1. Countryside Homecrafters Business Consultation
And Investor-related Recommendations
Ben Black
06/23/2015
As a potential investor (and as an advisor to said investor), I'd be very interested in seeing some
sort of illustration of past investment performance of comparable notes as shown on the sheet
of available notes. I'd also be very interested to see some sort of projection of not only different
time periods and the related expected rates of return, given various interest rate environments
and reinvestment rates, but also different default scenarios and base-case-to-best-case
investment projections.
Another helpful enhancement to such a presentation could be to show the projected
experiences of 3 or more "investors." Investor 1 could invest 1/3 of his principal in un-developed
property paying 8.99%, 1/3 in developed residential property paying 6.00%, and 1/3 in a note
paying 7.49%. Investor 2 could invest in similar notes, but with different rates, investor 3 could
invest in more commercial properties with notes of various callable provisions. Then, run a
simulation showing the various expected rates of return for each, given different interest rate
environments at each "reinvestment period," and you can make various assumptions on the
prevailing interest rates, the other properties that may be available for reinvestment, and many
other considerations. The main point of all of this being, an astute investor, or his (hopefully
competent) advisor, really need to see what different kinds of outcomes one could potentially be
looking at, depending on a whole host of variables. A spreadsheet that shows what an
investment is on its face is certainly important, but it's also crucial to have some sort of
tool/resource that shows how an investment is likely to behave going forward. It's very difficult to
discuss these types of things with less-than-savvy potential investors, and even the savvy ones,
because of the bare-bones nature of the information being presented, and the lack of visual
aides (silly to those with knowledge, but important to the layman, and even most HNW
clientele).
Another concern, which I expressed to a limited degree, is that Countryside, being private, is
also not required to "show their books," so to speak. While that is not a red flag in and of itself
(look at how well Private Equity firms are doing these days), but it does present a whole new set
of "risks" to an investor, for which he/she should be compensated. It's perfectly fine that
Countryside is willing to show certain serious investors its financials, but that still doesn't
address the fact that private companies simply aren't held to the same sort of regulatory
standards that public entities are. That's a risk, no matter what sort of due-diligence Countryside
is purported to engage in, or how much equity to assets their balance sheet reflects. Such
opacity, or at the very least, questions as to the validity of the figures being shared, would
require a bit of a risk premium to the discerning investor (hence, one of the reason PE firms
themselves tend to promise such high rates of return to their shareholders and other investors).
Finally, the name of the company, while I'm sure is a point of pride and represents a hard-won
local reputation, still connotes, or is at least associated with the most fraudulent and poorly-run
mortgage company of all time, Countrywide. Anthony Mozillo still makes most people cringe just
to look at. Obviously, Countryside has done well enough with or without that potential stigma,
but I personally feel like the company would be better off changing its name, because most
people, especially as consumers and investors, tend to be instinctive and reactionary. A name
like "countryside" does not help the cause. And as for the company's own prospects,
considering the pristine balance sheet and bevvy of valuable assets that Countryside

2. supposedly has, I'm pretty surprised that the board of directors (or whoever makes the ultimate
investing decisions for the company), hasn't made serious inroads into Greene County and the
areas surrounding 29-North. The opportunity up there over the coming decades far outweighs
the attendant "risks" associated with the headaches of complicated permits and licensing.
To sum up, as a potential investor/advisor willing to put down $250,000 or more, I'd want to see
(essentially, a "due diligence checklist," if you will):
 The company's full financials (annual statements going back at least 10 years)
 A breakdown of the company's current assets, drilling down into the information by
property type, county location, and even demographic trends (all of which can be
pulled up by ESRI for a fee).
 Individual credit numbers/profiles for each of the properties under consideration,
including known assets and liabilities of said property-owners
 Full explanations of all call provisions
 Projected investment performance under various scenarios and different interest rate
environments.
 Some examples of actual, real-world investor performance with such notes in the past.
 Some sort of literature explaining the structure of the company, particularly how it differs
from a private REIT, and whether or not the company has any intentions of becoming
such an entity in the future.
 The amount and nature of the company's reserves to cover any defaults.
 The compensation, if there is any, for the prepayment risk associated with each note.
 A breakout of the various "risk tranches," similar to what you'd find buried within a CDO
or more specifically, a CMO, and how expected risks and returns vary and compare
with similar alternatives.
 Why it is a good idea to invest a (relatively) large sum of money into such a concentrated
real estate position, when public and private REIT's, and even crowd-funding investing
companies like Propser and Lending Club offer cheap, convenient ways to mitigate
and spread risk among hundreds, if not thousands of notes, with very, very small
investment minimums. What is the value-add of Countryside when compared to such
competitors for investor assets?
So, what's the value-add I'd have to use to try and sell Countryside to various investors?: They
have solid in-house due diligence, which served it very well during the Financial Crisis of '08-'09,
not to mention unrivaled knowledge of the local real estate market and its related risks and
rewards, as well as a lack of public shareholders pushing the company to take on too much risk,
etc.The company, as it stands today, and with the notes it offers, would be much more
comparable to high-yield bond fund, than to anything else, and I'm just saying that as an
advisor. Personally, I really like the company's risk management up to this point, but Central
Virginia, particularly certain sections of 29-North will simply explode with growth in the coming
decades, and it sounds like Countryside is poised to miss the boat due to its own risk-aversion.
The same tendencies which helped preserve it during the "Great Recession," may really hinder
it when the defense contractors begin carving up a second piece of Northern Virginia in Greene
County, etc. As a private equity holder in Countryside, I'd be pushing for more serious
investment in properties (especially undeveloped lots), with the potential for massive payoffs a
couple of decades down the road. As a potential investor in the notes, I'd be intrigued by the
rates you showed me, but also highly cautious about the lack of transparency behind the

3. numbers, or even the validity of any figures that may be provided, given the lesser regulatory
standards. In short, I'd want to see higher risk premiums for my money, unless I could be shown
the benefits a little more clearly.
So, I do have a couple of investors who could be potentially interested in something like this, but
#1, they are out of state and a bit unsure of their cash-flow situation given their upcoming
transition into retirement. Second, if you all have any interest, I do offer business consulting for
$400/hour (compared to the $250/hour I charge individual clients for portfolio reviews, etc.). I've
already given out a bunch of "freebies," so to speak in this email, and they are very general, but
I could certainly offer some more specific advice as it pertains to the business itself and
prospects for future growth and opportunity.
P.S. One potential name change for the company: "Commonwealth Investment Property
Holdings," or something along those lines. It connotes both the familiarity associated
with the state of Virginia, and has a nice subliminal message embedded within the
compound word from the beginning: "wealth." Obviously, your company is doing well for
itself, but so were the S&L's in the early '90's and they eventually got taken over
precisely BECAUSE they were cash-cows with too much equity and too little risk-taking.
In any event, I think there's truly a happy medium there, and I would be perfectly willing
to share my thoughts on the matter once I return from San Francisco, if you or any
members of the board are so inclined.