  • R-stud – manufacturer of open web stud
  • Wallace – engineering
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Management

David Wallach

Founder and Chief Executive Officer

Over 20 years in real estate and law. Developed more than $200 million of urban infill projects in Chicago and Arizona including energy efficient homes and mid-rise/high-rise mixed use (residential and retail) properties. Principal in general contracting, subcontracting, and manufacturing companies. Since acquiring modular manufacturing in 2015, participated in the development of over $150 million of residential development. Previously served as attorney for a diverse group of clients across all aspects of real estate, as well as representing developers and contractors as general counsel in business and litigation; argued before the Illinois Appellate Count. Co-Chair of Governmental Affairs Committee for the Chicago Chapter of The Illinois Homebuilder’s Association. Actively participated in re-write of the City of Chicago Zoning Ordinance. Frequent speaker at real estate forums throughout Chicago and Arizona. Chaired seminars for Illinois Continuing Legal Education credits. J.D. from Kent College of Law (Chicago, IL). B.A. Political Science and Criminal Justice from Indiana University (Bloomington).

Kelly Chamberlin

National Director of Sales and Marketing

Over 20 years of construction sales and marketing experience. Joined Insulated Wall Holdings in 2017. Past Partner at Mountain Vertical Contractors & Excavation, and McKenzie Taylor Fire, Smoke & Water Restoration. Previously held senior marketing and sales positions at Alcal Specialty Contracting, Mobile Mini, ClearTec Global, and PFI Heineck. Professional golfer from 2000-2005. B.S. Business Management from Liberty University.

Mike O’Mara

Vice President of Production

Over 30 years of commercial, retail, and residential property development. Expertise in actively framing light gauge structures in New York and Chicago with over $500 million of construction activity. Joined Insulated Wall Holdings in 2016. Previously served as Construction Superintendent at Ragnar Benson. Former U.S. Army Combat Engineer (Fort Leonard Wood, MO). Graduate of the Chicago Carpenters Training Center – Commercial, Retail, and Residential.

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FOOTNOTES:

Overview

(1) Fortune Business Insights – Modular Construction Market Size Share Covid-19 impact Analysis Forecast 2021-2028 – April 2021
(2) ReportLinker – United States Prefabricated Buildings Industry Study – Growth Trends COVID-19 Impacts and Forecasts 2021-2026 – 210419

Diamond Estates – Somers, Wisconsin

(3) BBG Real Estate Services – Appraisal Report – Diamond Estates of Somers – 220302

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Thanks, Ken

Ken Margolis | Managing Partner Castle Placement, LLC
1460 Broadway Street, Rte 400
New York, New York 10036
(212) 418-1188 | C: (516) 712-7784
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