Traction Capital — October 21, 2026 investor update Automatic transcript; may contain transcription errors. 00:00:05.760 --> 00:00:14.850 Andrew Davis: Okay, good evening, everyone. Welcome to the October 2026 Traction Capital Investor Update. 00:00:15.030 --> 00:00:18.470 Andrew Davis: We're gonna… we have a lot of good information to run through. 00:00:18.600 --> 00:00:30.170 Andrew Davis: Tonight, and these webinars are primarily for our existing investors as a time to connect with the team, get project-level updates, and ask any questions. 00:00:30.250 --> 00:00:43.440 Andrew Davis: But there's also some prospective investors on this webinar as well, so we're gonna take a few minutes just at the front of the call to just go over very quickly who Traction Capital is and what we do, and then we'll roll right into our updates. 00:00:46.070 --> 00:00:53.050 Andrew Davis: I'm Andrew Davis, I run Investor Relations here at Traction Capital, so I'm happy to connect with 00:00:53.330 --> 00:00:55.900 Andrew Davis: You on all things, 00:00:56.130 --> 00:01:02.719 Andrew Davis: Investing, Investor Portal, any questions that come up in that process, that's what I'm here to support with. 00:01:03.160 --> 00:01:10.149 Andrew Davis: And, we'll jump right into just some, some high-level Facts about our fund. 00:01:10.220 --> 00:01:21.740 Andrew Davis: This is a fund, meaning when you invest in Traction Capital, your investment is diversified across, across geographies and across different projects. 00:01:21.790 --> 00:01:35.260 Andrew Davis: We pay a 12.5% preferred return, and we're targeting 42 months from the time Investor's fund, and we call that capital for one of our projects, to the time we return 00:01:35.260 --> 00:01:42.970 Andrew Davis: Your capital, and as you'll see as we go through the slots, or go through the slides, our investment focus is finished lots. 00:01:45.150 --> 00:01:47.449 Andrew Davis: Wesley, I'll let you take this slide. 00:01:48.200 --> 00:02:04.139 Wesley Greene: Yep, fantastic, thank you. So, you know, one of the things when we are working with this is how do we de-risk this? And so, the risk, really, of development is on the front side, not taken by the investor, but taken by SAGE communities. And SAGE communities 00:02:04.140 --> 00:02:20.609 Wesley Greene: You know, works with all the different municipalities on the front side, you know, as far as the landowner, working with the engineering teams, and working with municipalities, and then all the other professionals that we work with to get a project from just a raw piece of land. 00:02:20.610 --> 00:02:27.799 Wesley Greene: to a fully designed set, to where a builder is willing to say, we are ready to buy this. We design it with the builder's, 00:02:27.800 --> 00:02:42.450 Wesley Greene: plans in place as far as what their lot requirements are and the markets that they're looking in. And so, as we go through this process, we work with our builder partners, and then we get it to the point with the landowner and the builder partner to where we're ready to get to a closing. 00:02:42.450 --> 00:02:54.410 Wesley Greene: And at that point, we bring in a first mortgage partner and first position loan that'll come in, and then we have the builder that is there, and at that point, we're ready to close on a transaction, and that's where Traction Capital 00:02:54.410 --> 00:03:12.849 Wesley Greene: Then comes into it. On average, we have somewhere around about an 8-month, or 8-10 month timeline to actually install the horizontal, which is going to be your roads, your sewer, your water, and then get the pad lots ready. And then at that point, we begin selling those to the builders. 00:03:12.850 --> 00:03:21.440 Wesley Greene: So, typically, obviously, your first quarters are going to be paying the bank back, and then the next quarters are going to be paying back the principal detraction capital. 00:03:21.440 --> 00:03:35.799 Wesley Greene: And that's kind of how these processes work. The risk of the vertical construction and the risk of the home being sold is not on this process, that is on the home builder that has the lot, so when they buy the lot, it is off our books and on their books. 00:03:35.800 --> 00:03:47.139 Wesley Greene: and transition. So, those are a couple key points, just to let you know, you know, to get it to the point where we actually have a closing with a builder and a lender, I typically say just spend about $150,000 to $250,000 per project. 00:03:48.320 --> 00:03:50.389 Andrew Davis: Excellent. Thank you, Wesley. 00:03:50.750 --> 00:04:06.779 Andrew Davis: So that's how we, when we're… as Traction Capital, and as stewards of your capital, really, we're always thinking about risk, and how we mitigate risk, so you can see how we're doing this at the project level, at the operational level, but we're also doing that at the capital level. 00:04:06.830 --> 00:04:18.700 Andrew Davis: So what you see here is just two example deal structures. The one on the left is a typical private equity deal, where there's a significant number of fees. 00:04:18.700 --> 00:04:38.349 Andrew Davis: that the sponsor takes that have nothing to do with whether they're actually delivering the investors their capital back, or a return on their capital. This creates a bad incentive structure for sponsors to go after fees and activity over conservative underwriting and performance. 00:04:38.350 --> 00:04:56.419 Andrew Davis: And then it also increases the risk to the investor. Their investment is automatically diluted by these fees. So we just fundamentally feel that, that we don't want to operate that way. We want to honor our investors' trust and confidence in us. So as you can see, very simply. 00:04:56.420 --> 00:05:05.419 Andrew Davis: We don't charge any fees to investors. We take a 2% asset management fee, but that is paid by Sage, the operator, so there is no dilution 00:05:05.430 --> 00:05:11.969 Andrew Davis: To Investor Capital, to your investment. And then we don't take any profit participation. 00:05:12.030 --> 00:05:18.049 Andrew Davis: Until we return your principal, and you're accrued 12.5%. 00:05:18.170 --> 00:05:36.189 Andrew Davis: preferred return. And if you have invested as an LP or passive investor, really in any private, private placement structure like this, you'll know how rare this structure is, and so we're really pleased to be able to serve our investors in this way. 00:05:36.900 --> 00:05:47.830 Andrew Davis: And then, for those, you know, prospective investors, always happy to jump in with more, you know, more information, answer any questions, and talk to you about the process. 00:05:47.990 --> 00:05:55.930 Andrew Davis: And now… Without further ado… We are going to jump into some industry news. Brandon, take it away. 00:05:55.930 --> 00:06:13.320 Brandon Hiett: Absolutely. For those that you… that do not know me, my name is Brandon Hiett. I'm the fund manager. I am responsible for, being a steward of your capital, and then also underwriting opportunities as they come in, so we are ensured that they can hit the hurdles that are, that we're going to, 00:06:13.390 --> 00:06:26.900 Brandon Hiett: meet, and then give you a return on, your equity. Some of the exciting things as well that I wanted to share are in regards to the overall housing market. Really exciting news over the past, 00:06:26.900 --> 00:06:40.059 Brandon Hiett: let's call it since July. What you don't see on this slide is there was a large acquisition by Berkshire Hathaway. They ended up purchasing, one of the nation's top home builders, Taylor Morrison. 00:06:40.060 --> 00:06:44.250 Brandon Hiett: In July, with, $8.5 billion, investment. 00:06:44.250 --> 00:07:08.720 Brandon Hiett: And in addition to that, news as of today, I believe, or yesterday, there was an SEC filing for DreamFinder, closing a $2.2 billion acquisition of, Beezer Homes. This is creating now the sixth largest U.S. home builder, and reaches, well over half the states in the United States. Adding to the scale and the specific geographies, that we're in. 00:07:08.720 --> 00:07:31.840 Brandon Hiett: being Texas and the Carolinas as well. One unique piece that I would say on this is that, DreamFinder is also closing 8,600 homes a year, and part of their equity to help them with this acquisition actually comes from a land fund, of all things, which they invested as preferred equity, similar to us. 00:07:31.840 --> 00:07:46.290 Brandon Hiett: And, they are really land bankers, so what they do is go buy, or buy land, hold the land, and then deliver finished lots to home builders. So I thought that was a unique take, as well. So those types of funds are getting active in the space. 00:07:47.970 --> 00:07:49.399 Andrew Davis: Excellent. Thank you, Brandon. 00:07:49.980 --> 00:08:04.829 Andrew Davis: And now we're going to jump right into our pipeline, and, you know, we have a… we have a larger pipeline than what we're going to present today, but this is… this is really where we want to spend our time. It's a large acquisition, and Wesley and Brandon are going to talk about 00:08:04.830 --> 00:08:14.570 Andrew Davis: The market and all the work that's gone into this, but for updates on the rest of the assets that are in the fund or in the process of coming into the fund. 00:08:14.580 --> 00:08:22.850 Andrew Davis: Those will be in the weekly email. So tonight, the focus is on Hewitt, Texas, and with that, take it away, Wesley and Brandon. 00:08:23.580 --> 00:08:25.699 Wesley Greene: Fantastic, yes, 00:08:25.870 --> 00:08:48.849 Wesley Greene: So, what I want to talk a little bit about is the process, because the execution of where we are in the process, what we're delivering on, and then I think Brandon's going to hit the highlights of what about the market is attractive in Hewitt and Waco area, and all the greater economy down there. So, as far as the contract goes, and where we are, the process, so, the good news is all the zoning is done. So, we have all the zoning approvals for the 194 lots. 00:08:48.850 --> 00:08:57.710 Wesley Greene: We are going back to the Planning and Zoning and the City Council in November, so it'll be November 3rd and November 10th to get the site plan finalized. 00:08:57.750 --> 00:09:11.120 Wesley Greene: Before us, so we're working on the plats that will be approved, so that was kind of the difference between before and now, is the plat approvals that we're working through. So we're in the process of getting that executed, have been having great conversations with the town and the staff. 00:09:11.250 --> 00:09:27.280 Wesley Greene: And then the next two big pieces are, really, we got a closing lined up for November 20th for this project, and right now, we are in the final phases of signing the contract, with our builder. So our builder and I had a great chat yesterday. 00:09:27.280 --> 00:09:46.630 Wesley Greene: Making sure we're aligned on a couple different pieces of the contract, and he's well-versed in it, he knows this area. As you'll learn from Brandon, he's built a lot of homes in this market. It's one of his key markets. He's a large regional builder. And so, we were just talking about all kinds of different details, but it, we're getting the finishing touches on that, which is exciting to get to. 00:09:46.630 --> 00:09:55.269 Wesley Greene: And then also, we are putting the first lender position in place as well, so we are expecting a couple different lenders to give us term sheets at the end of this week. 00:09:55.270 --> 00:10:17.410 Wesley Greene: So that we'll have both, as we always promise, having the first position secured, and then having the builder secured, and the closing with everything approved secured. So all those three are coming together for us to achieve the end of November, and super excited to get to that point, but that's kind of the update there. I will give a quick update. The traffic study and the flood studies have come… the flood study is… 00:10:17.750 --> 00:10:35.989 Wesley Greene: mostly delivered, traffic studies mostly delivered, and so those final things are there. They're all looking good and lining up with everything that we've got. We've got our grading plan, actually, as well, well, through the process, so everything looks to be in very good order. So the process is, once we close, then we'll finish up the permits. 00:10:35.990 --> 00:10:38.770 Wesley Greene: And I'll be ready to push dirt here in January. 00:10:40.080 --> 00:10:59.389 Brandon Hiett: Awesome. Now, the obvious question is, why you, right? And so, what's supporting the demand for these 194 homes? I think one of the things that initially attracted us to the location, is the amount of investment that's, immediately around the property. Since 2020, the Waco Industrial Foundation 00:10:59.390 --> 00:11:15.169 Brandon Hiett: has reported 19 major projects in the area, which is representing $2 billion of investment, and 2,600 jobs. So, where do those employees need to go, and where are they going to live? And so, there's a huge housing demand there. 00:11:15.250 --> 00:11:32.820 Brandon Hiett: In addition to that, these projects aren't just spread around the state, they're really within a few miles of our site. There's a company called Graphic Packaging, for example, they're putting $1.6 billion in paperboard manufacturing, just two and a half miles away to the north of our, subject site. 00:11:32.830 --> 00:11:35.630 Brandon Hiett: And that's roughly about 230 jobs or so. 00:11:35.730 --> 00:11:48.839 Brandon Hiett: Walmart just opened a $350 million project as well, in a town called Robinson, which is right across I-35, going north. That's another, 400 jobs that are projected with that. 00:11:48.840 --> 00:12:10.990 Brandon Hiett: In addition to, a few other manufacturers, like a transformer manufacturer with 700 jobs, and then also Electrolit, the sports energy drink, they're investing $400 million in the manufacturing facility, only 2 miles away from our site, and that's 200 more jobs that are projected. So a ton of activity in the job market. 00:12:10.990 --> 00:12:30.380 Brandon Hiett: Which… and specifically, the exciting piece is that we aren't relying on a single employer in this market. There's diversification across all industries, including, you know, packaging, food, electrical infrastructure, and even beverage manufacturing as well. So, significant amount of capital. 00:12:30.410 --> 00:12:37.449 Brandon Hiett: And, and jobs. So, one of the things with those jobs, which I really want to touch on, 00:12:38.020 --> 00:12:47.909 Brandon Hiett: is that those 2,600 announcements are not only jobs, but also families, right? And so, with McLennan County, where Hewitt lies. 00:12:47.920 --> 00:13:00.240 Brandon Hiett: There's about, just under 300,000, residents alone, and these jobs, represent 1% to 2% of all, households. 00:13:00.240 --> 00:13:05.830 Brandon Hiett: growth within this specific market, and not just Waco or Hewitt, but the entire county. 00:13:05.830 --> 00:13:29.350 Brandon Hiett: So, significant job growth and, representing about 1,300 households. So, there is going to be, major demand for housing, to satisfy, this employee base as well. So, very excited about that. And, and to the point that John, or, that Wesley was making here, is that, you know, John Houston. 00:13:29.370 --> 00:13:42.360 Brandon Hiett: who is the builder that's committed to this project, he's already building that market many, many homes. This is actually a town I believe he was even… grew up in, where he's building a, 00:13:42.360 --> 00:13:59.739 Brandon Hiett: let's call it a project just north of ours with a little bit larger of a lot size, and the mid-$400s to $500,000 range. So, a move-up product, and really something that's sought after compared to the other sites and, let's call it, 00:13:59.740 --> 00:14:17.770 Brandon Hiett: home builders, what home builders are building in the area. D.r. Horton's right across the street with Park Meadows, which represents, just around 2,000 or so homes. Smaller product, first-time home buyer, and then also a group called Stylecraft, which is just south of us in the Lorena, corridor. 00:14:18.120 --> 00:14:28.740 Brandon Hiett: So, tons of, established builders in the market, which also give us the confidence that, you know, that there is, 00:14:28.850 --> 00:14:48.780 Brandon Hiett: diversification, one, in the product size, and then two, also the builders. So, heaven forbid, you know, I look at risk, especially as we can protect our capital, is what if, you know, John Houston or someone were to exit the project? We also have backup contracts, or Sage has backup contracts, rather. 00:14:48.780 --> 00:14:58.129 Brandon Hiett: From some of these groups that I've mentioned. So, there is builder demand, and, diversification as well. So, I… 00:14:58.510 --> 00:15:12.710 Brandon Hiett: I believe all these things are fantastic for our project, and overall give us the confidence that not only is this economy robust, but, we have options to exit to. 00:15:16.690 --> 00:15:17.700 Wesley Greene: Good job, Brandon, thank you. 00:15:17.970 --> 00:15:36.830 Andrew Davis: Nice, thank you guys. Yeah, I think… I think just a couple things that I want to highlight here, call attention to, is this is exactly the kind of market that we look for, where there's significant undersupply, and… and housing in demand really, really is local and regional, and there's markets right now that are… 00:15:36.930 --> 00:15:46.920 Andrew Davis: That are very, very much, you know, don't… don't have this… this favorable imbalance, but that's exactly why we're operating in 00:15:46.920 --> 00:16:01.580 Andrew Davis: Texas and the Carolinas, because these are the three highest growth markets in the country, so we're very, very much going to where the demand is, and then even within those states, looking for the markets where there's this significant undersupply, we're confident in the demand. 00:16:01.580 --> 00:16:12.999 Andrew Davis: And to Brandon's point, the demand is very strong in this market. We have multiple LOIs, on this, on this, on this project, and this was just the John Hewson was just the strongest 00:16:13.090 --> 00:16:16.600 Andrew Davis: the strongest one, but there's plenty of backups, as Brandon said. 00:16:17.190 --> 00:16:32.629 Andrew Davis: And with that, speaking of… speaking of demand, we have really very little left that's gonna be deployed this year. And the way that we deploy capital here, At Traction Capital, is, we call your capital. 00:16:32.710 --> 00:16:48.019 Andrew Davis: as it's needed for a project. So, when you make a commitment, we'll let you know when we anticipate our next closing, and then we're not actually going to call that capital until we're within about 2 weeks of closing on a project, and so we already have 00:16:48.200 --> 00:17:04.730 Andrew Davis: We're well over 50% committed to this project. Probably have room at the current investment size, current average investment size, probably have room for 4 to 5 more investors. So, if you'd like to get your capital working in a preferred equity position at 12.5%, 00:17:05.060 --> 00:17:08.559 Andrew Davis: Annualized return in the next… 00:17:09.750 --> 00:17:15.370 Andrew Davis: Two months and change, reach out to me and can certainly talk to you about that process. 00:17:18.460 --> 00:17:26.389 Andrew Davis: And, some questions. Some questions that have come up, number one, very, very simple. Wesley, what is a plat? 00:17:27.530 --> 00:17:39.779 Wesley Greene: Alright, what is a PLAT? So, a plat is the surveyed recorded instrument that will show a group. So, example, for Hewitt, because of the size of it, we'll have Plat A and Plat B. 00:17:39.780 --> 00:17:51.689 Wesley Greene: which will be this segment of a group of lots that they will then record into their GIS, geographic information system, down the road, and that's where it counters to all the other points that they've got in their system. 00:17:53.890 --> 00:17:54.750 Andrew Davis: Thank you. 00:17:55.410 --> 00:18:03.050 Andrew Davis: Next one, and this is more, well, actually, you know, we talked with an investor about this last week, and it's a question that's come up. 00:18:03.220 --> 00:18:16.640 Andrew Davis: And I think it's really worth highlighting. Can you talk about the difference between development and construction, and the perception that development is risky, and kind of how we're… how… where we're operating in that continuum? 00:18:16.640 --> 00:18:19.270 Wesley Greene: That's a great question. So… 00:18:19.460 --> 00:18:32.609 Wesley Greene: Construction is where you have everything measured and ready to be delivered, right? Like, so you know how much pipe you're gonna have, how much road, how much… all the construction costs are calculated and contracted. 00:18:32.730 --> 00:18:45.170 Wesley Greene: The thing about development, and a lot of people, when they hear development, is scariest, because it's taking the risk where you've got a lot of unknowns, right? You've got the unknowns of what actually will get approved, the unknown of what it… unknown what it will actually cost. 00:18:45.350 --> 00:19:02.400 Wesley Greene: the unknown of what… who's actually going to build. I mean, you know, we could give examples of land that we've come across that where people get in situations, and that's where there's development risk. That's where I go back. Sage is taking the development risk side. What we're talking about. 00:19:02.420 --> 00:19:12.719 Wesley Greene: here is this construction side. So what we're really getting to the point is we're ready to construct with a contract in hand. So that's the difference between ready for construction and development. 00:19:14.620 --> 00:19:18.210 Andrew Davis: Development is speculative, construction is not. 00:19:18.360 --> 00:19:19.050 Wesley Greene: Correct. 00:19:19.270 --> 00:19:19.830 Andrew Davis: Yep. 00:19:20.200 --> 00:19:21.080 Andrew Davis: Thank you. 00:19:21.800 --> 00:19:34.650 Andrew Davis: And the… another question, how does… how does absorption rate affect our business? You can… can you talk a little bit about that as it relates to, you know, homes, the end… the end product being sold? 00:19:35.200 --> 00:19:54.590 Wesley Greene: That's a great point as well. So, as we're working with our builder partners, you know, the… you know, obviously right now, we're like, oh, higher interest rates, does that impact absorption? What does that impact? How do we do it? They have very sophisticated understanding of what they're seeing and how they're doing it, and so when we go into a contract with a builder. 00:19:54.590 --> 00:20:01.390 Wesley Greene: we will work with them to know absorption rates. Obviously, you know, somebody like our partner John has been in this market for a long time. 00:20:01.390 --> 00:20:13.639 Wesley Greene: And he knows exactly, based on his years of experience and the hundreds of thousands… he's sold over a thousand homes in this market. He knows, kind of, what it's going to take on a quarterly basis of homes for him to meet his goal. 00:20:13.640 --> 00:20:29.919 Wesley Greene: And so when we did the contract, we actually structured it based on his absorption data, and just like we're working with some other national builders right now, we kind of negotiate that out, and the pricing and the absorption it takes to deliver it, and then for them to deliver homes, right? So they might be doing 4 homes a month. 00:20:30.010 --> 00:20:33.519 Wesley Greene: Then we deliver 15, or, you know, 12 a quarter is what we'd be delivering. 00:20:34.740 --> 00:20:49.930 Andrew Davis: Yeah, thank you, that's really… that's really helpful clarity. So, absorption rate is not… it's not, it's not demand in general, it's just pace of sales and… and moving things through the pipeline. Okay, that's… that's very helpful. And then I think just… just… 00:20:50.070 --> 00:20:59.840 Andrew Davis: to, I guess, speak to another part of that, because we get questions about interest rates all the time, and obviously that dominates the news cycle, what the Fed isn't… is and isn't thinking. 00:20:59.940 --> 00:21:10.990 Andrew Davis: We did some research in terms of how much further existing inventory would have to drop in order to be competitive. 00:21:11.020 --> 00:21:19.269 Andrew Davis: With existing inventory in terms of the pricing of existing inventory, meaning not new construction homes, how much that would have to drop to be 00:21:19.290 --> 00:21:37.339 Andrew Davis: competitive with these types of homes. And one of the things that's really interesting, back to the conversation about these mergers and acquisitions in this space, is these large home builders, because they're doing so much volume, they don't… they don't need to have the margins that, say, a spec builder would have, or a very small builder would have. 00:21:37.340 --> 00:21:42.849 Andrew Davis: And what they're doing right now, and the reason that they're continuing to build and sell. 00:21:42.850 --> 00:22:00.839 Andrew Davis: is they're actually able to offer significant concessions that function as rate buy-downs for these entry-level home buyers. And so they're giving, in some cases, 60 or 70 grand in concessions that obviously they're building into their pricing, but for the home buyer, which is oftentimes a first-time home buyer. 00:22:00.840 --> 00:22:07.499 Andrew Davis: That lets them have a monthly payment that, you know, is within a reasonable 00:22:07.760 --> 00:22:25.349 Andrew Davis: you know, reasonable range to what they would pay for rent for a similar type property. And so, you know, new construction has a really distinct advantage over existing. And then the other piece of that, too, is about 60% of homeowners right now are locked into rates under 4%. 00:22:25.530 --> 00:22:45.130 Andrew Davis: No… with all the speculation about the Fed, it does not seem like we're going back to those, to that… those… those types of rates. And so, you know, these… these big home builders have a lot of advantages, especially in these growth markets. And I think that's just… that's just really important to know as we continue to monitor 00:22:45.280 --> 00:22:48.340 Andrew Davis: Interest rates, absorption, growth, demand. 00:22:48.790 --> 00:23:01.090 Andrew Davis: And so, as always, if you don't get your question, out here, if one comes up tomorrow, or in a week, whatever it may be, you can reach out to me directly, and we'll get you an answer right away. 00:23:01.400 --> 00:23:05.460 Andrew Davis: And just to wrap this up, Wesley, Brandon, any final thoughts before we wrap up? 00:23:08.560 --> 00:23:09.940 Brandon Hiett: Not for me. 00:23:10.200 --> 00:23:10.690 Andrew Davis: Okay. 00:23:10.690 --> 00:23:20.990 Wesley Greene: No, I think we touched on great things. Like I said, the Hewitt's a great opportunity. We're excited to get that one to where it's in a great position, and all the pieces are coming together, so it's great. Thank you. 00:23:20.990 --> 00:23:29.139 Andrew Davis: Very good. Yeah, thank you guys. And just last but not least, you know where to find us, Traction Capital Fund, Andrew at Traction Capital Fund. 00:23:29.280 --> 00:23:40.350 Andrew Davis: So look forward, and I've enjoyed every single one of you that we've connected with thus far, and look forward, to connecting with more of you in the upcoming month. All right, everybody, good night. 00:23:40.750 --> 00:23:41.829 Brandon Hiett: Cool. Thank you. 00:23:41.830 --> 00:23:42.480 Wesley Greene: See ya.