Business Plan

Mission Statement

SBQ Holdings’ mission is to provide quality affordable housing built by professionals across the United States. We seek to establish long-lasting relationships and to exceed expectations. We are committed to attracting, recruiting and retaining the most knowledgeable and passionate professionals in the industry, while delivering superior results and contributing to the communities in which we build.

Vision Statement

Our vision is to become one of the nation’s largest multifamily real estate companies, building and rehabbing multifamily projects nationwide with emphasis in the Southeast United States, from market-rate apartments to senior housing, student housing to HUD and tax credit projects. We wish to be known as a leader in the industry with deep experience, superior financial strength and relationship-driven commitment to customer service, as well as a leader in quality control, delivering our projects on time and within budget while maintaining the highest standards of quality and safety.

1.0 Executive Summary

Massive population growth, rapid urbanization and limited development of affordable housing options has left a major gap in the housing market. This has been exacerbated by the presence of the two largest generations in United States history –baby boomers and millennial –both in transitional phases in their lives. They are seeking modern, mid-range properties, yet these are increasingly difficult to find at reasonable rents, especially in red-hot markets like the Southeast’s major metros. For savvy investors and development companies, this presents an opportunity to offer quality properties at affordable prices while creating a large portfolio of income-generating properties and an enviable investor return.

MasterBeat Corporation(“the Company)and its subsidiary SBQ Holdings will meet a market demand for a variety of affordable housing for multiple sectors, focused on large metro areas in the Southeast U.S. initially. SBQ Holdings will leverage its founders’ experience in real estate rental management, investment management, property management and consulting to develop and manage a growing portfolio of multifamily properties.

This venture is launching operations in Florida with projects, from new builds to renovated acquisitions, in high-demand areas to include affordable housing as well as workforce, senior, student and military housing. Southeast Florida and Orlando in particular have pressing needs. Southeast Florida will add an estimated 68,700 residents in 2020, and Orlando will add over 48,000 residents, according to real estate analyst Marcus & Millichap, which notes that the multifamily market will slow in 2020 “not because of reduced demand, but because of supply limitations.” And as PricewaterhouseCooper notes in its Emerging Trendsin Real Estate 2019 report, “Residential, residential, residential. Single-family, multifamily, and single-family to be rented. It’s a safe bet that you will outstrip inflation by a couple of percent by doing that. You will get above-normal historical returns by doing residential, all three legs of the stool.”

Various investments will be created that range from build-and-hold and build-and-sell rental property to commercial investments, helping communities add affordable housing, working with city governments, senior-housing developers, universities and military agencies, etc. SBQ Holdings will also be seeking investment opportunities in other high-grown states, including Georgia, Tennessee, Texas, Virginia and the Carolinas, which all have strong in-migration, large senior populations and a substantial student and military presence. SBQ Holdings believes that timing in the market is prime for investing in this region’s housing, with opportunities that may not be around in a few years.

SBQ Holdings’ founder and CEO, Josh Tannariello, has nearly 20 years of experience in the construction industry, working with some of the largest multifamily developers in the country. Along with a skilled team, he plans to build the Company into an asset-rich conglomerate,expanding beyond real estate and into steadily performing asset classes that offer long-term capital appreciation and deliver instant revenues and profits to shareholders, all while being self-sustainable.

SBQ Holdings is currently seeking investors to develop and acquire the initial slate of units. An investment of $35 million is being sought for this purpose, as further detailed in this business plan

1.1 Objectives

Achieve initial investments
Acquire first property/build out first new property
Create individual packages/investment pools for new developments
Purchase and develop multiplemultifamily sites annually
Become a leading Southeast U.S. investment group
Expand into other markets and grow consistently, adding asset classes such as precious metals and others

1.2 Keys to Success

Principals with a wealth of senior-level management experience in real estate, investing, financing, and portfolio management
Development in areas with limited current competition
Leveragingthe experience and contacts of the owner and managers to perform due diligence across the potential portfolio
Offering a unique housing product and investment opportunities
Entering the market at time of huge population growth yet underfunding in high-demand housing sectors

1.3 Financial Overview

2.0 Company Summary

MasterBeat Corporation was founded in Delaware in 2007 as a unique acquisition company organized for the special purpose of effectively assessing and implementing mergers, partnerships, asset acquisitions, reorganizations, and strategic business opportunities whose operations align with our aggressive growth strategy in tangible asset acquisitions. SBQ Holdings, LLC was launched in June 2019 to focus on the acquisition and development of income-generating real estate assets, growing a large portfolio of self-sustaining profitable properties with great potential for appreciation.

2.1 Company Ownership

MasterBeat Corporation and SBQ Holdings, LLC are managed by Josh Tannariello.

2.2 Pre-Operating Source and Use of Funds

3.0 Market Needs and Value Proposition

There has been a construction boom in recent years. On a national level, total construction starts in the U.S. for 2019 were estimated at $808 billion, just ahead of $807 billion in 2018. According to Dodge Data & Analytics, there were more than 815,000 single-family housing starts and 465,000 multifamily housing starts. Yet many key markets face housing shortages, leading to lower housing affordability and, perhaps more importantly, creating investment opportunities for strategic and well-timed development.

In PricewaterhouseCoopers and the Urban Land Institute’s report, Emerging Trends in Real Estate for 2019, it states that, “Affordability is not just an issue for 24-hour cities or 18-hour cities, but also for markets thought to be some of the most affordable in the United States… As in the single-family segment, opportunities exist across development segments: garden apartments, mid-rise rentals in the core, housing as part of transit-oriented development. The upper-income market is well served at this point, so builders can profit by going where demand has not yet been adequately met.” Solutions include the delivery of more mid-range homes and developing in secondary markets. “Along with more affordable housing, an increasing number of secondary markets also offer some of the amenities of the primary markets at a much lower cost,” the PwC study states. As a housing expert observed: “Don’t be surprised to see millennials who had been living in urban areas, move to the suburbs when they decide to start a family.” At the same time, the population of seniors is at an all-time high.

As such, a consistent stock of nice, modern, affordable housing across single-family, multifamily and senior living is in demand, as people at all levels desire high-quality homes in great locations. The strong economy and population growth throughout the U.S. Southeast – as well as its large senior and student population – has created a unique opportunity to capitalize on market timing.

3.1 Products and Services

SBQ Holdings will meet the market’s demand by building and rehabbing multifamily projects nationwide, with emphasis on Florida, Georgia, South Carolina, North Carolina, Tennessee and Virginia. These have been among the fastest-growing states in the country the past several years, and SBQ Holdings will be providing renters with well-priced, excellent housing and investors with strong returns.

SBQ Holdings will purchase existing properties and build new construction, concentrating on location-based properties where the demand for workforce, student and affordable housing is at its greatest. As such, the real estate rental sector and real estate-related businesses primarily being targeted include, but are not limited to:

Workforce
Student
Military/VA
HUD/Affordable housing

Cost-efficient yet attractive materials and architectural features
Excellent weatherization
Energy-efficient appliances
Resource-saving fixtures

Through years of experience, SBQ Holdings’ owners have developed a sophisticated and streamlined process for finding good values, evaluating their investment potential, and structuring favorable timelines for construction, repositioning, and potential sales. SBQ Holdings has the experience and capabilities to make it an attractive partner to potential target businesses, which enhances its ability to complete a successful business combination and bring value to the business post-business combination.

Not only does SBQ Holdings’ management team bring a combination of operating, investing, financial and transactional experience, but its members have worked closely together in the past with multiple related companies, creating value for stockholders.

In addition, great design and quality craftsmanship will be hallmarks of SBQ Holdings’ properties, with highly functional, beautiful floor plans, and modern features not commonly found at the price point. All new apartment/multifamily homes will be built to the highest possible standards, including using:

Each project for SBQ Holdings will be studied on its own merit as either its own independent project or a sub-project. SBQ Holdings will have a collection of qualified builders, contractors, and architecture/engineering professional in various markets, with the ability to complete the project from concept down to the punch list, beginning with extensive due diligence.

SBQ Holdings’ initial projects will provide a growing source of annual revenue, with each project structured specifically to the project/investor/partner needs. The Company will eventually become a self-sustaining entity and expand into other regions in the U.S. and branch out into other asset classes, including, but not limited to precious metals, collectible classic automobiles and related businesses segments.

4.0 Market Analysis

The overall value of the real estate in the United States continues to grow, reaching $29.3 trillion in 2019, according to data from the Fed. The value of U.S. real estate grew by 4.2% in 2019 and reached its highest level since 2006. The Mortgage Bankers Association (MBA), in its January 2020 “Mortgage Finance Forecast,” reports that there were 5.33 million home sales and 1.29 million housing starts in 2019, with 5.7 million sales and 1.39 million housing starts projected by 2022. Yet, there has been an under supply of new housing stock in recent years. Real estate analysts Marcus and Millichap, in their 2019 Investment Forecast, report that, “The housing boom of the early 2000s resulted in an oversupply of housing between 2000 and 2007. However, since the recession, the surge in household formation has caused an under supply of 2.0 million units.”

As a result, the market for housing rentals in the U.S. has performed strongly over the past several years, according to market research firm IBISWorld. “Historic lows in home ownership, decreasing rental vacancy rates and surging demand for rental units have enabled landlords to increase rents, aiding revenue growth,” states IBISWorld. Revenue in the apartment rental market grew at an annualized rate of 3.4% since 2014, reaching $175.8 billion in 2019. The market is projected to continue growing. “Currently, there is an increasing consumer preference toward renting,” adds IBISWorld. “Among the millennial demographic, many are delaying marriage and family to develop their careers, making renting a more favorable option. The baby-boomer generation is now opting to move into single-level, less maintenance-intensive properties to accommodate their changing lifestyles… the industry is currently exhibiting a supply crunch of middle- and low-market rental units, whereby numerous consumers are being priced out of potential units, and whereby higher-income earners are trading down, occupying middle-market units, exacerbating this supply crunch.” The market by size and type includes:

PwC report housing as a “best bet” over the next few years: “Residential, residential, residential. Single-family, multifamily, and single-family to be rented. It’s a safe bet that you will outstrip inflation by a couple of percent by doing that. You will get above-normal historical returns by doing residential, all three legs of the stool.”

Student housing is another growing sector, as the U.S. has the largest student housing market in the world. Annual student housing investment has more than tripled since 2014, according to commercial real estate analyst CBRE, with investment reaching $11 billion in 2018. University enrollment was 19.9 million in 2018, with growth to 20.5 million projected by 2027.

Senior housing is a much larger market. The total value of senior housing and care property market in the U.S. is estimated at between $250 billion and $270 billion. Approximately 20% of households of people age 75+ live in senior housing and care properties, according to the National Investment Center (NIC). There are approximately 2.9 million units in 22,100 senior care facilities in the U.S. With the massive size of the senior population, more units are needed.

Workforce housing is yet another growing sector. There are approximately 12 million multifamily workforce units across 66 major metro areas in the U.S., defined as housing for households earning 60%-100% of the area median income. Yet with housing affordability needs not met, this market has attracted $375 billion in investment of the past five years, according to CBRE, which reports that “workforce housing has very strong supply/demand fundamentals that give the sector a solid foundation to provide continued good investment returns.

4.1 Market Segmentation

Initially, as noted, SBQ Holding swill focus on real estate opportunities in areas of rapid population growth, with a special focus on Florida (South Florida, and Orlando), Georgia (Atlanta), and Tennessee (Nashville), as well as Texas (Austin), Virginia, North Carolina, and South Carolina. As shown in the chart below, these states are some of the fastest-growing in the nation.

These population trends have driven multifamily investment. “Over the past decade, nearly 2.7 million additional apartments have been filled, more than triple the net absorption of the of the first 10 years of the millennium,” states analyst Marcus & Millichap. “This has pushed vacancy rates to their lowest level since 2000 and delivered 10 years of steady rent growth. Looking forward, the pace of absorption will slacken in 2020, not because of reduced demand, but because of supply limitations.” This is particularly the case in the areas of largest growth. “Americans are moving to markets in the nation’s Sunbelt in greater numbers this year (2020),” notes Marcus & Millichap, “drawn by a lower cost of living, favorable tax climate, job opportunities and warmer weather, among other factors.Many of these metros will also be leaders in job gains this year as companies move out of high-cost metros and expand operations.”

The top metro’s by net migration (Note: Forecasted in the pre-COVID period) are as follows: This is followed by the metros on which SBQ Holdings will focus.

4.2 Competitive Landscape

On a broad scale, SBQ Holdings competes with a host of builders, investors, and other holders of multifamily housing stock. Most competitors are big, national builders, REITs and others that typically focus mostly on tract-type housing and market-rate apartments in “hot” locations. On a national level, as noted above, there were more than 815,000 single-family housing starts and 465,000 multifamily housing starts, in 2019. In 2020, housing starts are projected to fall slightly, with 765,000 new single-family starts and 410,000 multifamily starts. According to the National Multifamily Housing Council (NMHC), the top builders include:

Few investors and builders, however, are focused heavily on the affordable housing sector. SBQ Holdings believes its affordable-oriented properties across multiple sectors will differentiate it and allow it to meet high demand in strategically targeted areas. The Company will meet a market needs locally and will engage the local businesses, government/military, and community organizations that will make each investment a true benefit to the residents.

4.3 Industry Summary

The Company will operate in this distinct industry: New Multifamily Housing Construction (NAICS 236116)

New Multifamily Housing Construction

This U.S. industry comprises general contractor establishments responsible for the construction of new multifamily residential housing units (e.g., high-rise, garden, town house apartments, and condominiums where each unit is not separated from its neighbors by a ground-to-roof wall). Multifamily design-build firms and multifamily housing construction management firms acting as general contractors are included in this industry.

The following maps show pertinent information on trends and revenue history for the industry based on geographic location. The charts illustrate which areas of the country spend more per capita and in total within the industry.

The map below shows sales ($) per capita.

5.0 Marketing Strategy/Implementation

SBQ Holdings customers will be reached through direct sales, networking with business leaders, as well as internet marketing, public relations, and limited traditional marketing. SBQ Holdings’ owners and managers have unique expertise as investors in and operators of companies in the real estate rental sector, including investment banking, property management and consulting.

As such, the Company will leverage its owners and mangers’ existing relationships, as well as forming public and private partnerships in South Florida, Orlando, and the surrounding areas initially. The Company will work with city governments, universities and military agencies, for example, to place affordable units in areas in need of new mid-level housing projects. SBQ Holdings will also network with complementary businesses, including developers, architects, and engineers that focus on multifamily/commercial and federal projects.

For property acquisition, sales, rentals, and disposition of real estate, SBQ Holdings will use traditional marketing methods and the internet to create a brand known for a consistent stock of high-quality newly built affordable properties within each metro area. Marketing will also include traditional methods used in the real estate rental market, further detailed below.

Internet marketing: SBQ Holdings will make extensive use of the internet, which is the primary way people find real estate and rentals. Search engine optimization (SEO) will be utilized because affordable rental housing is constantly being searched for by potential tenants and their families or public agencies. SBQ Holdings’ website will include numerous keywords, including property location and features, to generate organic traffic.

Outdoor marketing: SBQ Holdings will use a variety of signage prominently placed for maximum visibility at properties before, during, and after construction to advertise that the property is being developed and units are for rent or sale, which will also help to establish brand recognition and drive traffic to the SBQ Holdings website.

Publicity: SBQ Holdings will create press releases and story ideas that are sent to a variety of media outlets, including to magazines, newspapers, TV shows and any business development or housing and lifestyle publications in each region. This is a way to potentially get free publicity in the media, which often lends more credibility than paid advertisements.

Advertising: SBQ Holdings will also advertise in local real estate magazines, brochures, and flyers.

5.1 Web Summary

SBQ Holdings’ website will showcase apartment, student, senior, and military housing portfolio. There will be photos and videos of the initial developments and investment options for future developments. There will be SEO to gain relevant traffic from private investors for the equity fund as well as consumers and government agencies. The website will allow people to contact SBQ Holdings to inquire about projects and to begin the application process.

5.2 SWOT Analysis

The following is a summary of the Company’s strengths, weaknesses, opportunities, and threats.

5.3 Company Milestones

Acquire the 1st set of properties
Grow number of units and occupancy each year
Construct 1st senior/student complex
Complete 1st military/VA complex
Create new equity funds for metals, auto, other sectors

6.0 Management Summary

Josh Tannareillo, CEO

With 19 years of experience in the Construction Industry, ranging from sales, to project oversight, to executive management, Josh is an extremely valuable asset to SBQ Holdings. During these 19 years, Josh has provided construction products to general contractors throughout the United States, and in the process, developed quality business relationships with professionals in all aspects of the industry. With his experience and connections, Josh will build SBQ Holdings into an asset-rich conglomerate appreciating revenues and profits.

Presently, Josh works with the following industry leaders via his ownership in Eco Stone Works, which has provided high-quality stone products to commercial clients, including architects and designers, for over 20 years. Josh has established great business relationships with the following corporations:

Toll Brothers, an award-winning FORTUNE 500 company founded in 1967 and the nation’s leading builder of luxury homes.
ACPI, America’s 4th largest cabinetry manufacturer, with offices and manufacturing facilities all across the United States.
CBG Building Company, which builds more than 4,000 homes each year from coast to coast, operating for more than 25 years.
Wood Partners, which has been involved in the development of more than 79,000 homes with a combined value of more than $14.1 billion.
Mill Creek Construction Company, which has participated in the development of over 275,000 apartment homes in over three decades of service, executing over $25 billion in transactions since 1993.
Summit Contracting Group, which has built more than 350 multifamily projects nationwide, with over 100,000 units completed.
NRP Construction, which has developed and constructed over 28,000 residential units in 12 states and now manages more than 16,000 luxury, family and senior rental units in 8 states.

6.1 Management Gaps

Expertise gaps in legal, tax, marketing and personnel will be covered by a professional staff as well as Board of Advisors. In addition, the Company will retain a real estate consulting firm in addition to legal and bookkeeping services. This will be used for certification approval, market research, customer satisfaction surveys and to provide additional input in the evaluation of new business opportunities, etc.

7.0 Financial Summary

7.1 Revenue Forecast

The Revenue Forecast section details the revenue that the Company projects to receive. This section also details the direct costs. The following graphs illustrate the amount of revenue each line item contributes.

7.2 Personnel Forecast

The Personnel section breaks down the payroll expense line on the Income Statement. It provides total headcount, average salary per category and total pay per category.

7.3 Income Statement

The Income Statement is also known as a Profit & Loss Statement. This table breaks down Revenue, Cost of Revenue, Operating Expenses, Depreciation, Interest, Taxes, and bottom line Earnings for the first five years.

Yearly Income Statement

Year 1 Income Statement

7.4 Statement of Cash Flow

Quarterly Statement of Cash Flow

Year 1 Statement of Cash Flow

7.5 Balance Sheet

Operating Break-Even

Investment Cash Flow Break-Even

7.6 Break-Even Analysis

The Break-Even Analysis details two different break-even points. The Operating Break-Even accounts for the Company’s revenue and expenses on the Income Statement. The Investment Cash Flow Break-Even takes the Operating Break-Even one step further by including the inflow and outflows of the Cash Flow. The Investment Cash Flow Break-Even looks at all transfers of money except investments.