TOWER505 of Royal Oak

Mr. Akouri:

We’ve been discussing this project for over two years now. From your email back in February to our conversations over the summer, after the height variance was secured, and now once again—it’s clear there’s a shared vision for making this development a success. If this is going to happen, it needs to happen now, and it needs to happen with the right partner, and at the right terms.

Blackacre has a proven track record of delivering complex developments, managing properties, and navigating the challenges that come with large-scale projects. Our team, while seemingly nimble, has completed over 500,000 square feet of premier real estate, including office, salons, medical, and most recently shifting it’s focus to larger multifamily and mixed-use developments.

Most importantly, we’ve recently worked through the most significant challenge any project of this scale faces: obtaining proper financing.

Less than 24 months ago, we went through over 13 lenders and seven committee reviews before securing financing for a similar project—not because of a lack of credibility or experience, but because financing these types of developments is inherently complex. Lenders scrutinize every detail, and their appetite for risk is low, especially in today’s market. This is where Blackacre’s expertise truly sets us apart. We know how to navigate these hurdles and have the relationships, experience, and persistence needed to secure funding.

That said, we foresee challenges with this project that will need to be addressed head-on. Based on our experience, we are concerned that the property’s current value may not be sufficient to satisfy the equity requirement for a construction loan. With construction costs estimated between $12 and $14 million, the property as-is may not appraise at a level high enough to bridge the equity gap. These are not insurmountable issues, but they are significant ones that will require the expertise and alignment of a capable partner.

Moreover, even with the proper equity, lenders have made it a material point to consider the experience of the lead developer and sponsor of each project. Quite frankly, this means lenders are looking to loan not only where it makes sense to satisfy the sources and uses, but to developers with recent, applicable, and comparable experience. These are all bridges that can be crossed with Blackacre’s track record.

We have spent countless hours since we met reviewing the floor plans you provided, and we are confident in our ability to deliver this project both on time and within budget.

What sets Blackacre apart is our vested interest in the success of ANY project in which we are involved. Unlike third-party construction managers, whose sole focus is maximizing their profit on the construction front, Blackacre’s interests are fully aligned with the long-term success of the project as a business. As equity partners, we will be looking out for the best interests of the project at every step. For example:

1. Pontiac Project Success: On our recent Pontiac project, we secured over $5 million in Missing Middle funds.

2. Cost Savings: We saved more than $2 million on the construction budget by leveraging our supplier relationships.

3. Strategic Rebates: Through utility rebates, we obtained over $700,000 in additional cash for the project.

These are value-add drivers that third-party managers simply cannot deliver, as their goal is to maximize their fees regardless of the project’s long-term success. More to the point, it’s in their interest, not to save money, but to maximize the amount of money they could reasonably expend on the project to ensure THEIR maximum profitability without any regard or concern for ownership.

One critical element of this partnership is clarity on roles and responsibilities. For the sake of our friendship, let us make this part extraordinarily clear: Blackacre would act as the managing member of this project. You would retain authority to make high-level decisions, particularly those impacting the project’s overall direction and significant financial milestones. However, the day-to-day operations, construction decisions, construction management, and business operational items would fall entirely within Blackacre’s scope of responsibility.

This isn’t about control—it’s about what’s best for the project. There can’t be two captains to the ship, and this structure ensures that decisions are made efficiently and aligned with the project’s goals. This point has very little negotiability, as we’d rather this proposal fall through on friendly terms than to have any tension in the future. We’re not asking for anything that we have already done several times already. As a testament to this, we welcome and encourage you to speak with any of our current partners.

Here’s what Blackacre is offering to ensure this project’s success:

1. Earned Equity: Blackacre will earn a 25% equity stake upon completion of the project, measured by obtaining Certificates of Occupancy.

2. 5% Developer Fee: This compensates for managing construction and ensuring the project stays on track.

3. Full-Service Partnership: Blackacre will handle construction management, marketing, leasing, and ongoing operations.

4. Cost Efficiency: Blackacre’s aligned interests ensure the project stays under budget and on schedule. The team’s ability to import furniture, fixtures, and building materials, along with leveraging established supplier relationships, will significantly reduce costs and enhance the bottom line.

5. Financing Expertise: Blackacre’s recent, real-world experience with lenders provides a clear path forward for overcoming the financing hurdles this project will face.

This is a tremendous opportunity - FOR EVERYONE - but it requires commitment and urgency. A decision must be made soon. If we’re moving forward, every second of lead time will be vital to ensuring success. If not, we will respectfully redirect our resources and focus to other projects and partnerships.

“A year from now, you may wish you had started today.” – K Lamb

The challenges are real, but so is the potential. Blackacre is prepared to bring the expertise, commitment, and determination necessary to bring this project to life. Let us know where you stand so we can proceed accordingly.

Next steps…

We will have to quickly to build a strong pro-forma, a relatively accurate construction and development budget including any capital stack items that we have not discussed such as state funding or tax abatement items, and of course, a sources and uses.

Our team will then build a loan presentation using state of the art renderings plans, rental forecasts, and all of the data described above. We will immediately distribute these items to all prospective lenders to gauge their appetite, and we will continually improve the presentation as we obtain feedback. We will have to meet with city planners to assess their preferences for architecture and engineering items, construction plans, permitting, right of way, and other site and staging items.

All of these items would be partnership efforts and would require that Akouri and Blackacre have a sealed and signed partnership agreement.

Lastly, let it be known that we want this.

We WANT to do this project!

We want to partner with you. We look at hundreds of deals and walk away from most for one reason or another. We just hope YOU want to do this project with us… because we believe between what you bring to the table and what we bring to the table, we can make this property an AMAZING success.

That’s the truth.

Godspeed.