Real Estate Investment - Shawn Gross ,
 I wanted to inform you of an investment opportunity with Shawn Gross.  =20
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He planning on developing a 2.5-acre tract at the corner of Kirby &  Braesw=
ood.  This location as you know is close to the medical center area  and su=
rrounded quality old neighborhoods.  Two apartments in the area have  been =
very successful.  The Providence across the street is getting rental  rates=
 in the $1.22 per square foot and Kirby Place, an older apartment complex, =
 is getting $1.13 per square foot.
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The preliminary plan is to develop three or four story structures with a  t=
otal of approximately 110 or 150 units, respectively.  The total  project c=
ost are projected to be $8.1 million or $10.9 million.  Capital  required f=
or this development is between $1.6 million (for the three story  developme=
nt) and $2.2 million (for the four story development).  An  additional call=
 later on during development could be around $200,000 due to  increasing co=
sts (i.e, increase in lumber prices).  The property would  probably be comp=
leted 18 months out.  Projected IRRs are between 20% to 28%  depending on t=
he sale of the property.  Return on Cash Invested starts at  approximately =
11% in 2002 and increases steadily up 20% around 2006.   Assumptions are: $=
1.22 per square foot rents; revenues & expenditures rising  3.5%; vacancy l=
oss of 5%; Cap Rate of 8.5%; total project cost between $8.1  million and $=
10.9 million, depending on three or four stories.  There is an  issue with =
the property being in the 100-Year Floodplain, but he is proposing to  alle=
viate the problem by creating a water feature on the property and raise the=
  grade of builderable area above the Floodplane.
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I spoke to Jenard about the project before I've been able to discuss it  fu=
rther with Shawn.  I asked him about some of the assumptions, such  as the =
rental rates and cap rates which I thought where a bit aggressive.   He tol=
d me to the contrary, that Shawn's other project is pulling in  similar rat=
es, as well as other non-Shawn projects.  With regards to the  cap rate, he=
 said that he has been seeing 8%, which would call for a greater  sales pri=
ce than the assumed 8.5% (I can discuss this in further detail for  anyone =
who doesn't understand cap rates).  Jenard is investing 15% of  the capital=
 required as a limited partner (same terms as the rest of the  partners) an=
d Shawn is investing 5% (4% as a limited partner, 1% as GP).   Shawn will b=
e the developer, JMG Builders will be doing the construction, and  JMG Mana=
gers, Ltd. will be managing the property.  In otherwords, Dad will  have hi=
s construction company and management company doing the project.   Shawn wi=
ll be the developer.  While the property is under operation there  should b=
e distributions (not treated as capital returned).  At the time of  sale, m=
ortgage refinance, or other capital event, after all debts have been  repai=
d, all of the partners will get their capital contribution back.   Then, pr=
ofits are distributed.  I can go through the partnership structure  for tho=
se who are interested, which includes distributions and fees.  =20
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I am considering investing in 1% to 2% of the deal.  A 1% percent  investme=
nt amounts to either $16,000 or $22,000 invested, depending on the three  o=
r four story scenario, plus the possible additonal cash call of $2,000.   T=
here are several risks (i.e., softening of rental rates) which dooesn't mak=
e  the returns a guarantee.  However, I feel good about the Houston  econom=
y and absorption rates in the residental (and commercial) markets for  Hous=
ton.  Feedback from Jenard regarding his developments in  Houston and Steve=
 Keller's South Rice Apartment development have all been  extremely positiv=
e.  Shawn's personal developments include:  one in  Houston completed and d=
oing great;  the other Houston project never got  developed because someone=
 offered him so much money on the land, he and his  partners had to take it=
 (not a bad problem considering it took the risk out of  developing and ret=
urned an enormous IRR to the investors).  Although he has  not developed mu=
ch, his father is an investor and will have some  involvement.  Money inves=
ted would be tied-up for at least two years  (unless something happens like=
 his last project), but up until a sale which  could take between 2 to 5 ye=
ars (or longer) there could be distributions.   That assumes that the proje=
ct is doing well.
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Anyway, please let me know if any of you are interested.  The deal  is sche=
duled to fund June 10.  Like I said, I have not heard from him  on all the =
specifics.  Therefore, I don't know at this time how much is of  the deal i=
s even available.  I would be glad to discuss this in greater  detail with =
any of you that are interested.
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- Beau
lay.vittor@enron.com, robyn.vermeil@enron.com, mark.lay@enron.com, 