Investing Where America Lives

Transcription

1 Investing Where America Lives INCOME REIT Investment Summary This is neither an offer to sell nor a solicitation of an offer to buy the securities described herein. The offering is made only by the prospectus. This material must be read in conjunction with the prospectus in order to understand fully all of the implications and risks of the offering of securities to which it relates. A copy of the prospectus must be made available to you in connection with the offering described herein. No offering is made except by a prospectus filed with the Department of Law of the State of New York. Neither the Maryland Division of Securities or the Attorney General of the State of New York nor any other state regulators have passed on or endorsed the merits of this offering. Any representation to the contrary is unlawful. Unless otherwise indicated, properties pictured throughout this brochure are of properties owned by Steadfast Income REIT. The cover photos are included as examples of the types of properties owned by the REIT, but are not owned by Steadfast.

2 Risk Factors An investment in Steadfast Income REIT, Inc. ( Steadfast Income REIT ) involves a high degree of risk. You should purchase shares only if you can afford a loss of some or all of your investment. Past performance is no indication of future results and there can be no assurance that Steadfast Income REIT will be able to execute the business plan for the properties or the offering. You should carefully consider the information set forth in the Risk Factors section of the prospectus for a discussion of material risk factors relevant to an investment in our common stock, including, but not limited to, the following: We commenced operations on August 11, 2010 and have a limited operating history. There is no assurance that we will be able to successfully achieve our investment objectives. Because there is no public trading market for shares of our common stock and we are not obligated to effectuate a liquidity event by a certain date or at all, it will be difficult for you to sell your shares of our common stock. Additionally, there are restrictions and limitations on your ability to have your shares repurchased under our share repurchase plan. If you are able to sell your shares or have your shares repurchased, it may be at a significant discount from the price you paid for your shares. The initial offering price of our shares was not established based upon any appraisals of assets we own or may own, and we do not intend to adjust the offering price based on any such appraisals during the first two years of this offering; therefore, the offering price may not accurately reflect the value of our assets when you invest. We will pay substantial fees and expenses to our advisor, its affiliates and broker-dealers. These fees were not negotiated at arm s length and therefore may be higher than fees payable to unaffiliated parties. This is the first public offering sold by the dealer manager. Our ability to raise money and achieve our investment objectives depends on the ability of the dealer manager to successfully market our offering. Continued disruptions in the financial markets and deteriorating economic conditions could have a material impact on our business. The amount of distributions we may make is uncertain. Apartment investments have inherent risks including variations in rental income and occupancy, lack of liquidity and changes in the value of the properties. Our distributions have been paid from, and in the future may continue to be paid from, sources such as borrowings, offering proceeds or advances and the deferral of fees and expense reimbursements by our advisor. We have not established a limit on the amount of proceeds from this offering that we may use to fund distributions. Payment of distributions from sources other than our cash flow from operations would reduce the funds available to us for investments in real properties and real estate-related assets, which could result in investment losses and/or a reduction or suspension of distributions. All of our executive officers and some of our directors are also officers, managers, directors and/or holders of a controlling interest in our advisor, the dealer manager and other entities affiliated with us. They will face conflicts of interest as a result of compensation arrangements, time constraints and competition for investments, which could result in actions that are not in your best interests. Because this is a blind pool offering, you will not have the opportunity to evaluate our investments prior to purchasing shares of our common stock. We may incur debt exceeding 75% of the cost of our tangible assets with the approval of a majority of our independent directors. High debt levels increase the risk of your investment. If we fail to qualify as a REIT, it would adversely affect our operations and our ability to make distributions to our stockholders and may have adverse tax consequences to our stockholders. We depend upon our advisor to conduct our operations. Our advisor and its management are newly formed and do not have significant experience operating a public company. The underlying assumptions and any forward looking statements herein may not be accurate, the projections herein shown may not occur, and your performance may vary significantly. To the extent the information in this brochure conflicts with the information in the prospectus, the information in the prospectus shall govern. 2

3 Important facts to consider Dear Potential Investor - Thank you for taking the time to review Steadfast Income REIT with your financial advisor. We appreciate your interest and consideration in adding this real estate investment trust to your portfolio. We believe real estate deserves a place in almost every investor s portfolio, whether you are seeking diversification *, a balance to historic uncertainty of the financial markets, or the opportunity for income and long-term capital appreciation. As you review the following pages, you will see that we have outlined the compelling demographic forces that underpin our multifamily investment strategy which targets established, stable apartment communities. The heart and soul of Steadfast is that of a real estate company. Over the years the organization has grown into a diverse and multifaceted real estate investment management company with a team of dedicated professionals that bring their collective experience, wisdom and talents to bear on behalf of our investors, partners and tenants. As an investor with Steadfast Income REIT, you can feel confident you are doing business with a company that is committed to quality and integrity. Sincerely, Rodney F. Emery President and Chief Executive Officer * Diversification does not ensure a profit or guarantee against a loss. 3

4 Real Estate The original asset class Investors often invest in real estate to seek a combination of benefits including: U.S. Invested Assets Including home equity, mortgages and institutional debt, real estate is 41% of all invested assets. INSTITUTIONAL REAL ESTATE DEBT 9% Income Real estate investments can help investors meet their income needs. As tenants make lease payments, after expenses, income is passed through to investors. Potentially consistent distributions of income is a primary objective of real estate and REITs. HOME EQUITY AND RESIDENTIAL MORTGAGES 23% STOCKS, BONDS & PRIVATE DEBT 59% Commercial real estate asset class in the U.S., $6.5 trillion of market 7% Diversification COMMERCIAL AND MULTIFAMILY REAL ESTATE EQUITY 2% AGRICULTURE/ TIMBER Modern Portfolio Theory teaches that diversification into multiple types of investments can help to decrease risk and increase overall total return. Direct ownership of commercial real estate historically has exhibited a low level of correlation to both stock and bond market performance and can reduce overall volatility in an investment portfolio. * Source: Commercial Real Estate Analysis, 2nd Ed. David Geitner and Norman G. Miller,

5 Real Estate: The Original asset class How Real Estate May Align With Investor Objectives INVESTOR OBJECTIVES Tangible Value Unlike most other investments, real estate equity represents ownership in a tangible, physical asset. Prices may move up and down, but a real estate owner always has a unique plot of land and improvements behind a deed of title. * is the third largest representing some value. 1 Real estate is unique in its potential to meet multiple investor objectives. With a properly diversified portfolio of real estate assets, an owner may reasonably seek to preserve capital, achieve potentially consistent, positive income and possibly benefit from long-term appreciation.* VOLATILITY ** TRADED SECURITIES DIRECT PARTICIPATION REAL ESTATE CASH AND EQUIVALENTS GROWTH INCOME CAPITAL PRESERVATION * Past performance does not guarantee future results. REIT investors participate in the indirect ownership and potential benefits of real estate. 1 Prudential Real Estate Investors, The Case for Commercial Real Estate, March 2011 ** Measured in terms of volatility, commercial real estate has produced competitive absolute returns and superior risk-adjusted returns to stocks. (The Case for Commercial Real Estate, Prudential Real Estate Investors, March 2011 referencing historical returns 1Q78 4Q10 in the NCREIF Property Index and the S&P 500. The NCREIF Property Index is a quarterly time series composite that reflects investment-grade, income-producing properties typically acquired on behalf of institutional, tax preferred investors without leverage. Returns in the index are depicted without fees and expenses deducted. It is not possible to invest directly in an index. 5

6 Apartment Communities Where America Lives Occupancy 100% 98% 96% 94% 92% 90% 88% 86% 84% 82% Average Apartment Occupancy Apartments Have High Historic Occupancy Levels Apartments are a mainstay of the U.S. real estate market, as one in every three Americans rents instead of owns their home. 2 Due to the strong, consistent demand for apartments, occupancy for the past 12 years has averaged 94%. 3 80% Source: REIS Annual Effective Apartment Rent Change 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% -2.00% -4.00% Apartments Generate Rental Revenue Effective rents climbed in 80 of 82 metropolitan areas surveyed in the second quarter of While not guaranteed, national rents are projected to increase 2%-4% annually. 4 Effective annual rents dropped only twice in the last 11 years. Source: REIS 2 U.S. Census Bureau 3 Reis 4 Multi-Housing News, MPF Research Confirms Strong Occupancy, Rental Growth for U.S. Apartment Sector, October 3, Apartment investments have inherent risks including variations in rental income, lack of liquidity and changes in the value of the properties. Past performance is no guarantee of future results.

7 Apartment communities: where America Lives Apartments May Be An Inflation Hedge Shorter-term leases common in apartments allow for frequent rent adjustments that can generate increased revenue over time. Apartment Office/Industrial Average Lease Duration Apartment rents tend to move with inflation, which may allow apartment income to respond better during inflation than fixed-income investments. Apartment Yields Have Been Attractive Since 1999 the capitalization rate *, or first-year investment yield, for apartments nationwide has averaged 6%. During the last three years, the spread of capitalization rates over the 10-year Treasury has averaged 2.33%. As a result, REITs investing in apartments have an opportunity to produce shareholder distributions that may outperform other income-generating securities. Retail Years Source: Lakemont Group. Commercial real estate landlords do not face lease expirations as frequently as apartment landlords, but have to try to anticipate market changes that may occur over a multi-year lease when negotiating initial rent terms and increases with a tenant. Apartment Capitalization Rates 9.00% 7.00% 5.00% 3.00% 1.00% Apartment Cap Rates Source: NCREIF ** Past performance is no guarantee of future results * The capitalization rate is derived by dividing a property s net operating income by its purchase price, excluding acquisition costs, and is a ratio used to estimate the value of income-producing properties. ** The NCREIF Property Index is a quarterly time series composite reflecting investment-grade, income-producing properties typically acquired on behalf of institutional, tax preferred investors without leverage. Returns in the index are depicted without fees and expenses deducted. It is not possible to invest directly in an index. 7

8 Never a Better Time To Be a Landlord * Millions Most Likely Renters (20-34 year olds) Expected To Grow Echo Boomers: Demographic Tidal Wave Individuals under the age of 35 have the highest propensity to rent of any demographic. By 2020, Echo Boomers between the ages of will hit an all time high of almost 68 million. Current labor statistics show that nearly 68% of the new jobs created in America since the end of the recession went to Echo Boomers. 5 Source: U.S. Census Bureau 10 million new renters are projected Thousands Source: U.S. Census Bureau Growth of Households Increases Demand for Apartments Household Creation Household Formation will Rise The recession forced many to combine households or hold off new household formation. As more people find jobs, leave home or move out of a roommate situation, the demand for multifamily housing should increase. Future demand will be augmented by nearly 1 million new immigrants per year forecast to enter the U.S. between 2008 and Marcus & Millichap National Apartment Outlook, October U.S. Census Bureau 8 * Market conditions are subject to change

9 Never A Better Time To Be A Landlord* Homeownership is on the Decline Homeownership is currently around 66%, down from its 2004 peak of 69%. Each 1% drop in homeownership creates 1.3 million new rental households. 7 The home ownership rate is projected to continue to decline and reach a 20-year low by Difficulty of borrowing Intent to Buy From Owning to renting 7% % 93% Staying put 66% 3% 34% rent % of single-family renters say it would be difficult for them to get a home mortgage.* 7% of people have plans to buy a home within the next six months.** 3% of adults have moved from owning to renting since 2004 an addition of 3.9 million renting households.*** Data and characteristics are subject to change * Fannie Mae, Quarterly National Housing Survey, Second Quarter, 2011 ** The Harris Poll #126, December 13, 2011 *** Multihousing Professional, Housing Bust Reverses Ownership Gains, July/August 2011 between July 2010 and June New Supply has Never been Lower 700 Multifamily Construction Starts (5+ Units) New apartment supply is currently expected to cover only one-third of the current demand. 8 Below average construction is expected until This increased demand and limited supply should funnel renter interest towards existing apartment communities. Thousands Source: HUD 7 Barron s, Renter Nation, July 26, Lakemont Group, US Department of Housing and Urban Development, US Census Bureau, 9 CoStar Group, Break Out the Shovels: Major Ramp-Up In Apartment Development Expected, January 19,

10 Steadfast Income REIT Investment Strategy U.S. Percentage of Households* 20.00% 18.00% 16.00% 14.00% 12.00% 10.00% 8.00% 6.00% Class C and subsidized housing tenants Typical Middle Market Renters High-end apartment/single-family residence renters and homeowners 4.00% 2.00% 0% Household Income: Under $15,000 $15,000 to $24,999 $25,000 to $34,999 $35,000 to $49,999 $50,000 to $74,999 $75,000 to $99,999 $100,000 to $149,999 $150,000 and over STEADFAST RENT RANGE (as of 07/31/12) Monthly Rent: $250 (20% of gross income) $416 $583 $833 $1250 $1666 $2500 Targeting the Largest Potential Tenant Population Steadfast Income REIT seeks apartment communities that serve middle-class Americans the largest population group. With 53.9% of households in this category, Steadfast s rental rates reach a large pool of potential tenants. We believe having more potential renters supports demand and serves to reduce re-tenant risk. 10 * U.S. Census Bureau

11 The Steadfast investment strategy Geographic Diversification Steadfast Companies has developed a 22-state footprint with on-site property management and nine offices throughout the country.* We intend to utilize this market knowledge and in-depth experience, along with deep industry relationships, to source opportunities, evaluate market trends and respond to changing market conditions to build a geographically diversified portfolio. Apartments with High Occupancy We will target established, stable apartment communities with operating histories that have demonstrated consistently high occupancy and income levels across market cycles. We believe this strategy will allow us to build upon the performance of properties that exhibit strong fundamentals for the benefit of our investors. 93% Average Has properties owned by Steadfast Income REIT Targets for Steadfast Income REIT Under 90% 90-92% 93-95% % Steadfast Income REIT portfolio occupancy (as of 6/30/12) Opportunity for Appreciation Steadfast seeks opportunities to increase both revenues and property values from all acquisitions. Steadfast Companies experienced team, equipped with its institutional resources, can identify instances of underperformance by previous owners and make improvements that can enhance investors total return. ü Reduced ü Better ü Sophisticated ü Selective costs via purchasing power and economies of scale leasing management to attract tenants and minimize downtimes between rentals rent roll analysis and adjustment to maximize revenue property enhancements to improve return on investment * As of 12/31/11. Steadfast Companies is the sponsor of Steadfast Income REIT. Investors are not making an investment in Steadfast Companies. Past performance is no guarantee of future results. 11

12 Steadfast Companies Unlike many financial services companies that offer real estate investment programs, Steadfast Companies is a real estate company first and foremost. Since its formation in 1994, Steadfast Companies has acquired, developed or redeveloped more than $2.5 * billion of residential, commercial, and resort property throughout the U.S. and Mexico. Steadfast brings an institutional approach to a comprehensive spectrum of commercial real estate services, adding value at every step in the investment process. We continuously position ourselves to capitalize on changing environments and embrace opportunities in real estate investing with almost 500 U.S. employees dedicated to making good investment decisions on behalf of investors. Steadfast at a Glance Portfolio Value $1.3 Billion * Properties 100+ Units 15,000+ States 22 U.S. Employees 500 *As of The information above is specific to Steadfast Companies, the sponsor of Steadfast Income REIT, and reflect properties owned and/ or managed. Investors are not making an investment in Steadfast Companies. Past performance is no guarantee of future results. Institutional Relationships Include Ladenburg Thalmann and RJL Wealth Management include an allocation of Steadfast Income REIT within investment funds. The remaining list includes some of the institutional relationships that have been involved in Steadfast Companies private real estate funds. (Amstar, BlackRock, GE and JP Morgan each have invested in Steadfast projects while AXA Equitable, East West Bank, Fannie Mae, Freddie Mac, PNC and US Bank have provided loans for projects.) None of these institutional investors named above have endorsed this offering or purchased shares of Steadfast Income REIT. By including their names, we do not suggest that any of these investors approved of the services provided by Steadfast Companies. These names are included only for purposes of your evaluation of the experience and reputation of Steadfast Companies and their team of real estate professionals. 12

13 Steadfast companies Steadfast s Competitive Advantage Bringing Institutional Resources to Main Street Markets Adding Value with Institutional Capabilities We believe we can drive value in our real estate portfolio by selectively investing in markets that are often overlooked by other real estate firms. By leveraging Steadfast Companies institutional experience and resources we believe we can create a new gold standard for the communities where we invest. = Regional Offices Unique Management- Driven Growth Acquisition Steadfast Companies signature Integrated Asset Strategy capitalizes on real estate experience and sound investment planning to actively manage each acquisition from site selection through disposition. With a seasoned team of revenue enhancement experts involved with every property in our portfolio, we seek to achieve greater operational efficiencies and higher occupancies to optimize asset appreciation upon sale and maximize our profit potential. Accounting Marketing and Leasing 132-point checklist Regional management Total performancebased bonus structure Continuous analysis Property Management Asset Management Redevelopment 13

14 Lincoln Tower Springfield, IL Sonoma Grande Tulsa, OK Truman Farm Villas Grandview, MO 14

15 EBT Lofts Kansas City, MO Montelena Round Rock, TX 15

16 Estancia Tulsa, OK Clarion Park Olathe, KS 16

17 Park Place Des Moines, IA Prairie Walk Kansas City, MO Montclair Parc Oklahoma City, OK 17

18 Our REIT Offering Steadfast Income REIT The REIT targets stable, established apartment communities with consistently high occupancy located in regions with economic growth and neighborhoods near mature employment centers. The REIT Advantage A REIT is a company that pools the money of many investors to purchase and, in most cases, operate incomeproducing real estate. REITs generally pay dividends of at least 90% of their taxable income to shareholders. REIT investors purchase equity in the REIT and earn a pro-rata share of the potential economic benefits. Investors receive many of the potential advantages of property ownership, but leave the hassle of identifying, acquiring and managing those assets to the REIT sponsor. Current Distribution 10 7% annualized dividend, paid monthly Long-Term Capital Appreciation 11 Proceeds split 90% to investors, 10% to REIT advisor after investors receive return of capital and an 8% cumulative, non-compounded annual return Competitive Dividend Reinvestment Plan $9.73 per share during initial offering period 12 Set Share Price $10.24 per share during initial offering period 12 Defined Program Period Anticipated 3-5 year investment with evaluation of possible liquidity event by 01/01/ Net Asset Valuation Earlier than Required Board of Directors determined an estimated net asset value per share of $10.24 as of March 31, Intend to update semi-annually no later than 6 months after offering stage 12 Professional Management Tenured investment team with average 30 years of real estate experience No Pre-2009 Acquisitions The REIT began acquiring assets in August 2010 Investment Objectives Preserve, protect and return stockholders invested capital; pay attractive and stable distributions to stockholders; and realize capital appreciation in the value of the investments over the long term Offering Size / Minimum Investment $1.5 billion / $4,000 with additional investments in $100 increments Investor Suitability $70,000 gross annual income and $70,000 net worth or net worth of at least $250,000 (excluding the value of the investors home, furnishings and automobiles) Currently, Steadfast Income REIT is paying a distribution at a rate that, if paid each day for a 365-day period, would equal a 7.0% annualized rate based on a purchase price of $10.24 per share. Through the quarter ended June 30, 2012, all distributions have been paid with offering proceeds and such distributions have exceeded earnings, and there is no guarantee that the REIT will continue to pay distributions at this rate, if at all. 11 Return of capital, an 8% return and excess proceeds are not guaranteed. 12 Offering stage will be considered complete on the first date that we are no longer publicly offering equity securities that are not listed on a national securities exchange, whether through our initial public offering or follow-on public equity offerings. 13 We are not obligated to effectuate a liquidity event by a certain date or at all. 14 Alabama, Iowa, Kansas, Kentucky, Maine, Massachusetts, Michigan, Nebraska, Ohio, Oregon, Pennsylvania and Tennessee have different suitability standards; see prospectus for details.

19 Our Reit Offering You work hard to build a portfolio that supports your financial goals, now it s time to make sure your investments work hard for you. Meet with your financial advisor today and discover the benefits the Steadfast Income REIT may deliver to your investment portfolio. The property pictured is of the Steadfast Income REIT headquarters, and is not owned by Steadfast Income REIT. 19

20 Steadfast Companies mission is to pursue real estate investment, development and management opportunities responsibly and with integrity for the benefit of our investors, partners, tenants, employees, company, and the community Von Karman Avenue, Suite 500 Irvine, CA SCMG (7264) Steadfast Income REIT is sponsored by Steadfast REIT Investments, LLC, an affiliate of Steadfast Companies. Steadfast Capital Markets Group, LLC, member FINRA & SIPC, is the dealer manager for the Steadfast Income REIT, Inc. offering. SIR