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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