🎯 Decision Memo

The core numbers are solid and well-documented by Novak:

• $37M TPC for 140 SFRs = ~$264K all-in per door — reasonable for New Braunfels MPC with infrastructure
• 6.5% YOC on $37M TPC — confirmed. Atlas independently calculates 6.62% — close match
• 5.0% exit cap → $52M exit value — confirmed by Novak. In line with institutional SFR pricing in the I-35 corridor (5.0–5.5% range)
• 150 bps dev spread — positive but not exceptional. JAK's other deals target 200+ bps
• 19.1% LP IRR | 1.9x EM — real returns but below JAK's 22–26% project-level target
• Adjusted IRR of 38.32% with promote — this is the real number for F&F investors

The catch: 19.1% is the weakest return in JAK's portfolio. But the $800K equity requirement makes this extremely capital-efficient — $1.9M total return on $800K invested is a 2.38x adjusted EM.

New Braunfels is one of the strongest growth markets in Texas. The thesis is sound.

• Population growth: NB is one of the fastest-growing cities in TX by percentage, driven by I-35 corridor expansion between Austin and San Antonio
• Affordability advantage: NB offers 30–40% lower housing costs than Austin, attracting families and remote workers
• Employer base expanding: Amazon distribution center, growing healthcare sector, tourism (Schlitterbahn, Comal River, Hill Country)
• SFR rents in MPC: $1,600–$2,200/mo for 3BR/2BA — Atlas's $1,930 blended is well-centered
• MPC premium: Master planned communities command 10–15% premium over standard NB rents — Mayfair's 800-acre community fits this mold
• Institutional SFR demand: Invitation Homes, FirstKey, American Homes 4 Rent all actively acquiring in the I-35 corridor — deep buyer pool for exit
• Key comps: Vintage Oaks, Veramendi, Gruene Oaks demonstrate strong MPC demand in Comal County

The project is fully designed but not yet permitted. First-round permit comments have been received but not resolved.

• What we know: Plans are complete, submitted to city, 1st round comments returned
• What we don't know: Are the comments routine (drainage, setbacks, utility easements) or substantive (density objections, zoning challenges, environmental)?
• Timeline impact: SDP target is 8 months → Q4 2026. If comments are routine, this is achievable. If substantive, could delay 6–12 months
• Cost of delay: Each 6-month delay adds ~$200K in carry costs (loan interest, consultants, overhead)
• Budget allocated: $800K use of funds includes $300K for design/eng/permit resolution

The current $1.75M loan (Novak's existing debt) has been extended through August 2026 with no debt service until September 2026. This creates both an opportunity and a hard deadline.

• Opportunity: No debt service until Sept 2026 = free runway for permit resolution and capital formation
• Risk: If permit isn't resolved by Aug 2026, JAK faces simultaneous loan maturity + unresolved permit = potential crisis
• Mitigation: Novak has incentive to extend (he owns the land and wants the deal to proceed) — but each extension likely costs goodwill and possibly fees
• F&F equity timing: $800K needs to be raised alongside permit resolution. This is manageable given the amount

Key question: Can Novak extend the loan past Aug 2026 if needed? What are the terms? Is there automatic extension language or does it require fresh negotiation?

Black Cat is the construction partner for 140 SFRs at ~$155K/unit ($21.7M construction + $2.5M site work = $24.2M total).

• Cost per unit: $155K is within the NB range ($140K–$165K) — not aggressive but not padded either
• Contingency: $550K = ~2% of TPC. This is tight. Industry standard for a 140-home BTR project is 5%+ (~$1.85M)
• Scale risk: 140 SFRs is a large BTR build. Coordinating that many homes simultaneously requires strong project management
• Material costs: Lumber, concrete, and labor in the NB area are subject to competitive pressure from other MPC developments (Veramendi, etc.)

JAK's F&F equity is only $800K on a $37M project. That's 2.2% of TPC. This is either brilliant capital efficiency or a sign that JAK has limited skin in the game.

• Bull case: $800K gets you $1.9M total return (2.38x adjusted EM, 38.32% adjusted IRR). That's an outstanding risk-adjusted return per dollar invested
• Bear case: If something goes wrong, JAK's downside is capped at $800K. The institutional LP bears most of the risk. This could create alignment concerns
• Novak's land ($3M): Novak has more capital at risk than JAK. His incentives are aligned to make the project work — he can't walk away from $3M of land
• Promote structure: 15% of GP promote to LP partially aligns interests, but the core alignment comes from JAK's developer fee ($1.85M) — they get paid regardless of exit

Net assessment: For a F&F investor, this is an attractive risk/reward. $800K of exposure for a 38% adjusted IRR in a well-defined SFR project with a confirmed exit thesis. The capital efficiency is a feature, not a bug.

CONDITIONAL GO — Mayfair is a viable deal with attractive capital efficiency, but it's not a slam dunk.

Why GO:

• Exceptional capital efficiency — $800K for a $37M project
• Strong market thesis — NB is genuinely one of the best growth markets in TX
• Well-defined deal — highest assumption agreement of any JAK project
• 150 bps dev spread with institutional SFR exit — liquid buyer pool
• 38.32% adjusted IRR for F&F — outstanding risk-adjusted return
• Diversification from Austin metro (which is overbuilt right now)

Why CONDITIONAL (not unconditional):

• 19.1% LP IRR is weakest in JAK portfolio — need to be comfortable with that
• Permit status unclear — 1st round comments could be trivial or deal-breaking
• 2% contingency is dangerously thin for 140-home construction
• Novak loan maturity (Aug 2026) creates timeline pressure
• Black Cat construction terms unknown — GMP vs cost-plus matters enormously

Before committing $800K:

• ✅ Get the permit comments — determine if routine or substantive
• ✅ Confirm Black Cat contract structure — GMP strongly preferred
• ✅ Verify Novak can extend loan if needed past Aug 2026
• ✅ Confirm institutional LP interest level — at least LOI stage before F&F close