Sample Business Plan UrbanRealtors

U RBAN REALTO RS,CO PLAN M BUSINESS CITY 5023 Washington Avenue I _T_T_ Zi? - f | i Hous|on ! TX I 77007 I I !........ 713.868.7226 888.868.7226 J I l 713.868.7239 = Table 1.0 Executive Summary Of Contents I I.I MissionStatement 1.2 Industry and Market Trends 1.3 Marketing Strategy_ 1.4 Competitive Advantages 1.5 Use of Proceeds 1.6 Management 1.7 Milestones 1.8 FinancialPlan 1.9 Investor Exit Strategies 2.0 Company 2.1 2.2 2.3 2.4 i Summary I I 2 2 3 3 4 4 4 6 6 6 7 7 8 8 8 8 9 10 I0 10 II 12 12 12 13 13 13 14 15 16 16 18 18 18 19 19 19 20 20 Company Ownership. Start-Up Expensesand Funding Houston Facility Operations Plan Operations 3.0 Website 3. I 3.2 3.3 3.4 4.0 _ Site Specifications Web Hosting Hardware Security/Consumer Privacy Strategies and Integration Service ! 4. I Website 4. I. I SearchCapabilities 4.1.2 Resources 4.2 UrbaniCenter 4.2.1 InteractiveShowroom 4.2.2 On-Site Transactional ervices S 5.0 Strategic Business Units 5.1 UrbanLiving 5.I. I Services 5.2 UrbaniMedia 6.0 Market Analysis Summary 6.1 Market Segmentation 6.I. I Home Buyers 6.1.2 Home Sellers 6.1.3 Home Developers 6.1.4 RelocationServices 6.2 Target Market SegmentStrategy 6.2.1 Home Buyers 6.2.2 Home Sellers 6.2.3 Home Developers 6.2.4 Relocation Services _ _ _ i ] 7.0 6.2.5 Commercial 6.3 Real EstateIndustry Analysis 6.3.1 Trends in the Industry 6.3.2 Competition in the Industry Strategy and Implementation Summary 2I 2I 21 22 24 24 24 24 24 24 25 27 27 28 28 28 30 30 30 33 33 35 36 7.I Marketing Strategy 7.2 Positioning Statement 7.2.1 Key Consumer Benefit 7.2.2 Features 7.3 7.4 7.5 7.6 8.0 SalesStrategy_ Strategic Alliances Expansion Strategy_ Milestones Summary i Management 8. I OrganizationalStructure ! i ] 8.2 ManagementTeam 8.3 ManagementGaps 8.4 Board of Directors/Advisory Board 8.5 PersonnelPlan 9.0 7 9.1 Important Assumptions 9.2 Projected Profit and Loss 9.3 Projected Cash Flow Appendices J Financial Plan : I. II. III. IV. V. VI. VII. Attachments A, B and C Cash Flow Pro Forma - Year I, 2 and 3 Real EstateCommission Breakdown - Year I, 2 and 3 Mortgage FeesBreakdown - Year I, 2 and 3 Title InsuranceFees Breakdown - Year I, 2 and 3 UrbanLiving Revenue Forecast- Year I, 2 and 3 1%Cash Back Breakdown - Year I, 2 and 3 Contact Information _ _ • Vinod Ramani President/ CEO UrbanRealtors.com 5023 Washington Avenue Houston, Texas 77007 Phone: (713) 868-7226 Fax:(713) 868-7239 Email:vramani@urbanreators.com Website: www.urbanrealtors.com I I I :El ' UrbanRealtors.com Business Plan i.0 Executive Summary B 0 UrbanRealtors.com is a technologically based real estate company that integrates the Internet with a traditional brick-and-mortar presence. The Company offers a one-stop, one-solution environment that streamlines the home buying/selling process and provides consumers with additional home-related products and services. !.1 Mission Statement It is the mission of UrbanRealtors.com to transform the experience of buying and selling real estate by offering the most comprehensive resources available to buyers, sellers, renters, commercial businesses,developers and Realtors®.By introducing innovative technology (such as the multiple search capabilities offered through the Company's web-based search engine), professional expertise, superior service and a one-solution environment, we will set a new standard in the way the real estate businessis conducted. !.2 Industry _._ and Market Trends Although interest rates have risen steadily in the last 12 to 18 months, it has only had a minor impact on the real estate industry. The National Association of Realtors expects that 2000 will be the third best year for existing home saleson record. New home salesare expected to be at least 858,000 in the United States. With respect to the Houston market, all current indicators suggestthat the economy will be strong in 2000 and that the new home construction and home resale market will remain robust. Total residential salesin Houston for 1999 were $7.32 billion, a 13%increaseover the prior year's salesof $6.44 billion. The real estate industry is undergoing a significant transformation. Property listings, once exclusively controlled by agents and brokers, have become readily available to home buyers through the Internet. Easy access to this information and technological innovations have redefined the role of the real estate professional and reshaped consumer expectations. Consequently, a growing majority of buyers and sellers are ready for real estate companies to provide extensive and integrated functionality, including the ability to go beyond mere property listings. Increasing numbers of consumers are demanding a localized, customer-focused solution that leveragestechnology, while providing the following turnkey services and support: • A totally managedtransaction, including real estate, mortgage, title, insurance, architectural and interior design services Comprehensive property data, statistics, demographics and related community information .'_ UI_BANI_£ALTORS°COM 200 f'l URBAN HOLDING5 BUSIN£S_ GROUPr PLAN INC. CONFIDENTIAL INFORMATION ] | I I I | • • A faster and more efficient consumer-focused experience with enhancedservice levels Lower commissions and additional cost savingson home-related products | | The exponential growth of the Internet has also redefined the real estate market. Relatively young, highly educated and affluent, the Internet consumer is self-directed and less dependent on the real estate agent than the traditional consumer. According to Gomez.com, a leading consumer research firm specializing in e-commerce, 71%of Internet consumers plan to buy or sell a home in the near future. Of these, 30% plan to enter into a home transaction within the next two years. Additionally, 85%of these consumers will utilize the Internet in their next home transaction. This significant usage will occur in both first-time and experienced home buyer groups alike. I 1.3 Marketing Strategy I i UrbanRealtors.com leverages the latest technology in order to provide consumers with a dynamic, one-solution experience availableonline and in person. The Company will offer homerelated services that foster a more efficient, consumer-centric environment, including comprehensive online search capabilities, local transaction support and vital community information. The Company will provide services to buyers, sellers, renters, commercial businesses, developers/builders and Realtors®. However, our marketing efforts will primarily cater to home buyers, typically in their early 30s with a household income exceeding $50,000 per year. In order to attract these young, wealthy and educated near-term consumers, UrbanRealtors.com's image-related advertising will position the Company as progressive and high-tech, providing "virtually all you need in the realty world." Due to the proliferation of online usage,the Company will primarily target consumers who utilize the Internet as a tool for facilitating the home buying and selling process. Nevertheless, because the Company's operations will function on the Internet and at a fixed location like a traditional "brick and mortar" real estate company (i.e., our real estate agents will be able to service customers online and in person), we will be able to service anyone who is interested in purchasing or selling a home, regardless of whether they own a computer or have accessto the Internet. 1.4 Competitive Advantages Although there are many real estate websites, few offer significantvalue to the consumer. Portal sites are trying to provide an entry point for home buyers and sellers for all home-related needs. However, a nationalized approach contradicts the localized nature of real estate. The fact remains that the broker is in control of their local market, data and client relationships. Unfortunately, brokers have not leveraged this power to cement online relationships with their local community. There are several web-based real estate companies in the industry; however, no competitor currently offers the high-level of customer support and resources that UrbanRealtors.com will provide its clients. The Company believesthat its main competitive strengths lie in the following areas: URBANREALTORS.COM (_ _000 URBAN HOLDINGS BUSINESS GROUP, PLAN INC, CONFIDENTIAL INFORMATION 2 \ BII_III J 3 • • _11 '1 • • '! • • Website: User-friendly, navigablewebsite, featuring complete property search capabilities, virtual tours and comprehensive community resources, information and applicable real estate tools - all provided free of charge.The Company's proprietary technology takes existing MLS data and converts it into a readable, printable format designed specifically for the consumer. The website contains various comprehensive search categories, including Quick, Custom, Map and New Construction - each of which contains sub-search parameters such as price range,property type and specifications, address,zip code, school district and MLS number Urban-_)-Center/On-site services: An interactive showroom showcasingavailable real estate properties and creating an intermediate market for dot coms and traditional retailers offering home-related products and services. The Center will also provide personal, on-site services for consumers, including real estate agents,architects and interior designers and loan officers Urban-_)-Media: A full-service graphic design and web development division, which will service the Company's other offices, Realtors and the public Programs and Alliances: Through our UrbanLiving department, the Company will offer consumers additional values and rebates on home-related products and services Team approach: A company-wide commitment in providing services and resources that will be superior to those of our competitors Cash rebate/reduced commissions: One percent (1%) cash rebates for buyers and sellers who purchase or sell residential property through UrbanRealtors.com (in person or online) Marketing: Innovative branding and advertising tactics and local promotion 3 _1 • 1.5 Use of Proceeds The Company is seekinginitial financingof $3,000,000 within the next 30 to 45 days to fully launch its Houston operations, as well as to enter into the Dallas and Austin, Texas markets. The capital infusion will be used to fund planned expenditures for computer hardware (mainly to reconflgure its web servers), continued website development, FF&E, marketing, advertising, staffing, legal, accounting, travel and other expenses. The Company plans to expand into 24 other targeted areas and believes that such expansion will require additional funding of approximately $1,500,000 per market. l _1 ,'1 _1 2 _1 1.6 Management UrbanRealtors.com is owned by four principalfounders, who constitute the Company's core management team. With a broad and diverse range of backgrounds, UrbanRealtors.com's executive team possesses proven management skills, marketing innovation and superior technological know-how. The management team consists of a successfulentrepreneur who is a licensed Realtor_, a corporate attorney and two marketing and advertising executives. These individuals'collective attributes along with an unmatched entrepreneurial drive comprise the key to the Company's success. Vinod Ramani, President of UrbanRealtors.com, currently owns a 72.3% equity interest in the Company, with the remaining founders each owning a 5.9% equity interest. The Company has reserved 10%of its common stock for the issuanceof stock options to key personnel. As of September 15, 2000, 105,000non-qualified stock options been granted. 2 _1 _1 URBANREALTORS.COM BUSINE55 HnLDINGS I"_ROUP7 PLAN INC. CONFIDENTIAL INFORMATION 3 3_ _) 2000 URBAN 1.7 Milestones As of September 15, 2000, several of UrbanRealtors.com's milestones have already been achieved, such as purchasing the main website server, securing a bank commitment for the acquisition and build-out of the Company's corporate headquarters and showroom facilities located at 5023 Washington Avenue and implementation of accounting controls. More importantly, as can be seen in the synopsis attached at the end of this section, UrbanRealtors.com commenced generating revenues from its real estate operations since the launch of its website in May 2000. The Company presently has approximately $8 million in property listings. There are several critical milestones that the Company is working to accomplish within the next 30 to 45 days, many of which are dependant on securing financing from external investors. 1.8 Financial Plan UrbanRealtors.com's financial projections are based on revenues generated from real estate related operations, strategic alliances and graphic design/web development services. The Company's primary assumptions for such projections are the following: the real estate market will stay robust despite rising interest rates, the Company will capture an initial 0.50% share of each market it enters into and such market share will grow at a steady but conservative rate of 0.25% in each subsequent quarter.ch The financial statements also assume that the Company will establish a fully operating Urban-O-Center in Houston by January of 200 I, and that it will establish at least four Urban-D-Center's per year as part of its national expansion. Finally, the Company has assumed that the non-Texas housing markets that it enters will on average be comparable in size to the 1999 Houston market. Based on these assumptions, UrbanRealtors.com has projected revenues of $5.8 million with a net loss of $146,000 by December 3 I, 200 I; revenues of $20.7 million with net income of $3.5 million by December 3 I, 2002 and revenues of $44.8 million with net income of $9.7 million by December 3 I, 2003. 1.9 Investor Exit Strategies _ There are three feasible exit strategies through which investors may realize a return on their investment. The preferred exit strategy (should future public equity markets remain favorable for high-tech start-ups) would be an initial public offering of shares of UrbanRealtors.com's common stock, which would lead to a potential divestment opportunity for investors. However, due to the growing trends in the real estate industry to utilize technology to market services and property listings, it is quite possible that a traditional company desiring to establish or revamp its existing Internet presence may acquire the Company to capitalize on its Internet presence and search engine capabilities. Alternatively, if UrbanRealtors.com is profitable and maintains a positive cash flow, dividend payments may be used to pay a return on the investment. ° URSANREALTDRS.COM 20r"lD URBAN HOLDINGS BUSINESS r'C_ROUpt PLAN INC. CONFIDENTIAL INFORMATION 4 Transaction Synopsis The following information and chart represent a synopsisof UrbanRealtors.com's real estate and web development activities through September I 5, 2000: $103 $103 URBANF_EALTORS,COM _) 200 r'l URBAN HOLDING_ RUSINE_SS GROUP PLAN t fNC. CQNFtDENTiAL |NrORMATION 5 \ _Jl_|lll )/ 2.0 Company Summary UrbanRealtors.com is an aggressivestart-up organization with 16 full-time staff members, including 5 real estate agents.We are a high-powered team of creative and technically proficient individuals who share a common goal: To create a technologically based real estate enterprise that integrates the Internet with a traditional "brick and mortar" presence. Although the ._ Company will initially launch in Houston, Texas, it plans to aggressivelyexpand into 24 additional markets. 2. I Company _ Ownership UGI.COM, INC. is the holding company for the UrbanRealtors.com organization. UGI.COM was incorporated in the State of Texas on October 15, 1999,as a "C" corporation. Presently, two subsidiarieshave been formed to encompassthe Company'stwo main operating divisions, its core real estate businessand complementary web-development and graphic design division. UGI.COM anticipates that it will be the sole shareholder of all its operating subsidiaries. UGI.COM, INC. is currently owned by 4 principal founders. The Company's president presently owns a 72.3% equity interest in the Company, with the remaining founders each owning a 5.9% equity interest. In addition, the Company hasreserved 10%of the Company's common stock for the future issuanceof stock options to key employees and other non-employee personnel. As of September 15, 2000, 105,000 non-qualified stock options have been granted and are outstanding. _1 _1 [] [] [] [] _11 2.2 Start-Up Expenses and Funding Vinod Ramani, UrbanRealtors.com's President, has personally financed substantially all of the Company's start-up expenses. The Company will issue a promissory note to Mr. Ramani of approximately $450,000 for the repayment of such investment. The note will be payableover a three year period and will accrue interest annuallyat the prime rate plus I%. UrbanRealtors.com is seeking initial financingof approximately $3,000,000 within the next 30 to 45 days to fully launch its Houston operations, as well as to enter the Dallas and Austin, Texas markets. The capital infusion will be used to fund planned expenditures for computer hardware (mainly reconfiguration of web servers), website development, FF&E, marketing, advertising, staffing, legal, accounting, travel and other costs. This investment will also fund the Company's build-out of its offices. The financial statements in Section 9 below provide a breakdown of the Company's projected expenditures for the first 3 years of operations. Mr. Ramani has, through a wholly-owned limited partnership, applied for 2 commercial loans in the amount of $960,000 through Compass Bank to finance the acquisition and build-out of the Company's future 14,000 sq. ft. corporate offices and 10,000sq. ft. customer parking lot. These loans will be secured with properties that are owned personally by Mr. Ramani (including the facility at 5023 Washington), as well as his personal guarantee and a guarantee from the Company. Mr. Ramaniwill leasethe Washington property to the Company. [] _! [] [] [] ° :3 URBANREALTORS.COM 2000 URBAN HOLDINGS BUSINESS GROUP, PLAN INC. CONFIDENTIAL INFORMATION _' ::_ :_ The Company does not anticipate purchasing office space in any of its future locations; instead_ it will seek acceptable leasearrangements for the same. Basedon its projected expenditures for the Houston market, UrbanRealtors.com anticipates that its planned expansion into other market areaswill require additional funding of approximately $1,500,000 per market. :_ :_ :_ ::_ The Company's corporate offices will be at 5023 Washington Avenue, which is located between the Memorial Park area and the Houston downtown business district and is a two-minute drive from the Durham/Shepherd exit off Interstate Highway 10. The Washington location was selected based on (i) the low purchase price of the property, which hashistorically been significantly lower than other developed areaswithin the Highway 610 Loop and (ii) the recent residential boom in the area. The Company's offices will embody an efficient, high-tech "look" and "feel," as evidenced in the architect's renderings attached hereto as Attachment A. The facility will contain and offer the following features: o o o Executive and administrative offices [._jr-_-&____--_.:.,_ ......... : -=-_.-_ ,i, .... ] :'i_ _:._'_ o_ :__ _[' i:_ :_ On-site real estate, mortgage, insurance,title, interior design and architect services Urban-(])-Center: An interactive "clicks and bricks" showroom showcasingavailablereal estate properties, as well as services and products offered through the Company's alliances Urban-(])-Media: A full-service graphic designand web development division, which will service the Company's other offices, Realtors and the public UrbanJava:A third-party retail coffee/sandwich shop and cybercaf_ :_ o o :_ 2o40tpe_a_ion_ Plan The Company's post-funding goals will focus on fully launching its Houston operations and, in connection therewith, opening its showroom space to the public. In particular, our focus will be on the following: o :_ o o o Staff Hiring Needs: Immediately hire qualified real estate agentsand other key employees. A detailed list of available positions is set forth in the Personnel Plan Management Hiring Needs: Recruit senior management individuals with backgrounds and experience in real estate operations and accounting/finance FinalizeStrategic Alliances: Execute formal agreements with strategic partners Marketing Plan: Execute the Company's marketing strategy m:::3 URBANREALTnRS.C¢_M (_ 2f'_Of"l _JREAN H£:3LDINGS I_USlNESS _RC:_UP, PLAN INC. r-I:_NF'IDEINTIAL INF'nRMATIDN =7 3.0 Website Operations 3.1 Site Specifications Introduction: "Flash" is utilized for the lead introduction into UrbanRealtors.com's website. This program hasan efficient compact vector format that produces audio and video animation. We plan to implement a comprehensive Flash-drivenversion of the website by Fall 2001, since industry sources indicate that a majority of Internet users will have Flash installed in their computer systems. Composition: As a licensed real estate broker, UrbanRealtors.com receives Houston Association of Realtors®(HAR) MLSdata and inserts it into a SQL7 database. Additionally, usercreated lists including property favorites, notes and scheduled appointments are all stored in our SQL database.The site is comprised of HTML and Cold Fusion Markup Language(CFML), which is a server-side extension of HTML. 3.2 Web Hosting Verio: UrbanRealtors.com's website is hosted by Verio, the world's largest hosting solutions provider with more than 305,000 sites for customers in 127 countries. Verio's strategic partnerships and technology innovation provide UrbanRealtors.com with a wide range of services, including Cisco®-powered Tier One Internet backbone, security and virtual private networks. 3.3 Hardware Server: Currently, the Company utilizes a Dell PowerEdge 4400, dual processor 733 MHz with I GB of RAM. The server hasthree 100-bit network cards,40 GB DLT tape backup drive, four 9 GB SCSI hard drives, redundant power supplies, RAID, an uninterruptible power supply and is supported by Microsoft IIS4 software (running on Widows NT Server 4 and Cold Fusion Server 4.5). The server is valued at $16,000. Future Hardware: In order to handle high-traffic requirements in our four Texas markets, the Company will acquire and implement a new server configuration by September 2000. The new configuration will consist of a cluster of the following three servers: Compaq Proliant 6400R and two Compaq Proliant DL380R. This configuration will be utilized regionally as we move into expansion markets. The cost of such server configuration is estimated at $100,000 (includes hardware and software). Mail Server: UrbanRealtors.com will also acquire an additional server to handle our increased email requirements, including unlimited mail accounts for each domain, group mailing lists and scheduled email delivery. Server specifications include Cobalt RaQ3i with 128 MB RAM, 13 GB SCSIhard drive and dual Ethernet ports. The cost of such mail server configuration is estimated at $3,000 (hardware only). _1 ° ¢1 URBANREALTGRS.CDM (_) 2000 URBAN HOLDINGS BUSINESS r'C_ROUP_ PLAN INC. CONFIDENTIAL INFORMATION S_I 3.4 Security/Consumer Privacy In order to reinforce the site's security, the Company will implement a firewall behind Verio's firewall. Additionally, Verisign software will be used to encrypt online applications containing sensitive consumer information. Becauseconsumer confidence is vital to the long-term success of real estate e-commerce, UrbanRealtors.com will not sell, give away or share user information that is acquired through site visits or registration. The Company's Privacy Policy guidelines will be prominently displayed on the website in a dedicated section. =1 ° URBANREALTQRS.CQM _) 2000 URBAN BUSINESB HOLDINGS GRQUP_ PLAN INE:. CONFIDENTIAL INFDRMATION _1 =_. =_ Since the home buying and selling process requires numerous service providers to interact with consumers even before there is a transaction, we create value by offering a seamless, onesolution experience. Subsequently, UrbanRealtors.com provides buyers, sellers and renters a localized real estate solution that leveragestechnology, while providing value-added, person-toperson service and assistance. These services are supported by an internal intranet that facilitates scheduled appointments, lead generation and information requests. _. UrbanRealtors.com's website offers comprehensive tools, search capabilities and informative reports with relevant community information that have been implemented in order to significantly shorten the home buying process. The site's content, user-friendly layout and functionality has been systematically developed in order to capitalize on the ,_,_,_ .............. . .._-_ .... ,_ ...... inherent efficiencies of the Internet, thus ...... _ =_ -_ ,-_,_ .-_ __.,- ,.. _J _ -_ maximizing the end user's online experience. _L_=,_-==_._ -,_0.-_ ' Research conducted by the California Association of Realtors® supports our approach. Its May 1999 report cited that home buyers usingthe Internet shortened the decision time from home searchingto closing _=__ == _,_==._=_ Z=_'.._=_ =_ .... _-'--'_ i ;_L'-"_ _, ...o.. ! _" _._ ,, ::_ i;i!l _._i_! i_i _1 buyer, on the months. Theaverages5 months to under 3 other hand, traditional home for the same process. _ _,_- I With nearly 30,000 registered property listings in the greater Houston area alone, finding a home that fits specific parameters can be an overwhelming and time-consuming endeavor. In order to streamline this process, UrbanReaitors.com offers an advanced property search engine that takes existing IviLSdata and converts it into a _._.__.:._._-:;_,:,,.,_._ readable, printable format for consumers. The +.._ _ _ _ _ _ _..a _. _, _! website contains various comprehensive search _::::-TII:-:. ..................i._r_;;;;_:i;;_i_] categories, including Quick, Custom, Map and New ..I_ _'_:-i'_'_, :i_i"_"""_'_"_ _............................ .......... _,_ Construction - each of which contains sub-search t>L_i I,_._,i _ 1_] _ I _ ] t_t_:_:l _ • :_ i i-._ _ _ it parameters such as price range, property type and _.i specifications, address,zip code, school district and I _1 iViLS number. !.7:-."._,, !,':! ...................................... :- .o ,,z,,= .... £,_ LIRBAN_EALTORN,_.OM _) _OO =''t URBAN I=IU_INE_ PLAN HOLDINGS GI_I::IUP_ INC, "] rl CGNF"_DENT|AL JN_DRP,4ATIr'_H _banReaO_o_s.corn's _e_rch technoDogicz_ fez_ures: czpzbi_ities _e enhanced wi_h _he _ollowing IPa_m: As an extension of our online search engine, the Company will offer free software downloads to enable remote search capabilities utilizing Palm hand-held units that are equipped with wireless technology. q==_ !_ageffan GIP$: All Company cars will be equipped with portable Magellan Global Positioning Satellite (GPS) systems. Mi_uaD Yours: Our virtual tour program provides at least 6 property views, including exterior and selected room perspectives. UrbanRealtors.com will offer these services to enhance site content and acquire listings from individual homeowners and developers. :_ :_ In addition to streamlining property selection through specialized search technology, UrbanReaitors.com's Resource Center also providesa broad range of serviceschat simplify the transaction process. Near term buyers can print easy-co-read flyers that summarize property specifications, submit mortgage applications, calculate monthly payments, determine break-even points on buying vs. renting, and receive automatic email notifications on selected properties and savedhome criteria. Fez_ured Online [_esources Yeans_¢_ion Services: Our one-solution environment also offers consumers everything needed in the home buying and selling process, including mortgage, title closing, insurance and architectural/interior design services. ____._,_.,_=_-_..._ '_ i_ ;_ Z_ _ _ _._-_ ._. _ _-_'---_---_-=-............ :--:....... :'_-_ IP_anneF.The Planner is the primary interface for near term buyers. It includes the following personalized functions: Stores favorite homes; Schedulesappointments with our Realtors®;Saves search parameters for future inquiries; Obtains neighborhood statistics and maps; Modifies i_ existingaccount information. i_ t_e_o INet_ork: This function enables instant _I communications between the consumer and a live _ UrbanRealtors.com Realtore. :_1 -11 =n ID_nzmic tnformmtion: The website has been configured to automatically advance selected data into corresponding tools, calculators, forms and demographic information as seen on the following page. By dynamically populating these internal links and applications for the consumer, the transaction process is more accurate, efficient and user friendly. URSANREALTORS.COM 2000 IIRBAN HOLDINGS BUSINESS PLAN GROUP, ]NI_. _ONI'-ID_--NTIAL "_ 1 |NF_ORMATION :i Lozn Qualifier Rent V_oI_uy : I-=- J --=: K-.,..° ......... < -r_='_ --..... - -----_='--" L_ -........ i!! ' I_eaBtor® Suppo_c: UrbanReakors.com offers a host of marketing support and technological services for local Realtors®, including virtual tours, web design and weekend bus tours of selected neighborhoods and communities. The Urban-C)-Center in Houston, Texas, will be the site of our corporate operations, Realtor_ offices and multimedia development division, Urban-D-Media. The 14,000 square-foot Center offers consumers more than just a physical alternative to the Internet. Its primary function is to provide consumers with a local, one-solution realty experience through on-site transaction services, home-related merchandiseand services designed to ease residential transitions. The Urban-D-Center's technology-driven interactive area will feature home-related service providers, which will include both national dot corns and traditional retailers (see section 5.1.1 for retail categories). Eachmerchant will integrate its web services with interactive kiosks within the interactive area and display targeted consumer goods. Buyers, sellers and renters visiting the Center will be able to shop online from the showroom with the assistanceof a partnering sales representative and tesdsample products for in and around the home. 4oZoZ_n°$_e Trzns_c_onall Se_ce_ l_ea_tors®: Because UrbanRealtors.com offers a rare combination of online information and turnkey services; our Realtors® will also possessextensive transaction experience and Internet knowledge. The Urban-(_-Center will accommodate 16 agents/brokers to assist consumers visiting our brick-and-mortar location. _ran_ac_ion Services: From the consumer's perspective, buying a home is complex, heavily regulated and saturated with too many different participants. In order to simplify the process, in addition to its Realtors®,we will also offer the following complete on-site transaction services: mortgage, title, insurance, interior designand architecture. :_ ¢:_ LIRBANREALTORB,I_Dh,1 (_ 2000 URBAN HnLDINB5 BU_IN_BB r_ROUP, PLAN IN_. _I_NF'IDENTIAL INFnRMATION ] 3 3 2 3 5.0 Strategic Business Units In addition to the Company'score real estate business, rbanRealtors.comwill alsooffer buyers U and sellers additional discounts and rebates on home-related products and services and provide turnkey multimedia solutions through UrbanLiving and Urban-D-Media. These strategic units will support the Company's technical and customer service operations and incrementally increase the Company's revenues by: [] • • • • Providing the highest level of customer service Creating internal communication and productivity efficiencies Promoting long-term revenue streams Turning cost centers (website maintenanceand customer service) into profit centers [] [] [] 5. I UrbanLiving Functioning as a revenue source and a consumer support division to UrbanRealtors.com's real estate services, UrbanLiving will identify, develop and maintain alliances with companies that enhance our ability to: • • • • i] • Provide consumers with a turnkey, one-solution environment Offer home buyers substantialrebates and discounts on home-related products and services Create revenue streams, strategic alliancesand local retail partners Cross-promote UrbanRealtors.com's services through related websites and traditional retail locations alike Provide e-commerce companies and traditional retailers with an intermediate market interface in the Urban-D-Center, our interactive showroom, thus enhancingour customers' rangeof product and service options D D D 5.I.I Services According to industry research, in the 12months following a home purchase, consumers spend between $10,000 to $15,000 on related products and services for the home. With complete knowledge of each homeowner's background and specific needs, UrbanRealtors.com is in an excellent position to be a valuable resource to consumers in the months and years following their property purchase. The UrbanLiving department will facilitate this ongoing e-commerce opportunity through the following strategic service affiliations: • • 1 • • • • UrbanRewards: Major retailers that will provide rebates and additional discounts to the Company's home buyers and sellers Service: Local home-related service providers that will assist consumers in the residential transition, such as pest control, moving services and home security Lifestyles: Primarily comprised of dot coms that provide products and services that complement everyday life, the Company will target providers such as Petopia.com and Monster.com Local: Real-time updates on community culture, events and activities, including restaurant reviews, movie times and lifestyle advice UrbanUtilities: Disconnection, set up and transfer services for all utilities URBANREALTORS,COM _) "-_O I-I1-1 URBAN HOLDINGS BUSINESS GROUP_ PLAN INC. tr_-DNFIDENTIAL INFORMATION [] These alliances will provide value-added services and increased buying power through additional consumer incentives. The synergy formed here is three-fold: • Our partners will provide additional discounts and incentives for home-related products and services in one convenient location UrbanRealtors.com's credibility is enhancedand market penetration is expanded from national brand alliances UrbanRealtors.com will receive monthly partnering fees from these alliances,creating longterm revenue streams [] [] • • [] [] [] _1 5.2 Urban-O-Media The development of the UrbanRealtors.com website required a collaboration of minds anti technology to produce the final product. A combination of conceptual thinking, comprehensive data management_award-winning design, Flashtechnology, effective copywriting and audio were needed to create a site that far surpasses our existing competition. In addition, our goal of optimizing user simplicity and providing superior service levels in a constantly changing technological environment led to the creation of Urban-O-Media as a strategic business unit. The Urban-_-Media division will service UrbanRealtors.com's ongoing marketing, website development and graphic design needs and thus fully complement the Company's core real estate business objectives. Moreover, Urban-(D-Media will offer its services to the public, effectively converting a major cost center into a profit center. [] [] [] [] [] [] rl rs [] [] [] [] m m 3 URBANREALTORS.COM BUSINESS HOLDINGS GROUP_ PLAN INC. CONFIDENTIAL INFORMATION ] 4 3 _) 2000 URBAN | | | | 6.0 Market AnalysisSummary Residential Real Estate Market: Although interest rates have risen steadilyin the last 12to 18 months, it has only had a minor impact on the real estate industry. As will be evidenced below, many opportunities exist on the national and local level for real estate companies servicing the following sectors of the real estate industry: residential (buyers and sellers), commercial, home developers, corporate relocation and renters. _1 The services made available through UrbanRealtors.com should attract consumers in this competitive industry and satisfy their need for comprehensive information, live assistanceand cost savings, and ultimately ensure the Company's success in this presently high-growth economy, as well as in a slow-growth economy. On a national level, the residential real estate market has been strong during 2000: _11 • There was a 9.3% national increase in existing-home salesthis past August for a seasonally adjusted annual rate of 5.27 million units, which is almost as high as the 5.3 million rate set in August 1999 Home builders have maintained a high saleslevel for new homes - for the month of July 2000, salesof new homes increased 14.7%to an annually adjusted rate of 944,000, compared to 936,000 in July 1999 With respect to Houston, the residential market in 1999 was record breakingJ More importantly, all current indicators suggestthat Houston's residential market for 2000 will also be strong. _1 During the month of July, 5,183 used homes were sold in Houston, which was 7.4% lower than the sales posted in July 1999.. However, the past July marks only the I I • time in the past 20 years that monthly sales of used homes in Houston exceeded 5,000. New home sales in Houston during July 2000 were up 34% from the previous July. The median sales price in Houston for existing single-family homes last year was $105,000, up 8.4% from the record median price set in 1998.The median sales price for existing single-family homes for the month of July 2000 rose to $121,900, a new record for the Houston market. Economists believe that the low unemployment (4.2% last year, the lowest since 1969) and inflation levels, as well as the high-flyingstock market, are contributing reasons for the high sales activity being experienced in the real estate market. In addition, increased revenues in the energy sector and increases in corporate relocations have led to sharp increases in the sale of new homes in the Houston area. Thus, all economic indicators suggest that Houston and the rest of the nation will experience healthy salesin the new and used home market during 2000.2 _1 i Total residentialsalesfor 1999were $7.32billion,a 13%increaseover the prior year'ssalesof $6.44 billion. Total usedhomesalesin 1999for Houstonwere 54,704,up5.4%from last year'srecord number of 51,904.Realtorssold5,041town homes and condominiums 1999,representing 3.6%increaseover in a 1998,and soldthem at a medianprice of $67,000,up from $62,300a year ago.High-riseand loft sales dropped by 8% in 1999,however,the medianprice increasedsubstantially 9.8%,finishing1999at by $190,000. Salesof residentiallots also increased11.4%in 1999to 2,923, as did salesof multi-family property,whichincreased modestly. 2A recent studyfrom the Brookings Institution andthe HarvardUniversity JointCenter for Housing Studiesidentifiedin Houston(aswell asSanAntonio andDallas)as"hot" construction markets. _11 • _11 _11 _1 _J URBANREALTORS.COM 2000 URBAN HOLDINGS BUSINESS (_ROUP, PLAN INC. CONFIDENTIAL INFORMATION 1 5 I ;1 Commercial Real Estate Market: According to sourcesin the industry, the commercial real estate market will also remain strong in 2000 with plentiful opportunities for industry participants and continued national supply/demand equilibrium. For example, construction spending jumped sharply in January for the third consecutive month. Thus, it is predicted that the momentum experienced in the commercial real estate market during the past 5 years will continue, although with slightly more moderate value creation. _1 _! 6. I Market _! ;i _! _i Segmentation UrbanRealtors.com has identified the following participants in the residential real estate market that it will focus on: home buyers, home sellers, home developers, corporate relocations and renters. On the commercial side, the Company will target the following participants: buyers, sellers, lessors and lessees. _1 '11 _1 131 _il _1 11 _! 6. I. I Home Buyers 25.34 35-44 34.2 29.0 The growing use of the Internet by consumers throughout the nation is unquestionable. A study by Jupiter Communications predicts that 67.5 million (about 65%) households will be connected to the Internet by 2003. Many of those consumerswill usethe Internet to assist them in the home buying/sellingprocess. For example,Gomez.com estimatesthat in the year 2000, approximately two million consumers plan to buy and/or sell a home. More importantly, Gomez found that before visiting an agent, manysuchconsumers planto shop on the Internet to find unbiasedinformation, price discounts and outstanding customer service to assistthem in the home buying/selling process. At least one study conducted by the National Association of Realtors®hasfound that 23% of all potential home buyers have searched for a home online. Another study conducted by NPD Research Group ;f0und that online realty sites are attracting 64% of all Internet users looking for homes. For these reasons, we have categorized home buyers into two different target segments:traditional home buyers (nonInternet users) and Internet home buyers. 45 - 54 20.3 55-64 8.1 65 + 2.0 ................................................................... , ,,,. ,,, ___, _:..I $25-34 $35 - 44 $45-59 $60-74 $75 -99 $100-149 $150 - 199 $200. 10.9 14.9 20.3 14.1 14.8 11.7 2.9 2.5 _1 _1 3 "!1 '11 _! HS Grad Some College College Grad Graduate Dg 9.6 29.2 36.4 22.8 URBANREALTORS.COM _) 2000 URBAN HOLDINO_BUSINESS GROUP, PLAN INC. CONFIDENTIAL INFORMATION I 6 3 A study conducted last year by the California Association of Realtors®, which Management believes accurately reflects the impact that the Internet is having on the home buying process, revealed the following facts about traditional and Internet home buyers: • Lesstime spent in home buying process: Internet home buyers spend approximately half the time (two and one-half months) that traditional home buyers (five months) spend in the home buying process from the point of considering buying a home, to the time spent looking for the home with a Realtor_, to the decision to purchase Lesstime spent with agent: Internet home buyers spend approximately half the time looking for a home with an agent prior to a purchase (median of 4 weeks) as opposed to traditional home buyers (median of 8 weeks) Benefits of Internet: 71%of the Internet home buyers surveyed strongly agreed that the Internet gave them a better understanding of the home buying process; 52% said the Internet helped them shop for the best deal; 76%claimed the Internet put them in better control of the home buying process; and 56%claimed the Internet helped them to locate the best possible neighborhood • _! _11 Reasonsfor using Internet: 89% of Internet home buyers used the Internet to locate real estate firms; 87%to find a specific real estate agent; 82%to preview homes; 77%to learn about rights and obligations; 75%to identify specific homes to view; 71%to obtain information on home financingand down payments;69%to learn about specific neighborhoods; 61%to learn about relocation destination; and 58%to pre-qualify for a loan Finding real estate agentsand brokers: In looking for real estate agentsand brokers, Internet home buyers looked at real estate company websites (92%), individual Realtor websites (65%), and Realtor.com, the official website of the National Association of Realtors® (71%) • Finding listing information: In looking for listing information, the most common sites visited by Internet home buyers were real estate company websites (97%), individual Realtor websites (89%), and Realtor.com (71%) Use of Internet for purchaseof next home: Almost all Internet home buyers (93%) are "very likely" to use the Internet to aid in the purchaseof their next home, with the remaining buyers (7%) being "likely" to usethe Internet in the future _1 _1 • • • • 1 The NPD Research Group also found that 85% of home buying Internet users said that convenience is the primary reason for utilizing the Internet. However, notwithstanding the growing dependence on the Internet, it seems clear that the Internet will not any time soon truly displace the Realtor_, whose role in personally guiding the consumer through the complicated process of buying and selling a home constitutes a unique and invaluable resource for consumers. ,In fact_ one recent study found that only 10% of consumers are very comfortable doing business with companies that exist solely on the web. Thus, real estate companies must be prepared to not only offer web-based services to their clients, but also provide live personnel that can immediately support the clients' needs. _1 3 [] ] URBANREALTDRS.r_DM (_) 21-tf-IC] URBAN HDLDINGS BUSINESS [_RDUP_ PLAN INC. _-QNFIDENTIAL INFDRMATION 1 "7 [] 3 6.1.2 Home Sellers [] [] A survey conducted in 1998 by the National Association of Realtors® revealed that a vast majority of repeat buyers (85%) sold their previous homes before purchasing their current homes. A majority of respondents stated that real estate agents played an important role in selling their previous homes. In fact, 68% of repeat buyers sold their previous home with the help of an agent. When asked what they most desired from real estate agents, sellers in the survey responded: • • • Aid in finding buyers for their homes (30%) Assistance in pricing their homes competitively (28%) Facilitate the selling of their homes within a specific timeframe (26%) [] [] 3 [] [] [] _11 [] However, due to the abundance of information found on the Internet, an increasing number of sellers are turning to web-based companies for access to resources and services previously available only through agents. An increasing numbers of consumers are even selling their homes without the services of an agent. When queried as to the reason why they had not used an agent, 6 out of 10 respondents stated that they did not want to pay agent commissions. However, many of the For Sale by Owner (FSBO) sellers admitted that the primary problem in not utilizing an agent's services was attracting potential home buyers. Another problem experienced by at least 10%of these consumers was the inability to sell their homes within a planned timeframe. 6.1.3 Home Developers [] [] [] _1 [] [] [] [] Developers constitute another important target segment due to the increased construction activity in the residential real estate market. In interviews conducted by UrbanRealtors.com with local developers, they expressed the following concerns in the manner by which their properties have traditionally been marketed: • • • • • Payinga typical 6% commission to sellthe properties Inaccessibility of the Realtors®marketing their properties Minimal efforts by Realtors® to market the properties Resistancein usingtechnology and the Internet to speed up the selling process The need for other service providers such as interior designersand loan officers to assist home buyers through the transaction process 6.1.4 Relocation Services [] [] [] [] [] New home sales_jnHouston for July2000 were up 34%from lastJuly. One often cited reason for this increase is that major corporations in the area such as ExxonMobil and Enron continuously transfer a significant number of employees in and out of the Houston area. Additionally, the employment opportunities created by the thriving economy and consolidations taking place in various industries should also generate a steady flow of home buyers, sellers and renters for the local residential market. URBANREALTORS.COM 2000 URBAN HOLDINGS BUSINESS r_ROUP, PLAN INC. CONFIDENTIAL INFORMATION ] 8 6.2 Target Market Segment Strategy UrbanRealtors.com will offer home-related services that foster a more efficient, consumercentric environment, including comprehensive online search capabilities, local transaction support and vital community information. It will leverage the latest technology in order to provide its targeted market segments with a dynamic, one-solution experience available online and in person. The Company will provide turnkey services to buyers, sellers, renters, commercial, developers/builders and Realtors®. 6.2.1 Home Buyers UrbanRealtors.com will target consumers who utilize the Internet as a tool for property searches,selecting an agent and buying a home. Additionally, the Company will also service the traditional consumer who may not have accessto the Internet or be comfortable with online retail interaction. Since UrbanRealtors.com's operations will function on the Internet and at a fixed location like a traditional real estate company (i.e., our real estate agents interact with customers online and in person), we will be able to service anyone who is interested in purchasing a home, regardless of whether he or she owns a computer or has access to the Interner. The Company is making every effort to offer the Internet user an easy-to-use online interface that provides comprehensive property data, demographic and related community information in order to educate the user on important elements of the home buying process. Once a consumer makes the decision to purchase a home, the Company will provide a one-stop shopping environment,3 which includes on-site real estate agents, loan officers, title insurance representatives, architects and interior designers.Additionally, UrbanRealtors.com will provide home buyers with a full range of discounted services and products offered through the UrbanRewards and UrbanLiving program. These unique services and applicable resources by themselves will generate sufficient consumer interest, with the Company's I% cash back program increasingthe probability of securing their business. 6.2.2 Home Sellers Home sellers are becoming increasinglyresistant to payingthe typical 6% commission to agents and brokers. High property values and strong market demand have reshaped consumers' expectations. Sellers now demand that their agentsactively and effectively market their property in order to minimize the amount of time a home is on the market. Traditional methods, such as placing signs in a lawn or advertising in Sunday'spaper as the sole meansof marketing a home is no longer acceptable, especially with the advent the Internet and the proliferation of online real estate alternatives. _.. UrbanRealtors.com's primary focus with respect to sellers will be to capitalize on the efficiencies of the Internet in order to minimize the amount of time a home remains on the market by performing, among other things, the following services: (i) display the home as a featured listing 3 Current NAR researchrevealsthat 78%of home buyerslike the idea of one-stop shoppingand 32% would actuallypaymore for the convenience. URBANREALTORS.COM _1 *'_000 IIIRBAN HOLDINGS BUSINESS f'_RC]UP_ PLAN INC. CONFIDENTIAL INFORMATION 1 _ "__) on the Company's website (and thus increase the exposure of the home with potential buyers) with six virtual tour pictures of the home, provided at no charge to the seller; (ii) list the seller's property on the local MLS system and numerous national websites such as Realtor.com and HomeAdvisor.com; (iii) place the Company's branded signage on the homeowner's property with detailed property information flyers; (iv) schedule tours and open-houses for the home; and (v) install "Talking House" technology that provides detailed information on the listing via a fixed AM frequency. With respect to the FSBO market, the Company will assist homeowners in marketing their homes by listing the home on its website as a featured listing (but not on the local MLS system or any other national websites) with 6 virtual tour pictures of the home, provided at no charge to the seller, and the Company will place its branded signageon the homeowner's property with detailed property information flyers. This service will be provided to FSBOsfor a fee equal to 2% of the home salesprice. Representing FSBOsellers will give the Company an opportunity to potentially "upgrade" the seller into our standard marketing plan (full commission) and improve the home buyer capture rate when these sellers are ready to purchasea home. ._ 6.2.3 Home Developers By directly targeting developers, the Company will not only increasethe number of its exclusive listings, but it will also increase the probability of receiving the full 6% commission (less 2% in cash back rebates to the seller and the buyer, if the buyer is also represented by the Company) typically earned on the sale of a home. Like home sellers, developers are becoming increasingly dissatisfied with the services and non-web based marketing programs offered by traditional realty companies. More importantly, developers are looking for ways to savemoney and reduce the commissions they pay Realtors®. For these reasons, the Company will provide the developer with many of the services offered to home sellers (including the I% cash back program), along with bus tours to their residential developments. Some developers will be eligible to receive even greater cash back rebates depending on the volume of properties listed with the Company. Additionally, the Company intends to provide developers with technology allowing them to apply for construction permits through the nnternet and the added convenience of having on-site architects and interior designers available to assist the home buyer. m 6.2.4 Relocation Services The Company will target corporations that have historically relocated large numbers of employees to areasthat the Company services. If, for example, the Company were to represent ExxonMobil, which historically has relocated large numbers of employees in and out of Houston, Exxon's employees would have access to a website (for example Exxon.UrbanRealtors.com) that would link them directly to the Company's Houston search engine. The Company's real estate agentswould also be availableto assistthe employee in selling their homes and/or finding a suitable home to buy or rent. After closing on a home, the Company would make all arrangements necessary to relocate the employee, from hiring the moving company to connecting or disconnecting utilities. Of course, the employee would be entitled to the same cash back programs as other home buyers and sellers. URBANREALTORS,GOM _) 2o1-1o URBAN HOLDINGS BUSINESS r_RDUP_ PLAN INC. r"-ONFIDENTIAL INFORMATION _'__rl | | 6.2.5 Commercial The Company's real estate agents will also be availableto assist individualsand businessesin selling,buyingor leasingpreferred commercial space. | 31 | 6.3 Real Estate Industry Analysis The real estate industry is a very high-dollar volume4 but highly fragmented industry, as can be seen by the membership survey conducted last year by the National Association of Realtors®, which found that on a national level, Realtors®are affiliated with the following firms: • • • • Independent, franchised companies (38%) Independent, non-franchised companies (52%) Subsidiariesof national or regional corporations (9%) Other (2%) ! 11 According to such study, the typical Realtor_ is associated with an independently owned, nonfranchised firm that has one sales office and 18 salesassociates. The survey underscored the fact that an increasing number of Realtors® regardless of their firm affiliation, have begun to , market their services and listings with the help of the Internet in an effort to harness the potential benefits available from such technology. More importantly, because of the opportunities created by such technology, the industry hasalso seen an abundance of real estate website portals, as well as a handful of web-based realty companies, enter this very lucrative market. | _i I | 6.3.1 Trends in the Industry I | | | | As previously discussed,an increasingnumber of consumersare dependingon the Internet to transact business, especially those consumers who are interested in buying and selling real estate. Consumers are increasingly dependant on the Internet to, among other things, educate themselves on the home transaction process and find prospective neighborhoods, real estate companies/agents and savings, i.e., reduced commissions. Many Realtors® are aware of this increasing reliance on the Internet and the underlying reasons for such use and have already taken action. More than three out of five Realtors® currently use e-mail and the Internet for businesspurposes. Three out of ten Realtors® have a web page,but 28% of respondents without an online presence reported that they plan to set up a web pagein the future. The National Association of Realtors®also reports that 4% of Realtors® received at least 10%of their businessfrom the Internet, but such numbers are expected to grow substantially as more and more Realtors_ harness the benefits of the Internet. In fact, a majority of Realtors® in the survey already believe that the Internet represents a new opportunity for business,while only 10%perceive it as a threat. More important, however, is the fact that many consumers, whether or not they themselves are Internet savvy, expect their own real estate agent to eventually provide a broad spectrum of online services. 4 The U.S. Department of Commerceestimatesthat approximately$300 billion is spent annuallyby consumerssolelyon the purchase andsaleof residentialrealestate. I ! | | | | i URBANREALTORS.COM (_ 200 I-I URBAN HOLDINGS RLIBINCSS GROUPy PLAN INC. CONFIDENTIAL INFORMATION 21 I _1 Technology-based real estate will play a vital role in both residential and commercial transactions. Alex Perriello, Chief Executive Officer of Coldwell Banker Real Estate Corp., was recently quoted in a news articles stating that the "future belongs to real estate companies who offer consumers a high-tech, high-touch combination of extensive online information and savvy sales associates who can respond to the human side. Start-up web companies without experienced salesassociatesand traditional real estate companies that aren't using the Internet to its fullest only have part of that equation for success." 6.3.2 Competition in the Industr/ _1 Although there are many traditional real estate companies that the Company will compete with for a share of the market, such as RE/MAX, Coldwell Banker, Ray Allison, Martha Turner, Greenwood King, John Daugherty, etc., the Company's true competitors are the web-based real estate companies. From that perspective, our main Internet-based competitors are E-Realty, Zip-Realty, E-Home and YourHomeDirect. These companies are currently operating within limited geographic areas. E-Realtyand Zip-Realty are each currently operating in ten markets. EHome Js currently operating in eleven markets. YourHomeDirect is currently operating in the New Jersey area. All of these companies, however, have aggressive expansion strategies whereby they will commence servicingselect cities throughout the United States. Real estate portals such as the Houston Association of Realtor's HAR.COM, the National Association of Realtor's REALTOR.COM and Microsoft's HOMEADVISOR.COM, just to name a few, are not true competitors of the Company. Even though these portals offer consumers a guide to home buying and selling,tools to research homes and neighborhoods, accessto loans on the Internet and home listings, they are not real estate companies and do not offer consumers immediate online and in person support services. _1 | ] The Company's main competitive strengths lie in the following areas: • Website: User-friendly, navigable website, featuring complete property search capabilities, virtual tours and comprehensive community resources, information and applicable real estate tools, all provided free of charge Urban-(])-Center/On-site services: Our interactive showroom creates an intermediate market for dot corns and traditional retailers, and provides personal, on-site services for consumers, including real estate agents,architects and interior designersand loan officers Programs and Alliances: Through our UrbanLiving division, the Company will offer consumers additional valuesand rebates on home-related products and services Team approach: A company-wide commitment in providing services and resources that will be superior to those of our competitors Technology: Cutting-edge technology for our front and back-end systems Cash rebate/reduced commissions: One percent (1%) cash rebates for buyers and sellers who purchase-_br ell residential property through UrbanRealtors.com (in person or online) s Marketing: Innovative branding, marketing and advertising tactics and local promotional methodology I • i • _1 ! | • I | | • • • More specifically, as illustrated on the following page, to our knowledge, no competitor currently offers all of the servicesthat UrbanRealtors.com will provide the public. I ' i URBANREALTRIRS.COM _) 2E)E)Q URBAN HDLDING5 BUSINESS GRDUP, PLAN INC. CDNFIDENTIAL INFQRMATIDN 2 _- ¢1 :1 NO NO NO NO NO NO NO YES YES YES :l NO YES NO YES NO NO NO NO NO YES NO NO NO YES NO YES NO NO NO NO YES YES YES YES YES YES _1 NO NO "I NO NO [] [] _1 [] _1 E] NO NO NO NO YES NO NO NO NO NO NO NO NO NO NO NO NO NO YES NO YES YES YES YES YES Ci a Ci g B g URBANREALTORS.CDM _) 21"tl-IO URBAN HOLDINGS BUSINESS GROUP, PLAN |NC, CONFIDENTIAL INFORMATION _ 3 | 7.0 Strategiesand ImplementationSummary 7. I Marketing Strategy UrbanRealtors.com will primarily cater to home buyers, typically in their early 30s. Because the average real estate professional is 50 years old, there is an obvious generation gap between agents and their Internet using clients. In order to attract these near term consumers, UrbanRealtors.com's marketing efforts will position the Company as a progressive, high-tech, one-solution realty experience. 3 7.2 Positioning Statement UrbanRealtors.com is the leading online and bricks-and-mortar resource to the Internet-savvy professional as an alternative to impersonal portal sites and the inefficient process that is typical of real estate transactions today. We intend on offering an unparalleled, one-solution environment that incorporates all relevant transaction and home-related services online and onsite. UrbanRealtors.com will offer a broader range of services, advanced search capabilities and information resources than any other real estate company today. 7.2.1 Key Consumer Benefit Our "clicks and bricks," one-solution approach makes the most of the technology consumers prefer to use, while providing value-added,localized service and assistance. 3 1 | 7.2.2 Features The aspectsof our services that are most beneficialto our target consumers are: • Convenience: One-solution environment, "Clicks and Bricks" services integration/ dynamically populated calculators, forms and applications Technology."Advanced home selection capabilities/Interactive showroom Affordability: Commission rebates/Rebatesfrom home-related retailers Knowledge: Free comprehensive demographic and community reports/Resource Center | | • • • ! | | | | | 7.3 Sales Strategy Pricing _+ Due to the free-flow of MLS data and property value information now available to the general public, more consumers plan to independently identify the home they desire and take a more active role in leading the transaction to closing. This market reality, along with the acceleration of the entire real estate process, allows UrbanRealtors.com to effectively lower the typical 6% agent salescommission to 5% for sellers and givebuyers I% cash back on the purchase price of the home. ' I URBANREALTQR==.COM (_ 2000 URBAN HOLDINGS BUSINESS GROUP_ PLAN INC. [_ONFIDENTIAL INFORMATION 24 I 3 _11 Promotion Our primary means of acquainting our target groups with UrbanRealtors.com will be local advertising and branding. We will support our advertising efforts with a forecasted budget of approximately 22.5% of net sales in 2000, running strong awareness and image-building _1 campaigns.Additionally, a certain percentage of monthly revenuesfrom strategic allianceswill be diverted to advertisingexpenditures. Advertising External: UrbanRealtors.com's marketing and advertising program is designed to build brand awareness and increase traffic to both our website and Urban-(D-Center. Our comprehensive media plan will include billboards, radio, nnternet, broadcast, cable cross channel, direct mail and print. Internal Communications: UrbanRealtors.com's internal marketing will complement its external strategies. By narrowing the scope of our services through targeted posters, brochures and point-of-purchases, we will better guide near-term consumers through the transaction, maximizing each client's potential. Publicity and Public Remations Through our public relations firm, UrbanRealtors.com will aggressively promote company programs, alliances,market expansion and technology advancements. Our PR strategies will also include joining or associating with influential industry associations as we expand into each additional market. We will also employ local event marketing, promotions and value-added campaignsin order to stimulate exposure and subsequent sales. 3 _1 _1 7.4 Strategic Alliances According to industry research, in the 12 months following a home purchase, consumers on average spend between $15,000 to $20,000 on home-related products and services. With complete knowledge of each client's background and specific needs, UrbanRealtors.com will position itself as a home service consultant, providing valuable online and on-site resources for consumers in the months and yearsfollowing their initial purchase. The following table demonstrates the significanceof being accessibleto consumers during the transaction process. According to a national consumer study, homebuyers and sellers on average spend $5,000 on _urniture and accessories during the three weeks before and after a move. URBANREALTORS.C:OM (_) 2 nf'ln URBAN HDLDINGS BUSINESS f'_RDUP, PLAN IRE:, _--5 F_-nNFIDENTIAL |NFORMATInN 3 Established 1 Strategic Alliances 3 3 3 3 3 3 3 3 The Oaks Group, The Loft interior design and UrbanLending mortgage company (in joint venture with Stellar Mortgage, LLC), Terra Management Landscaping and Rock Fin Pier One Restoration Hardware _1 Bed, Bath & Beyond Linens 'n Things '_] Lowes Ace Hardware Sears Dell _1 Gateway Circuit City Tweeter i_ URBANRE:ALTORS.COM _) 2000 URBAN BUSINESS HOLDINGS I'¢-ROMPy PLAN INC. CONFIDENTIAL INF'GRMATIQN '_) Q | I I 7.5 Expansion Strategy I II The Company has adopted an aggressive expansion strategy whereby it will open offices in the top 25 residential real estate markets in the United States (based on the number of residential permits issued for 1999). The Company's future markets are highlighted in Attachment B. l | 7.6 Milestones l The Milestones Table below sets forth various milestones that Management has established for the Company. Responsibility for the implementation of such milestones rests on various members of Management. The Milestones Table will be updated as necessary during the first year of operations. ! I ! I ] Select building for Urban-DCenter location Purchase website server and secure host Implementation of accounting controls Secure bank financing for building Complete business plan Website soft launch _] Obtain final architect designs and interior design plans Implement marketing plan Implement personnel plan Urban-D-Center Construction Website hard launch 11/1/99 1/1/00 3/15/00 2/1/00 2/15/00 412/00 1/1/00 3131100 4/12/00 4/20100 5/1/00 5/1/00 VR JB VII VII RGM/SN VR/JB/CF Admin ITS Admin Admin Admin Admin/ITS ] _J _1 ,_ 8/1/00 4/15/00 4/15/00 10/1/00 10/1/00 10101100 111101 1/1/01 1/1/01 1/1/01 VR AN CF VR VPJJB/CF Admin Urban-_)-Media Admin Admin Admin/ITS Finalize major strateg 4115/00 311/01 SN UrbanLiving | URBANREALTORB.COM (_ 2000 URBAN BUSINESS PLAN HOLDINGS GROUP_ INC. ")'7 CONFIDENTIAL INFORMATION | | l 8.0 Management Summary UrbanRealtors.com is owned by four principalfounders, who constitute the Company's core management team. With a broad and diverse range of backgrounds, UrbanRealtors.com's executive team possesses proven management skills, marketing innovation and superior technological know-how. These collective attributes, along with an unsurpassedentrepreneurial drive and the clear division of defined responsibilities among members of executive management,will ensure the Company's success. a 8.1 Organizational Structure Each of the Company's departments, as well as the corresponding department heads and staff 3 members, are set forth in Attachment C. 8.2 Management Team members and Below is a brief overview of the Company's executive management their specific work responsibilities: Vinod Ramani, President and CEO _1 Employing technology to leverage all facets of the business, Mr. Ramani conceptualized and structured the backbone of the UrbanRealtors.com business model and continues to direct its growth strategies. Using his knowledge as a real estate agent and successful entrepreneur, he exhaustively researched the industry and each of its segments in order to assemble the most effective management team to develop, expand and launch his vision. One of his previous ventures included the creation of Global Dominance, an import/export and procurement company. Managing20 full-time employees and 20 independent contractors, he propelled the company to $15 million in sales within three years of inception. Having over 12 years of business-to-businessand consumer experience, he hascreated numerous partnerships with his clients, helping them build their brands with national market presence. His successin creating profitable concepts stems from a combination of effective project management, synergistic strategic alliances,operational efficiency, quality control, work ethic and customer satisfaction. Mr. Ramani's professional experience also encompasses turnkey solutions from purchasing to implementation for multi-billion-dollar national chains, including PepsiCo/PizzaHut, Hampton Inn, Best Western and Discount Tire. Corey Freundel, Vice President - Corporate Communications Mr. Freundel is .responsible for overseeing the Company's strategic marketing, recruiting, businessdevelopment and creative services. He brings nine years of experience in advertising, multimedia marketing, creative direction, management and sales. Prior to joining UrbanRealtors.com, he served as Vice President of Marketing for Multimedia Publishing Corporation, which publishes TelecomBusinessand TeleCardWorld magazines and runs their respective biannual conference and expositions - one of the largest co-located trade shows in competitive telecommunications. With his knowledge of multi-industry convergence, card-based [] [] [] [] [] [] [] [] [] [] W URBANREALTORS.COM _) 2000 URBAN HOLDING5 BUSlNES_ I_ROUPy PLAN INC. CONFIDENTIAL INFnRMATION 28 m I I I | | | | II II applications and IP telephony, he helped that company achieve its largest trade show attendance and a record weekly website hit count of 52,000 from over 50 countries, repositioning the Company's brand as a recognized leader in the industry. Previously, he served as an awardwinning senior copywriter at Adcetera, working on corporate accounts including SYSCO Corporation, Unocal, Halliburton, Landry's Seafood Restaurants, Inc., Natural Gas Clearinghouse (now Dynegy), Corporate Expressand Continental Airlines. Independently, Mr. Freundel has worked as a professional voiceover talent and as a creative consultant with numerous responsibilities on campaigns with AT&T, Schlumberger, Omnes, Discount Tire, Oshman's Sporting Goods, Inc., First FinancialResources and various dot-corn companies. His educational background includes a Bachelor of BusinessAdministration in Marketing from The University of Texas at Austin, as well as various accreditations in advertising, insurance and management. Ricardo Garcia-Moreno, General Counsel I Vice President - Investor Relations I I | | | | | | Mr. Garcia-Moreno is responsible for handlingthe Company's legal affairs and its investor relations. He brings a wealth of legal and businessexperience in securities, finance, acquisition and general corporate matters. Immediately prior to joining UrbanRealtors.com, he worked for more than four years in the Corporate FinancePractice Group of Winstead Sechrest & Minick P.C. His expertise covers numerous areas including capital formation transactions, venture capital and seller financing, negotiated mergers and acquisitions, private placements, IPOs, securities law compliance, due diligence reviews and general corporate counseling. Mr. GarciaMoreno has also worked in diverse capacities involving international trade, public assembly/sports facilities law and entertainment law. Before entering private practice, he was a law clerk to the Honorable Reynaldo G. Garza,Senior Judge,U.S. Court of Appeals for the Fifth Circuit. He is admitted to practice before the U.S. Court of Appeals for the Fifth Circuit and the U.S. District Court for the Southern District of Texas. He earned a Bachelor of Business Administration in Marketing and International Businessfrom The University of Texas at Austin, as well as a Juris Doctorate from The University of Texas School of Law. I t I | I I I I I Steven Nisenson, Vice President- Strategic Alliances Mr. Nisenson is responsible for developing partnership strategies and programs to generate revenues, create synergies and enhance the Company's branding for each of its business units. He brings a successfulrecord of new businessdevelopment, product and service marketing and multi-departmental management skills to UrbanRealtors.com. Immediately prior, he served as Vice President of Marketing for Horizon USA, an advertising, promotions and production company specializing in the telecommunications industry. Utilizing his experience with retail cross-promotions and branding, he formed strategic partnerships and national tie-ins with AT&T Cable Services,Time Warner Communications, Road Runner, HBO, Showtime, Disney Channel and Excite@Home, just to name a few. After taking Horizon from its regional presence to national recognition, he helped launch a coast-to-coast high-speed Internet and digital cable program for the tep 100 Designated Marketing Areas in the United States. Previously, Mr. Nisenson worked in television production with an ABC affiliate as a writer / producer for a nightly educational series. He earned a Bachelor of Arts degree in Communications with Honors from Texas A&M University - Corpus Christi. I I I URBANREALTORB.COM _) _000 URBAN HOLDING5 BUSINESS PLAN I"¢_ROUP_ INC. _-9 CONFIDENTIAL INFORMATION I ! I I ! John Boardman, Director of Information Technology Other key personnel: ! II II II III | II | Mr. Boardman is responsible for supervising the Company's Information Technology group, which includes website development such as graphics, FLASH animation, HTML programming and ColdFusion coding. Originally a mechanical engineering and later a math major, Mr. Boardman placed in the 99th percentile for the Major Field Test - the national exam used for math testing and its practical applications. Having this knowledge of computer programming, graph theory, structure, flow, schedulingand roots, he was able to integrate that knowledge into real world applications to optimize processes in industries such as engineering, manufacturing, economics, transportation and real estate. He later conceived and opened New Access Computers, a computer store and Internet service provider (ISP) serving two cities in Florida. During this time, Mr. Boardman taught Internet training classes and did web development and hosting for real estate firms, travel agencies,limousine services and restaurants. Mr. Boardman hasalso worked in various positions from technical support to computer component inventory for PDQ and Compaq. Prior to joining UrbanRealtors.com, he helped Microsoft launch its Sidewalk.com venture doing web content, graphic designand production for 50 U.S.cities. I II | 8.3 Management Gaps The Company is currently searchingfor experienced personnel to fill the following positions: • • Vice President of Real EstateOperations Chief FinancialOfficer I | | | ! !1 Since each of these positions constitute important ingredients for the Company's success,the Company has reserved sufficient equity to attract top candidates to fill such positions. UrbanRealtors.com will interview qualified individuals within the Company as well as outside the Company to fill these positions. 8.4 Board of Directors/Advisory Board | II The Company's Board of Directors currently consists of members of its management team. The Company has, however, identified several individuals from the local business community that it would like to invite to serve on its Board of Directors at a future date. The Company is also in the process of forming an Advisory Board to guide management during the Company's initial operations. I I I | | 8.5 Personnel Plan I In addition to the vacant management positions described above, key resources to be recruited include real estate agents, marketing and salespersonnel and administrative staff. URBANREALTORS.COM BUSINESS HOLDINGS GRQUPy PLAN |NC. CONFIDENTIAL INFORMATION 3C) I (_) 201-]0 URBAN _1 The table on the following pagesummarizes the projected staffing expenses for the first three years of operations, with such expenses increasing from $1,312,100 in 2001 to $2,729,349 in 2003, taking into account annual salary increasesof five percent. Depending on the profitability of the Company, employees will also be entitled to annual incentive bonuses, as well as be eligible for incentive stock options. 3 3 3 3 t | l I 3 1 I | I URBANREALTORS,COM _) 2000 URBAN HOLDINGS BUSINESS GROUP, PLAN INC. CONFIDENTIAL INFORMATION 3 "_ ]! ,3 3 :1 2001 $130,000 $110,000 $120,000 $110,000 $48,000 $66,000 $60,000 $30,000 $30,000 $36,000 $30,000 $30,000 $30,000 $26,400 $36,000 $21,600 $21,600 _'1 "11 $18,000 $24,000 $22,000 $18,000 $16,500 "11 $18,000 $18,000 $18,000 $18,000 $108,000 $72,000 $26,000 $0 2002 $136,500 $115,500 $126,000 $115,500 $50,400 $69,300 $63,000 $31,500 $31,500 $37,800 $31,500 $31,500 $31,500 $27,720 $37,800 $22,680 $22,680 $18,900 $25,200 $23,100 $18,900 $18,900 $18,900 $18,900 $18,900 $18,900 $151,200 $151,200 $151,200 $378,000 $635,040 $1 $1 $1 $1 $1 $1 2003 $143,325 $121,275 $132,300 $121,275 $52,920 $72,765 $66,150 $33,075 $33,075 $39,690 $33,075 $33,075 $33,075 $29,106 $39,690 $23,81 $23,81 $19,845 $o $o URBANR£ALTORS.COM _ 2000 URBAN HOLDINGS OUBINEBS _ROUPI PLAN INC. CONFIDENTIAL |NFORMATION 32 2 9.0 FinancialPlan 9.1 Important Assumptions Real Estate Operations: _i _1 Our main assumption in projecting our financial statements is that the economy will remain robust despite the threat of rising interest rates. We have assumed that the opportunities in the real estate market for the next few years will be substantially similar to 1999. The projections in our financial statements are based on the projected market share that the Company believes it will attain in each market. The Company hasassumed that it will capture an initial 0.50% share of each market that it enters into based on its historical sales data, and further assumed that such market share will grow at a steady but conservative rate of 0.25% in each subsequent quarter. The financial statements also assumethat the Company will establish a fully operating Urban-I-Center in Houston by January of 200 I, and that it will establish at least four Urban-_-Center's per year as part of its national expansion. Finally, the Company has assumed that the non-Texas housing markets that it enters will on average be comparable in size to the 1999 Houston market. Additional specific assumptions made by the Company in projecting revenues are identified on the detailed financial statements attached in the appendices. Revenues for UrbanLiving will come from the following sources: Website _11 • Individual Partner: o o o • $4,000 - set up fee $1,700 - per month (basecost) $20,400 - per year _1 _i 1 _11 3 Repeat Partner: 2 to 5 Markets o o o NO WEBSITE SET UP FEEFOR REPEATPARTNERS- ALL MARKETS (2 - 25) $1,360 - per month/market (20%discount - basecost) $16,320 - per year/market ,_1 • _1 Repeat Partner: 6 to 10 Markets o o $1,275- per month/market (25%discount- basecost) $15,300 - per year/market _J URBANREALTORS.COM 2_]1-10 URBAN HOLDINGS BUSINESS (_RE31JPy PLAN INC. CONFIDENTIAL INFDRMATION -_3 | | | • Repeat Partner: II to 15 Markets o o • $1,190- per month/market (30% discount - base cost) $ 14,280- per year/market I | Repeat Partner: 16 to 25 Markets o o $1,105 - per month/market (35% discount- base cost) $13,260 - per year/market ! 1 I ! ! Urban-(1)-Center • Individual Partner: o o o • $5,000 - set up fee $ I, 100- per month (basecost) $13,200 - per year 1 I ExpansionPartner" 2 to 5 Markets o o o $4,000 - 25% SET UP FEEDISCOUNT - ALL MARKETS (2 - 25) $990 - per month/market ( 10%discount - base cost) $11,880- per year/market • Repeat Partner: 6 to I0 Markets o o $935 - per month/market (15% discount- basecost) $ I 1,220 - per year/market _!1 _1 • [] [] • Repeat Partner: II to 15 Markets o o $880 - per month/market (20% discount - basecost) $10,560 - per year/market Repeat Partner: 16 to 25 Markets o o $825 _ per month/market (25% discount- basecost) $9,900 - per year/market • 1_ I_ Partner Development: Commencing in January 2001 (in conjunction with the projected Urban-(D-Center opening), UrbanLiving will begin incrementally growing its strategic partnerships over the first fiscal year. By April of 2001, The Company anticipates finalizing alliance agreements with its 10 UrbanRewards categories D URBANP_EALTORS.EC3M 2000 URBAN HOLDINGS RUSINEBB GROUP, PLAN IN(_.. CONFIDENTIAL |NFORHAT|DN _'4 ] ] ] 9.2 Pro Forma Income Statement ] ] 3 $443 $48,311 $420 $15,881 $1,707,435 $625 $720 $426 $802 I $138 $9O $9O ! $552,041 $11 $5,670,808 $1,704,104 $183,000 $255 I $2o,9ee,321 ! $42 $78 I $88 $18 $120 $72 $52 $45 $88 $120 $168 $120 $205 I I I ] I $8c $360 $27 I I I $219 $21 $96 $27 $27 $30 $75 $47C $69 $120, $75 $114 $12 $1_ $3C I ! I I I I I , URBANREALTORS.COM _ 200 I"1 URBAN BUSINESS HOLDINGS GROUP, PLAN INC, 3 CONFIDENTIAL INFORMATION 5 ] ] 9.3 Pro Forma Cash FUowStatement | I ] $3,941,61 e $443 $48,31 $420 ! $802 $138 $15,881,123 $1,707,435 $37C $60G $1,784 $282 $36,585 $3,686 $625 $720 $2,739 $426 ]1 ]1 $9o $90 $3 $90 $5 $42 $552,041 $1,355,830 $1 $72 $52 $219 $360 $25 $27 $18 $78 $1,704 $5 $1 $121 $91 $339 $840 $54 $51 $30 $78 $5,194 $12 $2,619 $168 $120 $470 $83 $75 $45 J $30 $27 $21 $27 I J $1,365,000 $111,000 $96,000 $12,000 $2 !1 $45,000 $3o $66 $45 $51 $3 $183 $108 $18 $5 $121 $3o $114 $69 $75 $255 $120 $18 $6 $205 | $135 $126 $1 $80,000 $120 $17,170 $80 $120 $35 II $88 $88 $88 | I $13 | URBANREALTORS,COM 2000 URBAN HOLDINGS BUSINESS GROUP_ PLAN INCo CONFIDENTIAL INFORMATION 3 6 B 1 1 :_ I. Attachments A, B and C 1 3 1 3 | Z I | I ] | | | | | | | | z j iI [ _I ;i,, "...... .,_ ........ :rl-ir ...... • ;::-" II. Cash Flow Pro Forma-Year I, 2, and 3 =11 =11 =11 ::11 ::11 3 ::11 ;::1t :11 :11 3 =1 :::11 m n m n m n m mm m m m mml. eal R Estate Commission Breakdown i, and Year z 3 m m m m m n m n m m m [] m m n m m m m m m m m m m m m m m [] m m m m m m [] m n n m [] [] m [] m m m [] m m [] m m m m m m n m m m [] [] n [] [] m m [] [] m m [] [] m [] [] [] m m m [] n m [] m n m m n [] m m m m m [] m n m m m m n m n m m m m mm m m n mm m m m m • m mm m mY. Mortgage Fees Breakdown-Year l, 2 and 3 m m m m m m m m [] m n m m n m m m m m m m m m n m m m m m u m u n m n m m m m m m m m m m m m m m m m m m m m m m m m m m U m U m m m m m m m m m m m [] m m m m m m m m m m m m I m [] m m m [] m m m m [] m m m m [] m m m [] m m m m m m U m m [] m m m m m [] m m [] m m m m m n [] n n m [] n [] m m m m m m m [] m [] m m [] • v. Title Insurance Fees Breakdown- Year I, 2 and 3 [] m m • v,. UrbanLiving Revenue Forecast-Year l, 2 and 3 [] m [] [] [] [] m n [] m [] [] [] m m [] m m m m m m m m [] m m m m m m m m m [] m m m m m m m m m m n [] [] [] m m m [] m m [] [] [] m [] • Vl,. i% Cash Back Breakdown - Year l, 2 and 3 [] [] [] m ml [] [] [] [] m [] • [] • • m • • m m • • • ) o_ o c o ) r_ o o • [] [] n i° ) m m m mm m m m [] [] • • • • m • [] m • m m o ) o ° .c: o [] m m n m [] [] • • • m m • [] [] m m • • .E ) o) o __ E • m .o _,_ E mm