Non-Profit Disclosures

Overview

New Way Homes funds and creates below-market-rate rental housing: affordable, workforce, supportive, and other discounted housing.  We are proving a scalable new model for filling the HUGE housing production gap.  We do not compete for the scarce, government dollars for housing construction that is already fully used. 

In 5 years, we want to have created an entire new part of the housing industry that has a fair balance between investor returns and maximizing affordability.  We hope to be creating thousands of units of mission-driven housing per year in the least affordable areas of California and others will be duplicating what we're doing here and across the country.  We already have non-profit land owners coming to us at the rate to achieve this and our first >300 units under design.

 

Milestones

New Way Homes, Inc. was incorporated in the State of California in April 2015.

Since then, we have:

  • We have 19 units in construction and >300 units in design and permitting today.

  • The majority of our pipeline of projects are creating housing to be owned by Black churches.

  • We have a four-year track record of making interest payments to investors and lenders.

  • Our team has decades of experience developing, designing, operating housing & social services.

  • Our model can scale and be replicated to solve this housing crisis - and you can help.

  • Thousands of non-profits own land & want to develop affordable housing; we unlock that potential.

  • There isn't close to enough government funding to meet our affordable housing need.

 

Historical Results of Operations

  • Revenues & Gross Margin. For the period ended December 31, 2019, the Company had revenues of $405,014 compared to the year ended December 31, 2018, when the Company had revenues of $65,320.

  • Assets. As of December 31, 2019, the Company had total assets of $2,482,051, including $238,658 in cash. As of December 31, 2018, the Company had $1,675,845 in total assets, including $276,232 in cash.

  • Net Income. The Company has had net income of $230,489 and net losses of $34,648 for the fiscal years ended December 31, 2019 and December 31, 2018, respectively.

  • Liabilities. The Company's liabilities totaled $1,881,703 for the fiscal year ended December 31, 2019 and $1,305,987 for the fiscal year ended December 31, 2018.

 

Related Party Transaction

Refer to Question 26 of this Form C for disclosure of all related party transactions.

Liquidity & Capital Resources

To-date, the company has been financed with $2,828,116 in debt and $882,884 in additional financing.

After the conclusion of this Offering, should we hit our minimum funding target, our projected runway is 8 months before we need to raise further capital.

We plan to use the proceeds as set forth in this Form C under "Use of Funds". We don’t have any other sources of capital in the immediate future.

We will likely require additional financing in excess of the proceeds from the Offering in order to perform operations over the lifetime of the Company. Except as otherwise described in this Form C, we do not have additional sources of capital other than the proceeds from the offering. Because of the complexities and uncertainties in establishing a new business strategy, it is not possible to adequately project whether the proceeds of this offering will be sufficient to enable us to implement our strategy. This complexity and uncertainty will be increased if less than the maximum amount of securities offered in this offering is sold. The Company intends to raise additional capital in the future from investors. Although capital may be available for early-stage companies, there is no guarantee that the Company will receive any investments from investors.

 

Runway & Short/Mid Term Expenses

New Way Homes, Inc. cash in hand is $363,609.98, as of May 2020. Over the last three months, revenues have averaged $19,225/month, cost of goods sold has averaged $0/month, and operational expenses have averaged $25,150/month, for an average burn rate of $5,925 per month. We do not intend to be profitable.

Since 12/31/19, there are few material changes or trends in our finances or operations.  A new impact investment loan for $500,000 closed in early May 2020 with approved uses for providing loans for the development of affordable housing, to directly pay for affordable housing development owned by New Way Homes and for general operating expenses related to these purposes.  New Way Homes provided loans to two organizations that repaid those loans in February 2020 ($50,000 plus interest) and April 2020 ($15,000 plus interest).  

New Way Homes expects our revenues to include interest earned from impact investment loans made and to increase contributions through this raise.  Expenses are expected to include project expenses for two New Way Homes owned projects.  After the close of the raise, revenues and expenses for one month are projected to be $37,000 in revenues and $32,000 in expenses.

All current sources of capital are listed under Debt in Past Raises.  New Way Homes has received two commitments for $1,000,000 each towards our permanent supportive housing project.  

 

Risks

  1. Residential Real Estate Assets may experience catastrophic events or major market value changes or changes in debt financing markets.  

  2. Events such as natural disasters, fires, the COVID-19 health & economic crisis, sudden economic downturns, or other events may cause significant loss of value to the real estate assets of NWH’s borrowers and/or a sudden need of capital. Over time, it is possible that the multifamily residential rental real estate market in California will change significantly; if rents go down, or if they increase much slower than historically has been the case, then a project may not be able to afford sufficient replacement reserves, operating funds, or debt service payments.

  3. NWH’s operations are subject to regulation.  

  4. NWH’s operations are subject to federal, state, county, local and other regulations that are subject to change without notice. In addition, there may be other legal, tax and/or regulatory changes that NWH may or may not be able to foresee that may materially affect NWH. Further, NWH’s borrowers will engage in development projects whose success is dependent upon the approval of local jurisdictions and regulatory bodies, including for variances relative to current regulations. Any given development project may not get the approvals anticipated, and therefore may lose the benefit of significant expenditures, such as acquiring or optioning properties, preparing projects, and seeking approvals. 

  5. NWH’s financial model and project plans may not be accurate or successful. 

  6. Real estate development projects carry significant risks, such as legal risks, approval risks, contractor performance risks, and risks related to unanticipated issues with a building site (e.g. pollutants, geologic characteristics, archeological value, etc.).

  7. Maintenance, utility, compliance, property management, variable interest rate, or other expenses may significantly exceed anticipated levels.

  8. NWH is dependent on key personnel.  

  9. NWH’s day-to-day operations are conducted by Sibley Verbeck Simon. The organization’s future operations may depend upon its ability to attract and retain highly skilled personnel and board members, of which there is no guarantee.

  10. Prices of construction labor and materials can fluctuate significantly due to changes in demand and supply.  The costs, availability, and quality of materials and services can increase a project's costs and therefore reduce the project’s ability to repay NWH.

  11. NWH’s borrowers (the housing projects) might not be able to service their debt obligations or might have other financial difficulties.

  12. PSEs will have debt from other lenders, and the debt to NWH will typically be subordinated to such debt to third parties. No assurances can be made that these entities will be able to achieve their operating or financial projections or that they will be able to service their debt, including the Notes. Repayment of Notes in particular may rely on the borrower’s ability to refinance or obtain other debt, of which there is no guarantee at the time Notes become payable. 

  13. There may be conflicts of interest with NWH Management, directors, and affiliates.  

  14. Sibley Verbeck Simon, President, will, and others who will serve on the Board of Directors of NWH and control NWH, may have interests in a variety of activities other than NWH. Accordingly, conflicts may arise in the allocation of time between NWH and one or more of these activities and in the involvement in or ownership of related entities. Potential conflicts of interest could exist or may develop in the future among NWH, its Note holders, its land partners, and/or any affiliate of the foregoing, which should be considered carefully by each potential Note holder. 

  15. Our success and ultimately the repayment of investor loans is dependent upon raising the additional capital needed for the construction of projects, in most cases both as debt and equity capital or in some cases as donations to the charitable projects.  There can be no assurance that such funding will be available or will be available on favorable terms.

  16. To date there have been no legal claims against NWH or any of the development projects it has funded. However, it is not uncommon for development projects to lead to legal disputes, and even when those disputes are between third parties and local jurisdictions, NWH may be required or it may be in NWH’s best interest to participate in or fund legal defense or related activities. NWH’s insurance may not adequately cover these claims and even if such claims are unsuccessful, the costs incurred in defending against these claims, in terms of the money and the time and distraction of NWH Management, could have a material adverse effect on our business, results of operations or financial condition.  

  17. Affordable multifamily rental housing development and operations in some cases rely on the Federal and State Rental Subsidy Vouchers and associated public policy. 

  18. James Rector and Robert Singleton are part-time officers. As such, it is likely that the company will not make the same progress as it would if that were not the case.

  19. Our future success depends on the efforts of a small management team. The loss of services of the members of the management team may have an adverse effect on the company. There can be no assurance that we will be successful in attracting and retaining other personnel we require to successfully grow our business.

 

Other Disclosures

The Board of Directors

DirectorOccupationJoinedRobert SingletonExecutive Director @ Santa Cruz County Business Council2015James RectorCEO @ RC Cubed Inc.2015Owen LawlorPrincipal @ Lawlor LandUse2015Aura OslapasPrincipal @ A+O Design Partners2015Christine SipplSr. Director for Impact and Partnerships @ Encompass Community Services2015Kim EdmondsCEO @ Ventura Partners2017Micah SilveyDirector, Certification @ Green Business Certification, Inc.2017Andrew OwCounsel @ Ow Family Properties2019Uche UwahemuState Legislator Staff @ State of CA2020

Officers

OfficerTitleJoined

James RectorCFO Treasurer 2015Robert SingletonSecretary 2015Sibley SimonPresident 2015

Voting Power 

No one has over 20% voting power.

Past Equity Fundraises

DateSecurityAmount05/2021Custom$523,16205/2020Loan$500,00004/2020Loan$10,31502/2020Priced Round$202,88412/2019Loan$110,00012/2019Loan$495,80104/2019Loan$682,00001/2019Priced Round$30,00009/2018Loan$250,00008/2018Loan$30,00008/2018Loan$350,00006/2018Loan$200,00003/2018Loan$200,00011/2017Priced Round$150,00011/2016Priced Round$500,000

Outstanding Debts

IssuedLenderOutstandingMaturity03/01/2018Dignity Health$200,48803/01/2023 06/01/2018Religious Communities Impact Fund$201,01806/01/2023 08/01/2018Community Foundation Santa Cruz County$350,00007/31/2025 08/07/2018Community Vision$9,61508/07/2020 09/01/2018Adrian Dominican Sisters Community Investment Fund$251,25709/01/2023 04/30/201919 separate accredited investors$689,16106/28/2028 12/31/2019two separate accredited investors$111,15006/28/2029 04/30/2020two separate accredited investors$10,36906/30/2030

Related Party Transactions

New Way Homes, Inc. (NWH) has had three transactions in which it made payments to companies in which Sibley V. Simon, New Way Homes’ President, is a part-owner.

1. Notes Receivable (Loan):

New Way Homes, Inc. has approved a loan for up to $2.1M to Envision I, LLC for pre-development expenses on housing projects that meet NWH mission and specific criteria. $2,009,900 of this loan has been drawn down since October 2016. Interest has accrued on this loan at 6%, totaling $224,763 as of May 31, 2020. All principle and accrued interest is payable on October 14, 2022. Envision I, LLC is 50% owned by NWH President Sibley Simon. This loan is overseen by NWH’s Board of Directors and includes a variety of restrictions related to NWH’s loan policies and conflict of interest policy, including affordability restrictions on housing projects developed, disallowing Envision I, LLC from making any payments to its owners while this loan is outstanding, and requiring any services by companies related to a NWH officer or director to be performed at materially below-market rates approved by NWH’s Board under its conflict-of-interest policy 

2. Contract: NWH contracted Envision Housing, LLC via two contracts for development services on specific housing projects totaling $180,006. $90,000 of these contracts has been reimbursed via grants: one grant from the US Department of Housing & Urban Development (HUD) and one grant from the Central CA Alliance for Health. No further such contracts are anticipated. Sibley Verbeck Simon, the New Way Homes President, is a co-owner and Member of Monterey Bay Community Housing, LLC, which in turn is a 50% part-owner of Envision I, LLC and Envision Housing, LLC.

3. Project Assignment, Bill of Sale and Security Agreement (transfer of a project to NWH ownership):

New Way Homes, Inc. formed and wholly owns an LLC called 180 Supportive Housing, LLC, which in turn received ownership of a housing development project from Envision I, LLC. The project seeks to create 120-unit permanent supportive housing units. The project was transfered via a Project Assignment, Bill of Sale and Security Agreement. As a part of the transfer, 180 Supportive Housing, LLC assumed a portion of Envision I, LLC's debt to NWH in the amount of $830,496 with Envision I, LLC remaining a co-signer on that debt, as per the terms of the loan from NWH to Envision I, LLC. Envision I, LLC is 50% owned by NWH President Sibley Simon. This transfer was done at cost, meaning Envision I, LLC did not receive any profit from transferring this project to NWH ownership. 

NameEnvision Housing, LLCAmount Invested$42,668Transaction typeOtherIssued12/23/2019RelationshipIt is part-owned by Sibley Simon, NWH President

This was an unrestricted donation to New Way Homes.

Use of Funds

$100,00095% -- Pay for some pre-development expenses on affordable and mixed-income rental housing projects in partnership with churches (e.g. architectural design, engineering design, required studies, City fees). 5% -- Wefunder intermediary fees.

$1,070,00095% -- Fully fund the design and planning permit approval stage of our next six projects of over 300 rental housing units, including 120 supportive housing units, over 60 units restricted as low or very low income affordable units, and other below market rate units AND enable us to begin discussions with a next set of non-profit land owners for future projects. 5% -- Wefunder intermediary fees.