OZ Investing In Ohio And Kentucky, With Nest Opportunity Fund

In this webinar, Clint Edgington discusses Nest’s strategy focused on single family and multifamily housing in Ohio and Kentucky.

Webinar Highlights

• The rationale for Nest’s unique geographic focus on Ohio and Kentucky.
• How restrictions put in place in Lexington will limit the expansion opportunities.
• An update on Nest’s progress since the last OZ Pitch Day.
• Monthly rent trends in the Nest portfolio over the last several months.
• Live Q&A with webinar attendees.

Industry Spotlight: Nest Opportunity Fund

The Nest Opportunity Fund is an OZ investment program designed to not only do well for investors, but also do good for those in the communities targeted for fund investments. The fund invests in single-family homes and smaller multi-family homes because they present a lower risk to investors while maintaining the culture and character of the neighborhoods.

Learn More About Nest Opportunity Fund

Webinar Transcript

Jimmy: Our next presenter is Clint Edgington with Nest Opportunity Fund.

Clint: Good afternoon. This is Clint Edgington with Nest Opportunity Fund. Appreciate y’all spending a little bit of time with us today, and appreciate Jimmy putting this on. For those that are looking for kind of a conservative OZ offering, this would be good use of time. We built this fund in 2019 for ourselves, me and my family, and our partners, and operator in Lexington. And opened it up in 2020 to other folks. And it’s a little bit of a quirky fund. But we built it the way we like it, and we wanted to share that with other folks. And so far we have, and it’s worked out pretty well for us.

The Nest Fund focuses on heavy rehab in single-family and smaller multifamily in the Columbus, Ohio and Lexington, Kentucky areas. And we’ve assembled a pretty good team, and we’re excited to share it with you today. We’ve built what feels more like a partnership rather than a product. In our fund, we’ve got kind of best-in-class for the Midwest in the OZ space that’s helping us put things together. Kegler Brown does some co-counseling with Ashley Tilson. And our tax and audit group is some of the largest in the state that has that OZ competency. And I’m excited to share it with you today.

But really, comes down to our operators on the ground who are really kind of involved with putting it together, and the real kind of day-to-day management. And for us, we also have a social impact side of our fund. And for that, my job is to make sure that we protect the investors, and that we do financially what’s right for them. But then if our operators on the ground have a passion, then my job is kind of to get out of the way and make sure that it works out well for us.

Clint C.: We’re currently daily impacting our community. We are providing safe, secure housing for people to have the opportunity to live their best life. We are providing the opportunity for those in transition to utilize their current skillset or develop a new skillset so they can live their best life. We are providing on a daily basis, good houses for good people, built by good people, managed by good people, and funded by good people.

Clint: That’s Clint Capel. He’s our operator in Columbus. He has a passion for helping those who have graduated from addiction and recovery services to find kind of that first job. A lot of them kind of graduate from that with some sort of record, and it’s difficult for them to find that first job out. So, not only do they find a first job with us in Columbus, but they’ll build a skill. And skills in the trades right now are valuable skills. And it would be tough for them to really kind of find that career path in other areas. And so, you know, it was something I was skeptical of at first, but it’s been a wonderful thing. I mean, the folks who have built those skills up with Clint have a loyalty to him that you just don’t really see in the trades much. So we don’t have much turnover in Columbus, and it’s turned out to be a wonderful thing.

Jeff, down in Lexington, his real focus is kind of just community revitalization and building the houses, not back to their former glory, but building them back cooler and making, you know, more front porches that are not with vacant houses on the street than they had before. So, we won’t spend time with that, but for us, it’s important. Our asset class is on the conservative side. So, when you look at single-family, they don’t throw a bunch of yield off, but they do kind of give you relatively consistent gains over time. And my view is, is that it’s hard to sell for a loss in single-family if you can choose when you’re gonna sell. So, for us, with a kind of a long hold period, like we have with the 10-year OZ hold, we’ve got that ability. We’re pretty conservatively leveraged. We’re relatively conservatively run in all aspects. So, we certainly probably won’t be the highest performing OZ Fund out there over the next 10 years, but we won’t be the worst.

Also, where we’re at, if you’re not familiar with the Midwest, some people think everything is the Rust Belt. And really if you kind of draw a line from, you know, Chicago to Cleveland to Pittsburgh, everything above that has kind of that industrial base that has been having a hard time in the last 50 years or so. But below that, where we’re categorized…you know, we’re kind of characterized by the rural areas have some population decline. But areas with kind of a college, you know, like Ohio State University, University of Kentucky, generally have good demographics and a relatively young and stable workforce. And so we like the areas that we’re in. So, I can get to the assets of back in time for dinner.

Both Lexington and Columbus are kind two, the top four in the Midwest, as far as growth cities. And you can see Columbus has a lot of…you know, it’s kind of hit the top housing markets list in the last few years. We like Louisville as well. We just don’t have operations there. And we don’t have an operational footprint, but something we’d be open to adding to in the future. We can see, you know, Columbus and Lexington, as far as in the states of Ohio and Kentucky are some of the highest growing cities.

In addition, Lexington is one of the few cities in the Midwest that has a supply constraint. So, if you’ve ever driven from Louisville to Lexington, it’s a pretty drive, you’ll see the horse farms. And those are basically protected, essentially through an urban growth boundary and kind of easements that are put in place. And so the urban growth boundary has been set so that the city votes on it every five years. And in 2018, they voted to extend it for five years, and they also voted to not vote on it again in the 2023 time period. So, we know between now and 2028, there still will be that ring around Lexington proper, where development is very difficult and they just really can’t add more units. So, the urban infill area is a good place for us to be for the next decade or so. And we’re excited about it. I won’t take you too much through that.

We’re kind of in the core of Lexington, and there’s a lot of redevelopment that’s going on there. You know, that line that you see the purple line, the Town Branch Trail right now, it’s been developed some, but it’s kind of a culvert, essentially, through the middle of the downtown. And they’re opening it up, making some bicycle lanes, splash parks. That’s gonna really connect the downtown to the neighborhoods that we’re in, which is kind of the Novi neighborhood. And we’re seeing throughout kind of the line of houses, which we’re pretty much buying vacant houses that need complete rehab, that there’s expansion going on, kind of to the north of it and to the downtown side. So, it’s kind of, we’re in a good place as far as the connecting goes.

Working through, like, how have we’ve been doing, you know, real estate in urban infill rehab, heavy rehab is the ground game. So, we’re running pretty efficiently, you know, but we’re constantly kind of putting out different fires. So, we started the fund actually in January of 2020. And in total, we’ve put in about three-quarters of a million. And right now we’ve got 82 units in total. I’m sorry. As of last year, we had 82 units, now we’ve got 90. And we’ve had 16 properties appraised, and our rehab appreciation off appraisal is about 11% over our cost. And our cost has kind of been all over the place, like most folks. But the graph on the left shows since the last Pitch Day, which was November, how have we done as far as execution. And we had a pretty good run. So, you can see last November we had about 37 units that were online and rented or available for rent. And we now have about 57, 56 units that are online. And of those, the rental…