Secret Garden - Morgan Meadows

SECRET GARDEN — MORGAN MEADOWSPROJECT: Monolithic Holdings, Inc. is nearing completion of its the third project in a series of Studios toprovide affordable, energy efficient, housing for the fastest growing segment of our population — thehousehold of 1 or 2 persons with modest incomes. (See appendix)

The project consists of 48 Studios (314 square feet) in a garden-like setting. The structures are Io-20Monolithic Domes as developed by Monolithic Dome Institute. The studios are in groups of four to eight toprovide a private, secluded feel. These will be set off with plants, patios, walkways, fences, and canopies.Each residence will include covered parking with additional space for guests. The first 16 units will becomplete by December 15, 2002, with plans to finish the next 32 as soon as they are funded.

OWNERSHIP: Monolithic Holdings, Inc. is a regular, private Texas Corporation. It is owned by severalkey personnel of Monolithic Constructors, Inc. including David B. South, the owner. MonolithicConstructors, Inc.; David B. South; and other owners will guarantee the loan.

EXPERIENCE & PERFORMANCE: The first of these projects is located at the Monolithic Dome Institutebuilt as a prototype and a place to test methods and theories. It consists of 17 studios located on Dome ParkLane. Several configurations have been built as proof of concept. The units are rented by the week as aresidence inn under hotel rules.

The second project, Secret Garden in Italy, Texas is owned by Monolithic Holdings, Inc. It is a residence innconsisting of four studios on a small commercial lot —appraised at $137,000. Each studio rents for $100 to$110 per week including all utilities and upkeep. Additional fees apply for laundry, pets, storage, etc. Theunits are furnished with refrigerator, stove, bed, and closet. Bedding and towels are available for a fee.Maid service is not provided at this time.

MARKET COMPARISONS: Our market and product has no direct comparisons. The studios provideprotection from tornados, high winds, fire, earthquake. The energy consumption is half of the amount usedby conventional buildings, a significant savings. The useful life span is measured in centuries.Maintenance is less costly and simpler to provide than for the conventional buildings. Old motels are ouronly price competitors. The location and rental rates are such that residents travel as far as 30 miles to rentthem. The market pool is gigantic. (See appendix)

MARKET FOCUS: Our research show an ever-increasing market for our product as the populationcontinues to age and single person households increase in both number and percentages. (See appendix) In Texas (and all over America), significant numbers of singles and elderly live in homes that are not safe oreven adequate. Due to a lack of funds for reconstruction purposes, they cannot afford to renovate. Our goalis to offer a clean, safe and affordable option. We will concentrate our efforts in Texas to provide the single,the elderly and especially single senior women an opportunity to live in a dignified manner at an affordablecost.

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INVESTMENT: As an investment the Secret Garden studios are winners. The 48 studios with land,utilities, canopies, drives, walks, fences and storages will appraise and be valued at approximately $1.54million ($32,000 each). Twenty-five will be supplied by Monolithic Constructors, Inc. and the owners. Theremaining 75% will be obtained from a loan. It is anticipated that the loan would be paid back out ofoperating funds over a 15 year period at maximum of 9% interest in equal monthly installments. The loanfor the first 16 units is now in place. We are seeking a loan for the remaining 32 units. The loan could belarge enough to take out the existing 16 studios and be for all 40 studio.

PROJECTION OF PROJECT EARNINGS: The gross earnings will be an average of $100 per week perunit. After all costs; including vacancies, utilities, landscaping, repairs, write-offs, management, etc.;reasonable earnings of $132 per month per unit can be expected. This will leave a net positive cash flow ofover $100 per month per studio beyond debt repayment and costs. (See appendix). The studios arepurchased from Monolithic Constructors, Inc. —who will also manage and operate the Secret Gardens untilsuch time as there are enough of them to warrant and fund separate personnel.

FUTURE:The long range plan is to construct approximately 10 to 20 of these facilities in or near smaller towns withina 100-mile radius of our home office in Italy, TX.

Our experience is “if you build it --- they will come.” Our premise is to build a safe (near-absoluteprotection from tornado, and fire), easy-to-keep-clean, place for singles and couples to live at an affordableprice. A waiting list for guests quickly becomes the norm.

November 12, 20021

Secret Garden — 2

1 person - 37.50%

2 persons - 27.33%

3 persons - 15.36%

4 persons - 11.27%

5 persons - 5.21%6 persons - 2.12%

7 persons or more - 1.21%

Type of Rental Households

Source: 1999 US Census

Net Profit - 31.40%

Interest Expense - 34.10%

Depreciation - 2.50%

Utilities - 15.00%

Maintenance - 5.00%

Management Expense - 7.00%

Vacancy - 5.00%

Monthly Profit & Loss

Cash - 21.20%

Mortgage Payment (15yr@9%) - 46.80%

Utilities - 15.00%

Maintenance - 5.00%

Management Expense - 7.00%

Vacancy - 5.00%

Monthly Cash Flow

Under $20,000 - 40.59%

$20,000 to $40,000 - 33.36%

$40,000 to $60,000 - 14.34%

$60,000 to $80,000 - 6.45%

$80,000 to $100,000 - 2.28%Over $100,000 - 2.99%

Annual Renters Income

Source: 1999 US Census

Under $450 - 16.22%

$450 to $800 - 51.38%

$800 to $1100 - 22.24%

Over $1100 - 10.17%

Available Rental HousingMonthly rent plus average utilities

15% of which is substandard

Sou rce: 1999 U S Cen su s

Secret Garden - Morgan Meadows

Recently I listened to a talk show host interviewBarbara Ehrenreich about her experiences gatheringmaterial for her book. It was so intriguing Ipurchased and read the book. It says what I havebeen thinking and saying but in a better format andwith more facts and experiences. In her book shedetails how housing is by far the number 1 problemfor the low income wage earner.

The following is the “jacket” description of the book:

MILLIONS OF AMERICANS WORK FULL-TIME,year-round, for poverty-level wages. In 1998,Barbara Ehrenreich decided to join them. Shewas inspired in part by the rhetoric surroundingwelfare reform, which promised that a job -- anyjob -- could be the ticket to a better life. But howdoes anyone survive, let alone prosper, on six toseven dollars an hour? To find out, Ehrenreichleft her home, took the cheapest lodging she couldfind, and accepted whatever jobs she was offeredas a woefully inexperienced homemakerreturning to the workforce. So began a grueling,hair-raising, and darkly funny odyssey throughthe underside of working America.

Moving from Florida to Maine to Minnesota,Ehrenreich worked as a waitress, a hotel maid, acleaning woman, a nursing home aide, and aWal-Mart sales clerk. Very quickly, shediscovered that no job is truly “unskilled,” thateven the lowliest occupations require exhaustingmental and muscular effort. She also learned thatone job is not enough; you need at least two if youintend to live indoors.

As she started her foray into the world of poverty levelwages she wrote:

My first task is to find a place to live. I figure thatif I can earn $7 an hour---which, from the wantads, seems doable--- I can afford to spend $500 onrent or maybe, with severe economies, $600 andstill have $400 or $500 left over for food and gas.In the Key West area, this pretty much confines

me to flophouses and trailer homes—like the one,a pleasing fifteen minute drive from town, thathas no air-conditioning, no screens, no fans, notelevision, and by way of diversion, only thechallenge of evading the landlord’s DobermanPinscher. The big problem with this place,though is the rent, which at $675 a month is wellbeyond my reach. All right, Key West isexpensive. But so is New York City, or the BayArea, or Jackson, Wyoming, or Telluride, orBoston, or any other place where tourists and thewealthy compete for living space with the peoplewho clean their toilets and fry their hash browns.Still, it is a shock to realize that “trailer trash” hasbecome, for me, a demographic category to aspireto.

After a week on the job Barbara compiled thefollowing survey:

Gail is sharing a room in a well-knowndowntown flophouse for $250 a week. Herroommate, a male friend, has begun hittingon her, driving her nuts, but the rent wouldbe impossible alone.

Claude, the Haitian cook, is desperate to getout of the two-room apartment he shares withhis girlfriend, and two other, unrelatedpeople. As far as I can determine, the other Haitian men live in similarly crowdedsituations.

Annette, a twenty-year-old server who is sixmonths pregnant and abandoned by herboyfriend, lives with her mother, a postalclerk.

Marianne, who is a breakfast server, and herboyfriend are paying $170 a week for aone-person trailer.

S:\cabinet\Secret Garden\010821 Review of Nickel

Why We Need the Io-20 Residence InnsA review of the book “Nickel and Dimed” by Barbara Ehrenreich

By David B. South

Billy, who at $10 an hour is the wealthiest ofus, lives in the trailer he owns, paying onlythe $400-a-month lot fee.

The other white cook, Andy, lives on hisdry-docked boat, which, as far as I can tellfrom his loving descriptions, can’t be morethan twenty feet long. He offers to take meout on it once it’s repaired, but the offer comeswith inquiries as to my marital status, so I donot follow up on it.

Tina, another server, and her husband arepaying $60 a night for a room in the DaysInn. This is because they have no car and theDays Inn is in walking distance of theHearthside. When Marianne is tossed out ofher trailer for subletting (which is againsttrailer park rules), she leaves her boyfriendand moves in with Tina and her husband.

Joan, who had fooled me with her numerousand tasteful outfits (hostesses wear their ownclothes), lives in a van parked behind ashopping center at night and showers inTina’s motel room. The clothes are from thriftshops.

Later Barbara footnoted:

I could find no statistics on the number ofemployed people living in cars or vans, butaccording to a 1997 report of the NationalCoalition for the Homeless, “Myths and Factsabout Homelessness, “ nearly one-fifth of allhomeless people (in twenty-nine cities acrossthe nation) are employed in full-or part-timejobs.

Again quoting from Barbara Ehrenreich:

Gail tells me she is thinking of escaping from herroommate by moving into the Days Inn herself. Iam astounded: how she can even think of paying$40 to $60 a day? But if I was afraid of soundinglike a social worker, I have come out justsounding like a fool. She squints at me indisbelief: “And where am I supposed to get amonth’s rent and a month’s deposit for anapartment?” I’d been feeling pretty smug aboutmy $500 efficiency, but of course it was madepossible only by the $1,300 I had allotted myselffor start-up costs when I began my low-wage life:$1,000 for the first month’s rent and deposit, $100for initial groceries and cash in my pocket, $200

stuffed away for emergencies. In poverty, as incertain propositions in physics, startingconditions are everything.

The above quotation points out a very serious fact.There is a “real” impediment for the low income wageearner to renting traditional apartments. Thisimpediment is the advance rental and securitydeposit. In most cases the renter must dig up $1200 torent a $400 per month apartment. Many of thepoverty renters can not come up with this amount ofmoney. Nor can they come up with utility deposits aswell.

Another foot note in the book:

In 1996 the number of persons holding two ormore jobs averaged 7.8 million, or 6.2 percentof the workforce. It was about the same ratefor men and for women (6.1 versus 6.2).About two-thirds of multiple jobholders workone job full-time and the other part-time.Only a heroic minority --4 percent of men and2 percent of women -- work two full-time jobssimultaneously (John F. Stinson Jr., “NewData on Multiple Jobholding Available fromthe CPS,” Monthly Labor Review, March1997

Again quoting from Barbara:

On Cape Cod, too, rising rents for apartments andhouses are driving the working class into motels,where a room might go for $880 a month inwinter but climb to $1,440 a month in the touristseason. The Cape Cod Times describes families offour living squeezed into one room, cooking inmicrowaves, and eating on their beds (K.C.Meyers, “Of Last Resort,” Cape Cod Times, June 25,2000.

Another pair of foot notes:

The St. Paul-based Jobs Now Coalitionestimated that, in 1997, a “living wage” for asingle parent supporting a single child in theTwin Cities metro area was $11.77 an hour.This estimate was based on monthlyexpenses that included $266 for food (allmeals cooked and eaten at home), $261 forchild care, and $550 for rent (“The Cost ofLiving in Minnesota: A Report by the JobsNow Coalition on the Minimum Cost of BasicNeeds for Minnesota Families in 1997”). Noone has updated this “living wage” to take

Monolithic — 2

into account the accelerating Twin Cities rentinflation of 2000 (see page 140).

The last few years have seen a steady declinein the number of affordable apartmentsnationwide. In 1991 there were forty-sevenaffordable rental units available to every onehundred low-income families, while by 1997there were only thirty-six such units for everyone hundred families (Rental HousingAssistance -- The Worsening Crisis: A Reportto Congress on Worst-Case Housing Needs,”Housing and Urban Development Department, March 2000) . No national -- oreven reliable local -- statistics are available,but apparently more and more of the poorhave been reduced to living in motels. Censustakers distinguish between standard motels,such as those that tourists stay in, andresidential motels, which rent on a weeklybasis, usually to long-term tenants. But manymotels contain mixed populations or changefrom one type to the other depending on theseason. Long-term motel residents are almostcertainly undercounted, since motel ownersoften deny access to census takers and theresidents themselves may be reluctant toadmit they live in motels, crowded in with asmany as four people or more in a room(Willoughby Mariano, “The Inns and Outs ofthe Census, “ Los Angeles Times, May 22, 2000)

Barbara mused:

I either need to find a husband, like Melissa, or asecond job, like some of my other coworkers. Inthe long run everything will work out if I devotemy mornings to job hunting, while holding outfor a Park Plaza opening or, better yet, a legitimateapartment at $400 a month or $100 a week. But toparaphrase Keynes: in the long run, we’ll all bebroke, at least those of us who work for lowwages and live in exorbitantly overpriced motels.I call the YWCA to see whether they have anyrooms, and they refer me to a place called BudgetLodging, which doesn’t have any rooms either,although they do have dorm beds for $19 a night.I can have my own locker and there’s no“lockout” in the morning-- you can hang out inyou dorm bed all day if you want. Even withthese enticements, I have to admit I’m relievedwhen the guy at Budget Lodging tells me they’relocated on the other side of Minneapolis, so I canrule out the dorm on account of the drive and thegas costs, at least as long as I’m working at

Wal-Mart. Maybe I should have just dumpedWal-Mart, moved into the dorm, and relaunchedmy job search from there. But the truth is I’m notready to leave Wal-Mart yet; it’s my connection tothe world, my source of identity, my place.

The Budget Lodging clerk, who seems to havesome familiarity with the housing nightmares of low-wage workers, suggests I keep trying motels.He’s sure there must be some that cost less that$240 a week.

Again a foot note:

Actually, rents usually have to be less that 30percent of one’s income to be considered“affordable.” Housing analyst Peter Dreierreports that 59% of poor renters, amountingto a total of 4.4 million households, spendmore that 50% of their income on shelter(“Why America’s Workers Can’t Pay theRent,” Dissent, Summer 2000, pp. 38-44). A1996-97 survey of 44,461 households foundthat 28 percent of parents with incomes lessthat 200 percent of the poverty level--i.e. Lessthan about $30,000 a year-- reportedproblems paying their rent, mortgage, orutility bills (Welfare Reform Network News1:2 [March 1999], Institute for Women’sPolicy Research, Washington, D.C. ). In theTwin Cities, at the time of my stay, about46,000 working families were paying morethan 50 percent of their income for housing,and surprisingly, 73 percent of these familieswere home owners hard-pressed by risingproperty taxes (“Affordable Housing ProblemHits Moderate--Income Earners), ”Minneapolis Star Tribune .”

The point is there is an absolute dearth of affordablehousing here in America. It hits everyone in the lowerpoverty levels of our society. As far as I can see thereis nothing any individual can do about the situationwithout government help for most of these citizens.But there are hundreds we can help with our oldfashioned capitalism. We can build the Io-20 inclusters as a residence inn. By renting these units at afair price we furnish housing and make money at thesame time. A win for both.

One question I am asked often is “why a residenceinn?” “Why not apartments?” The answer iscomplicated so bear with the discussion. Firstapartments come under rentor (landlord) / renter(tenant) rules. These rules have built up over the

Monolithic — 3

years with good reasons for them. The rentors oftenhave had a history of taking serious advantage of therenters. Rules have been made to protect the renters.Never the less these rules have been countered by therentors by requiring larger deposits and first and lastmonths rent. Most apartments require the renter haveat least $1000 in cash to move in plus the moneys forutility deposits. For families the home or apartmentrenting is literally the only good answer. Residency ismuch more stable in generally larger facilities.

On the other hand the residence inns fall under motelor hotel or inn rules. The innkeeper and the guesthave a different relationship. The guest usually onlypays for the “room” a day or a week at a time. If there

is a problem the guest is asked to leave. Therefore theinnkeeper can forgo most of the securities of therentor. The huge advantage to the guest is the smallamount of cash needed to get into a room. Inns workwell for one or two people. They are not the answerfor families. A fourth of American households aresingles. A huge percentage of these need the benefitsof staying at a residence inn.

The Monolithic Dome cottages arranged properlymake a wonderful residence inn -- like the old timecabin camp. Our society needs the Io-20 cottages andlots of them.

August 22, 2001

Monolithic — 4

Investment Profit of $1600 per year 95.00%

Return 5.00%

Certificate of Deposit

ROI

0%

5%

ROI

0%

5%

10%

Net Profit - 65.50% Depreciation - 2.50%

Utilities - 15.00%

Maintenance - 5.00%

Management Expense - 7.00%

Vacancy - 5.00%

Monolithic Studios ROI$32,000 Cash Investment

$3406 per year

ROI

0%

5%

10%

15%

20%

25%

ROI

0%

5%

10%

Net Profit - 31.40%

Interest Expense - 34.10%

Depreciation - 2.50%

Utilities - 15.00%

Maintenance - 5.00%

Management Expense - 7.00%

Vacancy - 5.00%

Monolithic Studios ROI$12,000 Cash Investment

$1633 first year

Net Profit - 65.50% Depreciation - 2.50%

Utilities - 15.00%

Maintenance - 5.00%

Management Expense - 7.00%

Vacancy - 5.00%

Monolithic Studios ROI$12,000 Cash Investment

$3406 per year

Interest Expense completelypaid after 15 years

Monolithic Studios ROI$12,000 Cash Investment

Appreciation and Depreciation

� Studios appreciate by 8 to 9 percent as construction costs inflate over time

� Depreciation reduces ROI by an estimated 2.5%

� Return on Investment therefore increses by a net 6 to 8 percent per year

ROI

0%

5%

10%

15%

20%

25%

30%

ROI

0%

5%

10%

15%

20%

25%

30%

35%

40%

Net Profit - 72.50%

Depreciation - 2.50%

Utilities - 15.00%

Maintenance - 5.00%

Vacancy - 5.00%

Monolithic Studios ROI$12,000 Cash Investment

Income Increases withmore self management

$3770 per year