HSRE — John Burns + Kent McNeil

📝 Kohlenberg — Notes

Overview Pro Forma Notes Decision Memo Contracts & Docs
Deal Notes & Analysis
💰
Waterfall Structure — Unusual, Needs Scrutiny Key Risk
3-tier waterfall with no preferred return and no return of capital priority. Non-standard for developer/operator position.
April 11, 2026
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The proposed waterfall is a 3-tier structure: 70/30 → 10/90 → 50/50 (Landowner/BBM-HSRE). Key concerns:

  • No Preferred Return: HSRE does not receive a minimum guaranteed return before the landowner participates in upside. In most JV structures, the developer/operator earns a 7–10% preferred return before the split kicks in.
  • No Return of Capital Priority: If the deal underperforms, HSRE's invested soft costs (~$1.2M in Scenario A) are not returned before the landowner takes 70% of first dollars. In a downside scenario, HSRE could lose its entire investment while the landowner still recovers most of their land value.
  • Tier 2 Dependence: HSRE's economics are heavily concentrated in the Tier 2 (90/10) tranche. If total proceeds don't reach the Tier 2 threshold, HSRE's return drops dramatically.
Recommendation: Push for a preferred return of at least 8% IRR for HSRE before the waterfall kicks in, and/or a return-of-capital-first provision. This is standard practice and protects HSRE's soft cost investment.
💰
BBM Returns: 1,130% IRR / 14.53× / $7.587M Strong
BBM 2025, LLC earns extraordinary returns on $522K soft costs via tiered milestone promote. No LP investors in this deal.
April 14, 2026 — Updated from live pro forma
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BBM Total Return (Mid Case)$7,587,000
BBM Equity Multiple14.53×
BBM IRR~1,130%
BBM Capital at Risk$522,000 (soft costs)
Landowner Return$15,944K · 1.77× · 41.4% IRR
Unlevered Project IRR102.6%

IMPORTANT: There are NO LP investors in Kohlenberg. This is a BBM 2025, LLC (GP/Sponsor) + Landowner JV. The ~1,130% IRR reflects BBM's return on $522K soft costs through the milestone waterfall — NOT a traditional LP IRR metric.

Net profit (mid case): $14,989,212. Waterfall is milestone-based with no preferred return. Active tenants: QT, Big League Car Wash, Bubble Bath.

🏬
Costco Adjacency — Value Impact Analysis Positive
Adjacent Costco is a top-tier demand driver. Texas suburban comps show $42–55/SF retail pad values near Costco.
April 12, 2026
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Costco is one of the most powerful anchors in retail real estate. Key dynamics:

  • Traffic Generator: Costco stores draw 10,000–15,000 daily visits — creating massive foot traffic for adjacent retail
  • Retail Follows Costco: QSR chains (Chick-fil-A, Starbucks, Raising Cane's), medical, dental, and service retail actively seek pad sites near new Costco locations
  • Land Value Premium: Comps show 15–25% premium on land within 1-mile of new Costco locations within 2 years of opening
  • Credit Tenancy: Costco's presence de-risks the retail corridor — lenders underwrite more favorably
  • I-35 Corridor: New Braunfels/Kyle is the Austin-to-San Antonio growth corridor — among the strongest markets in Texas
Bottom Line: The Costco adjacency is a genuine and significant value driver. It's not just marketing — it materially impacts pad values, tenant demand, and the speed at which parcels can be sold. This is one of the deal's strongest attributes.
🤝
Gissler Intermediaries — Fee Structure Unknown Open Item
Brett Gissler (Edge Realty) and Bryce Gissler (Bridge Realty) acting as intermediaries. Their compensation needs clarification.
April 11, 2026
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The Gissler team is presenting BBM's proposal to the landowner rep "Chris." Key questions:

  • Fee Structure: Are Gisslers paid a flat fee, a percentage of the deal, a commission on sales, or a participation in the waterfall? This directly impacts HSRE's net return.
  • Which Side: Are they representing the landowner, BBM/HSRE, or both? Dual agency creates potential conflicts.
  • John Hopkins: CC'd on all correspondence as Edge Realty Senior Associate. What is his role and compensation?
  • Impact on Returns: If Gisslers take 3–5% of gross (~$750K–$1.2M), this comes directly off HSRE's share or reduces the pool before the waterfall. Either way, it reduces returns.
Action Item: Get clarity on Gissler compensation structure before advancing. This is a material open item that could reduce HSRE returns by $500K–$1.5M depending on structure.
📋
No PSA — Deal Is Non-Binding Pre-Contract
Proposal stage only. No purchase and sale agreement executed. Gissler team presenting to landowner rep "Chris."
April 11, 2026
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Current status: The Gissler team is presenting BBM's proposal to the landowner representative "Chris." No binding agreement exists.

  • Next Steps: Wait for landowner response on terms/waterfall → negotiate → execute PSA with inspection/due diligence period
  • Opportunity: Since no terms are locked, HSRE can push for waterfall improvements now — this is the best leverage point
  • Risk: Landowner may reject the proposal entirely, or counter with less favorable terms
  • Timeline: Unclear — depends on landowner's responsiveness and negotiation dynamics
🏢
BBM 2025, LLC — Confirmed Deal Entity Info
Kohlenberg is a BBM 2025, LLC deal — John Burns / Kent McNeil / Craig Biggar (33.33% each). GP/Sponsor = BBM. JV with landowner (Chris via Gissler).
April 12, 2026
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Important distinction: Kohlenberg is an HSRE deal (John Burns + Kent McNeil). The waterfall references "BBM/HSRE" because the proposal was presented through BBM channels via the Gissler intermediaries, but:

  • Entity: HSRE — John Burns + Kent McNeil only
  • NOT BBM-led: Craig is NOT involved in this deal
  • Clarify: When negotiating final terms, ensure the operating entity is clearly HSRE, not BBM
Open Action Items
☑️
Open Items Checklist
Outstanding items before HSRE can make a GO/NO-GO decision.
April 12, 2026
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  • ☐ Gissler fee structure — What do they get paid? How does it affect the waterfall?
  • ☐ Waterfall renegotiation — Push for preferred return and/or improved Tier 1 split
  • ☐ Landowner response — Has "Chris" responded to the proposal?
  • ☐ Scenario selection — John/Kent to decide: Scenario A (entitle + sell) or Scenario B (horizontal dev)
  • ☐ Due diligence scope — Environmental, survey, title, zoning confirmation
  • ☐ Costco opening timeline — When does the adjacent Costco open? Impacts timing.
  • ☐ IRR improvement path — Which lever(s) to pull to get above 20%
  • ☐ PSA terms — Inspection period, closing conditions, earnest money
📅 Last updated April 14, 2026 from Kohlenberg_Pro_Forma_LIVE.xlsx. Active tenants: QT (confirmed), Big League Car Wash, Bubble Bath. No LP investors in this deal — BBM/Landowner JV only. Net profit: $14.99M (mid). BBM: 1,130% IRR / 14.53× / $7.587M. LO: 41.4% / 1.77× / $15.944M.