Transcript APARTMENTS - Steadfast REIT

Steadfast Apartment REIT: The Opportunity Continues
Securities
Offered
through
Steadfast
Markets
Group,
LLC member
FINRA/SIPC
For Due
Diligence
Use
Only
– NotCapital
for Use
with
Registered
Reps
or the Public
• Apartments: Still the Best Opportunity in Real Estate
• Steadfast: The Apartment Experts
• STAR: The Opportunity Continues
For Due Diligence Use Only – Not for Use with Registered Reps or the Public
2
APARTMENTS: Still the Best Opportunity in Real Estate
SQUARE FOOTAGE
1. Industrial
2.2.APARTMENTS
Apartments
3. Retail
4. Office
5. Flex
6. Healthcare
7. Hospitality
MARKET CAPITALIZATION
1.Retail
Retail
2.2.APARTMENTS
Apartments
3. Healthcare
4. Office
5. Industrial
6. Flex
7. Hospitality
Sources: Journal of Real Estate Portfolio Management, Slicing, Dicing and Scoping the Size of the Commercial Real Estate Market, Vol. 16 No. 2, 2010
For Due Diligence Use Only – Not for Use with Registered Reps or the Public
3
APARTMENTS: Still the Best Opportunity in Real Estate
Apartments are…
18-20% of NCREIF Index1
(3rd behind office and retail)
15-18% of NAREIT Equity Market2
(3rd behind office and retail)
18-20% of Pension-owned Real Estate3
(2nd only to office)
…but only
4-5% of Non-traded REITs4
1 NCREIF
2 NAREIT
3 Pension Real Estate Association
4 Stanger Market Pulse
For Due Diligence Use Only – Not for Use with Registered Reps or the Public
4
APARTMENTS: Still the Best Opportunity in Real Estate
National Council of Real Estate Investment Fiduciaries
Highest
Performance
NCREIF sector
20-Year Annualized Return*
Apartment
9.3%
Retail
8.4%
Industrial
8.3%
Office
7.5%
http://www.ncreif.org/research-single.aspx?post=137
NCREIF INDEX COMPOSITION
5000+ Institutionally owned properties, Approx. $750 Billion universe
*For the time period covering 1992-2011
For Due Diligence Use Only – Not for Use with Registered Reps or the Public
5
APARTMENTS: Still the Best Opportunity in Real Estate
Highest riskadjusted return
Lowest risk-adjusted return
Sources: Joseph L. Pagliari, Jr., Clinical Professor of Real Estate, SNL REIT School – Chicago, IL
For Due Diligence Use Only – Not for Use with Registered Reps or the Public
6
APARTMENTS: Still the Best Opportunity in Real Estate
Sources: NCREIF, Joseph L. Pagliari, Jr., Clinical Professor of Real Estate, SNL REIT School – Chicago, IL
For Due Diligence Use Only – Not for Use with Registered Reps or the Public
7
Apartment:
Moderate Income
2014:
moderate income
apartments
once again
are tops for
investment prospects*
According to The Emerging
Trends in Real Estate in
2014, from the Urban
Land Institute, almost
1,000 real estate pros
believe Steadfast
Apartment REIT’s
strategy will be the #2
investment opportunity.
* #1 investment prospect, ‘12 and ‘13; #2 prospect, ‘14
For Due Diligence Use Only – Not for Use with Registered Reps or the Public
8
APARTMENTS: Still the Best Opportunity in Real Estate
- Millenials
- Immigration
- Household formation
- Personal economics
- Paradigm shift in
ownership preferences
- Increasing college debt
- Housing crash
- Post-recession
construction bust
- Tightened lending
standards
- Rising construction
costs
Reduced Supply
Increasing Demand
Factors leading to continued
demand/supply imbalance
For Due Diligence Use Only – Not for Use with Registered Reps or the Public
9
APARTMENTS: Still the Best Opportunity in Real Estate
Total Population will increase to 338 million people by 2022
14 MILLION ADDITIONAL
ECHO BOOMERS BY 2017
Sources: Axiometrics, Census, BLS
For Due Diligence Use Only – Not for Use with Registered Reps or the Public
10
APARTMENTS: Still the Best Opportunity in Real Estate
Sources: Axiometrics Inc., Census
For Due Diligence Use Only – Not for Use with Registered Reps or the Public
11
APARTMENTS: Still the Best Opportunity in Real Estate
America: The New “Renter Nation”
From MacArthur Foundation
April 2013 Report: “How Housing Matters: Americans’
Attitudes Transformed By The Housing Crisis &
Changing Lifestyles” based on 1,433 adults
•
57% believe “buying has become
less appealing”
•
69% report “it is less likely for families to build
equity and wealth through ownership
compared to two or three decades ago”
•
61% believe “renters can be just as successful
as homeowners in achieving the American
Dream”
For Due Diligence Use Only – Not for Use with Registered Reps or the Public
12
APARTMENTS: Still the Best Opportunity in Real Estate
New construction is rising, but still
well below demand
It takes at
least 300,000
new
apartments
each year to
meet demand
Enter 2014
with supply
deficit of
550,000 units
After 4 years of
lackluster
completions
Sources: National Multi Housing Council, National Apartment Association
For Due Diligence Use Only – Not for Use with Registered Reps or the Public
13
APARTMENTS: Still the Best Opportunity in Real Estate
Sources: Axiometrics, Census, BLS
For Due Diligence Use Only – Not for Use with Registered Reps or the Public
14
APARTMENTS: Still the Best Opportunity in Real Estate
Average lease duration
(below) and rental growth
rates*, by asset class
Only apartments beat inflation
*Sources: CB Richard Ellis, REIS, Joseph L. Pagliari, Jr., Clinical Professor of Real Estate, SNL REIT School – Chicago, IL
For Due Diligence Use Only – Not for Use with Registered Reps or the Public
15
Steadfast: The Apartment Experts
For Due Diligence Use Only – Not for Use with Registered Reps or the Public
16
Steadfast: The Apartment Experts
An Industry Leader
STEADFAST AT A GLANCE
Since 1994, Steadfast has acquired
or developed:
• $4 billion
• Multifamily, office, industrial
and resort
• U.S. and Mexico
Steadfast
Regional Offices
14 regional offices strategically positioned
to maximize operational efficiencies and
on-the-ground intelligence
The information is specific to Steadfast Companies, the sponsor of Steadfast
Apartment REIT, and reflects properties owned and/or managed. Investors
are not making an investment in Steadfast Companies. Past performance is
no guarantee of future results.
PORTFOLIO VALUE
$2.5+ Billion
PROPERTIES
140+
UNITS
24,500
STATES
27
U.S. EMPLOYEES
750+
For Due Diligence Use Only – Not for Use with Registered Reps or the Public
17
Steadfast: The Apartment Experts
An Industry Leader
Unified, Comprehensive,
Management-Driven
Growth
• Integrated Asset Management
– We actively manage each
acquisition from site selection
through disposition
• Enhancement Results
– Increased traffic
– Better tenants
– Higher occupancy
– Greater revenue
– Increased value
•132-point checklist
•Regional management
•Total performancebased bonus structure
•Continuous analysis
For Due Diligence Use Only – Not for Use with Registered Reps or the Public
18
Steadfast: The Apartment Experts
Our Performance Story
57 Full-Cycle Multifamily Deals
(as of 12/31/13)
# of Properties
Sq. ft.
57
8.2M
# of Units
10,000
Equity Invested
$137M
Total Cost
$487M
Total Sales Price
$679M
Equity Returned
$374M
Internal Rate of Return (IRR)
42.4%
Average Holding Period (months)
69
For Due Diligence Use Only – Not for Use with Registered Reps or the Public
19
Steadfast: The Apartment Experts
Our Performance Story
Steadfast Income REIT as of March 31, 2014
Number of Properties/States
65/11
Apartment Units
16,272
Square Footage
15,941,367
Portfolio Occupancy
92%
Portfolio Purchase Price
$1,565,577,557
Total Leverage (Loan to Cost)
65%
Weighted Average Interest Rate/Term
3.5% / 10 years
2014 Dist./MFFO Payout Ratio (Expected)
100%
Selling Group Size
143 Firms
For Due Diligence Use Only – Not for Use with Registered Reps or the Public
20
Third Quarter 10Q shows 36.8% annualized
NOI Growth:
________________
Steadfast: The Apartment Experts
Our Performance Story
Steadfast Income REIT
Successes
For the Three Months
Ended December 31,
2013
2012
Change $
Change %
277,089
3.0%
19 Same-store properties:
Revenues
$
Operating expenses
Net operating income
10,740,149
$ 10,463,060
$
(5,421,887)
(4,662,599)
(759,288)
16.0%
5,318,262
5,800,461
(482,199)
(8.0%)
14,225,968
1,008,327
13,217,641
6,808,788
$ 12,735,442
Non-same-store properties:
Net operating income
Total net operating income
$
19,544,230
$
For Due Diligence Use Only – Not for Use with Registered Reps or the Public
21
Steadfast: The Apartment Experts
Our Performance Story
Steadfast Income REIT: Impressive Year-Over-Year Growth
800.0
60.0%
49.6%
700.0
50.0%
600.0
40.0%
Sales
500.0
486
400.0
30.0%
23.0%
300.0
20.0%
Market Share
40.8%
200.0
100.0
10.0%
112.0
61.6
-
0.0%
Q4 2011
STEADFAST INCOME REIT
Q4 2012
MULTIFAMILY SALES
Q4 2013
STEADFAST MARKET SHARE
For Due Diligence Use Only – Not for Use with Registered Reps or the Public
22
Steadfast: The Apartment Experts
An Industry Leader
• One of nation’s most active
acquirers of apartments
in 2012 and 2013
• #1 capital raise among
current first-time sponsors
• Top 5 revenue per share
• Top 5 total assets among
non-traded REITs
• Steadfast is one of the
nation’s largest apartment
managers
*Based on review of SEC filings; SNL; Stanger Market Pulse; Real Capital Analytics
For Due Diligence Use Only – Not for Use with Registered Reps or the Public
23
Steadfast Apartment REIT:
A Total-Return Strategy for a Changing Economy
For Due Diligence Use Only – Not for Use with Registered Reps or the Public
24
STEADFAST APARTMENT REIT:
A Total-Return Strategy for a Changing Economy
INCOME
The “Total
Return” for
Steadfast
Income REIT
was
weighted
more toward
income than
growth
GROWTH
Capitalized on historic
spread between interest
rates and cap rates...
← Institutional quality
real estate
← Stable properties
← High growth markets
← 90-100% occupied
→ “Buying right”
→ Institutional resources
→ Operational efficiencies
For Due Diligence Use Only – Not for Use with Registered Reps or the Public
25
STEADFAST APARTMENT REIT:
A Total-Return Strategy for a Changing Economy
INCOME
GROWTH
→ “Buying right”
→ Institutional
resources
→ Operational
efficiencies
← Institutional quality
real estate
← Stable properties
← High growth
markets
← 90-100%
occupied
Value Enhancement
Strategy –
40% of units targeted for
strategic upgrades
The “Total Return”
for Steadfast
Apartment REIT
will place a higher
emphasis on
growth realized
through strategic
deployment of
additional capital
to produce
significantly
higher rents
For Due Diligence Use Only – Not for Use with Registered Reps or the Public
26
STEADFAST APARTMENT REIT:
A Total-Return Strategy for a Changing Economy
Make your Money on Day 1: Unparalleled scouting,
underwriting & negotiating embeds value from the start
Bigger is Better: Leverage our experience &
resources to maximize profit potential and
control expenses
GROWTH
Harvest Unrealized Potential: Generate NOI
growth by enhancing & streamlining operations
Get Bang for the Buck: Significantly increase current revenue &
long-term capital appreciation with impactful enhancements
For Due Diligence Use Only – Not for Use with Registered Reps or the Public
27
STEADFAST APARTMENT REIT:
A Total-Return Strategy for a Changing Economy
“BUYING
RIGHT”
Key Target Markets Based on
U.S. Demographics
Identify distressed sellers or
under-managed properties to
acquire institutional-quality real
estate at a discount
Bottoms-up, fundamental research:
exhaustive underwriting uncovers
deficiencies or deferred
maintenance that allows
advantageous deal negotiation
Utilize broker relationships and
demonstrated ability to close to
acquire properties -- even with
multiple higher offers
For Due Diligence Use Only – Not for Use with Registered Reps or the Public
28
STEADFAST APARTMENT REIT:
A Total-Return Strategy for a Changing Economy
INSTITUTIONAL
RESOURCES
Typical
Previous Owner
Steadfast
PROPERTY
MANAGEMENT
Property-specific individual
Integrated asset management team
with corporate, regional & local
support
RENT
DETERMINATION
“One size fits all” where all
similar units have same rent
Unit pricing software that maximizes
rent based on location, layout,
amenities and availability
Unsophisticated and low-tech
Cohesive, customized marketing plan
utilizing market research, social media,
and strategic advertising placements
CONSTRUCTION
MANAGEMENT
Project-based general
contractor
In-house team involved from
underwriting phase. Led by tenured
professionals
APPLIANCE
PURCHASING
Local retail purchase
National commercial account allowing
for volume discount and negotiating
One-off, local contractors
Structured, competitive bid process
that groups multiple properties under
one contract
MARKETING
SERVICE
CONTRACTS
For Due Diligence Use Only – Not for Use with Registered Reps or the Public
29
STEADFAST APARTMENT REIT:
A Total-Return Strategy for a Changing Economy
OPERATIONAL
EFFICIENCIES
Performance-based employee
compensation facilitates
operational excellence
On-site maintenance
quickly addresses
tenant needs
Reducing tenant
turnover decreases
expenses
Efficiencies increase NOI
and generate higher
returns for investors
Efficient unit turn
increases gross
potential rent
For Due Diligence Use Only – Not for Use with Registered Reps or the Public
30
STEADFAST APARTMENT REIT:
A Total-Return Strategy for a Changing Economy
Selecting Properties (30-40%) for Revitalization
VALUE
ENHANCEMENT
STRATEGY
In addition to proximity to
these types of prosperity
centers, a neighborhood
targeted for value-enhanced
apartments must have:
•Some exclusivity
•Little/no new
supply of
apartments
•Nearby
higher-priced units
that demonstrate a
market for higher
rents
For Due Diligence Use Only – Not for Use with Registered Reps or the Public
31
STEADFAST APARTMENT REIT:
A Total-Return Strategy for a Changing Economy
Unleveraged Value-Enhancement Illustration
AT PURCHASE
VALUE
ENHANCEMENT
STRATEGY
VALUE-ENHANCED
Cap Rate
Unit Price
Additional Capital
Monthly Revenue
Annual Revenue
Annual Expense
Annual NOI
6.5%
100,000
--975
11,700
(5,200)
6,500
6.5%
100,000
8,000
1,075
12,900
(incl. increased taxes) (5,236)
7,664
Ann. Rev. Growth
Ann. Exp. Growth
3%
3%
3%
3%
After 3 years…
Annual Revenue
Annual Expense
Annual NOI
12,785
(5,682)
7,103
14,096
(5,722)
8,374
Exit Cap Rate
Unit Value
Net appreciation
6.5%
109,276
9,276
6.5%
128,831
20,831
A $100/month rent
increase
after renovations…
… more than doubles the
unlevered appreciation in
just 3 years
For Due Diligence Use Only – Not for Use with Registered Reps or the Public
32
STEADFAST APARTMENT REIT:
A Total-Return Strategy for a Changing Economy
Case in Point:
Deep Deuce at Bricktown
AFTER
VALUE
ENHANCEMENT
STRATEGY
BEFORE
Results (as of May, 2014):
•
•
Effective rent increase of 16% since
renovation began
Revitalized units avg. $150+ in add’l.
monthly rent
•
•
17% unlevered cash-on-cash return on
additional capital
Property commands 30% rent premium
over submarket
For Due Diligence Use Only – Not for Use with Registered Reps or the Public
33
STEADFAST APARTMENT REIT:
A Total-Return Strategy for a Changing Economy
The Passive Approach to
Real Estate Ownership
The Steadfast Approach to
Real Estate Ownership
For Due Diligence Use Only – Not for Use with Registered Reps or the Public
34
Property Highlight
VILLAGES OF
SPRING HILL
#1
200 Kendron Parkway, Spring Hill, TN
Number of Units:
176
Occupancy:
94%
Average Rent:
$808
Year Built:
1994
Acquisition Date:
May, 2014
Purchase Price:
$14.2M
For Due Diligence Use Only – Not for Use with Registered Reps or the Public
Property Highlight
#2
HARRISON
PLACE
5812 Beatle Drive, Indianapolis, IN
Number of Units:
307
Occupancy:
93%
Average Rent:
$810
Year Built:
2001
Acquisition Date:
June, 2014
Purchase Price:
$27.9M
For Due Diligence Use Only – Not for Use with Registered Reps or the Public
STEADFAST APARTMENT REIT: Offering Details
INVESTMENT
OBJECTIVES
Realize capital appreciation in the value of the investments over the longterm; pay attractive and stable distributions to stockholders
OFFERING SIZE/ MIN.
INVESTMENT
$1.1 Billion / $5,000 ($2,500 for qualified accounts)
DECLARED
DISTRIBUTION
6.0% annualized, paid monthly. First distribution expected June 1, 2014
PRICE PER SHARE
$15 per share during initial offering period
DRIP
$14.25 per share during initial offering period
RMD-FRIENDLY
IRA investors will not be penalized for withdrawing RMDs
LONG-TERM CAPITAL
APPRECIATION
With return of capital to investors and 6% aggregated cumulative,
non compounded annual return then company
value split 85% to investors / 15% to advisor
For Due Diligence Use Only – Not for Use with Registered Reps or the Public
37
STEADFAST APARTMENT REIT: Fee Comparison
STAR
SIR
Commission
7.00%*
6.50%
Dealer Manager
3.00%
3.50%
Acquisition Fee/Exp. (leveraged)
5.50%
7.50%
Asset Mgmt. Fee Assets <$300mm
0.50%
N/A
Asset Mgmt. Fee Assets >$300mm
1.00%
0.80%
≤ 1.00%
≤ 1.50%
Disposition Fee
* Alternatively, participating broker-dealers may elect to receive 8.0% that is paid in increments
(3.0% at time of sale, 3.0% on first anniversary of sale and 2.0% on second anniversary of sale.)
For Due Diligence Use Only – Not for Use with Registered Reps or the Public
38