APPROVED FOR USE IN OHIO INVESTMENT OVERVIEW

Transcription

1 APPROVED FOR USE IN OHIO INVESTMENT OVERVIEW

2 Consider the Following Risk Factors Before Investing» No public market currently exists for our shares of common stock, and we have no current plans to list our shares on an exchange.» We set the offering price arbitrarily. This price is unrelated to the book or net value of our assets or to our expected operating income.» We have a limited operating history, and as of December 31, 2012, our total assets were $180.5 million and consisted primarily of $142.3 million of investments, $29.9 million of cash and $3.0 million of deferred offering costs. We have not identified all of the investments to acquire with the proceeds of this offering; consequently, you will not have the opportunity to evaluate all of our investments before we make them.» We are dependent on our advisor and its affiliates to select investments and conduct our operations and this offering. Our advisor has a limited operating history and no experience operating a public company.» We pay substantial fees and expenses to our advisor, its affiliates and broker-dealers, whose payments increase the risk that you will not earn a profit on your investment.» Our executive officers and some of our directors face conflicts of interest.» We may lack diversification if we raise substantially less than the maximum offering.» Property values may fall due to environmental, economic or other reasons. A change in interest rates can negatively impact our performance.» There are restrictions on the ownership and transferability of our shares of common stock. See Description of Shares Restriction on Ownership of Shares found in the prospectus.» Our charter permits us to pay distributions from any source, including from offering proceeds, borrowings, sales of assets or waivers or deferrals of fees otherwise owed to our advisor. To the extent these distributions exceed our net income or net capital gain, a greater proportion of your distributions will generally represent a return of capital as opposed to current income or gain, as applicable. Our organizational documents do not limit the amount of distributions that we can fund from sources other than from cash flows from operations.» We may change our targeted investments without stockholder consent.» Some of the other programs sponsored by our sponsor, Resource Real Estate, Inc. ( Resource Real Estate ), have experienced adverse business developments or conditions.» Assuming all else is equal, REITs investing in opportunistic commercial real estate generally have a higher level of risk associated with them compared to those investing in core and value-add properties. This is based on the premise that opportunistic investing is designed to generate returns through capital appreciation rather than income.» There are inherent risks associated with investing in real estate including but not limited to interest rate fluctuations, market conditions, property values, natural hazards and occupancy rates. Disruptions in the financial markets and sluggish economic conditions could adversely impact our ability to implement our business strategy and generate returns. Additionally, if we are unable to find suitable investments, we may not be able to achieve our investment objectives or pay distributions. This is neither an offer to sell nor a solicitation of an offer to buy the securities described herein; an offering is made only by prospectus. This information must be preceded or accompanied by a prospectus in order to understand fully all of the implications and risks of the offering. Neither 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 a criminal offense. Shares offered through Resource Securities, Inc., an affiliate of Resource Real Estate and member FINRA, SIPC.

3 The Resource Real Estate Opportunity REIT's objective is to invest for growth. The Opportunity REIT seeks to buy distressed multifamily properties at deep discounts and then turn them around by fixing them and attempting to stabilize their occupancy rates. As the properties generate income, the Opportunity REIT distributes that income to its investors. Eventually, however, the properties will be sold in order to monetize any value created. Asset Currently Owned by the Opportunity REIT Williamsburg of Cincinnati

4 Resource Real Estate More Than 20 Years of Real Estate Investing Experience Resource Real Estate, the sponsor of the Opportunity REIT, has a 20+ year track record of opportunistic real estate investing. 1 We currently own and manage a real estate portfolio with an aggregate value of approximately $1.7 billion. This is comprised of over 24,000 apartment units across 66 multifamily communities in 18 states. 2 These properties are owned by Resource Real Estate, the sponsor of the Opportunity REIT, and are indicative of the types of properties in which the Opportunity REIT seeks to invest. Resource Real Estate Expertise in Multifamily Properties Resource Real Estate invests across all types of value-add and opportunistic commercial real estate. Traditionally, however, we have had a focus on the multifamily sector. We often acquire a property by buying a distressed loan at a deep discount and then taking possession of the property through foreclosure. An important part of our business model is our comprehensive property management platform Resource Residential. This highly specialized division of Resource Real Estate is responsible for fixing and attempting to stabilize properties once they have been acquired. Unlike most property managers, Resource Residential specializes in distressed real estate operations and manages properties to create value for investors. Ultimately, we seek to monetize this value by selling the properties. Resource Real Estate A Subsidiary of Resource America, Inc. Resource America, Inc. a specialized asset management company with a focus on alternative investment solutions. Resource America has approximately $15.3 billion in assets under management as of December 31, 2012, diversified across real estate, equipment leasing, financial fund and private equity offerings. Resource America is publically traded on the NASDAQ under the ticker symbol REXI. 1 Opportunistic real estate investing is designed to generate returns predominantly through capital appreciation. 2 Data as of December 21, Resource Real Estate More Than 20 Years of Real Estate Investing Experience

5 Resource Real Estate s Distressed Investing Track Record Resource Real Estate has been buying, fixing and selling distressed real estate through a number of economic and interest rate cycles. This experience has helped refine our strategy to what it is today a disciplined and repeatable investment process designed to generate returns in a risk-controlled fashion. The table below illustrates Resource Real Estate s distressed investments that have been purchased and sold since $100M $20M Loans > $10M $80M $60M $40M $20M $0 Clemens Place ( 98-09) Pensacola Place ( 98-06) 1212 S. Michigan ( 98-02) Alex. Brown Building ( 98-06) Evening Star Building ( 98-10) Bingham Apts ( 10-11) Parkway Terrace ( 10-12) National Press Building ( 98-10) Midwestern Mtg Portfolio ( 09-12) Waterford at Nevillewood ( 09-10) Loans < $10M $15M $10M $5M $0 Crestwood Apts ( 98-02) Greenway Village ( 98-02) Sheridan Building ( 98-02) Rittenhouse Project ( 00-02) Treetops ( 92-03) 1301 Connecticut ( 95-03) Smythe Stores ( 96-03) Mill Spring Apts ( 96-03) Lofts at Red Hill ( 97-03) Woodcrest Pavilion ( 96-04) Crafts House Apts ( 96-04) Axewood Office Cmplx ( 97-04) Countryside Village ( 97-04) Acquisition Cost Net Cash Profit Net Cash Loss Deerfield Beach Apts ( 97-04) The Loewy Building ( 97-04) Winthrop Square ( 97-04) NorthCal Property ( 96-05) Locke Mill Plaza Condos ( 95-06) The Granite Building ( 93-06) Malco Industrial Ctr ( 95-06) Redick Hotel ( 97-06) 1521 Locust Street ( 97-07) Richmond Kmart ( 97-07) St. Cloud ( 94-10) Mill Creek Terrace ( 09-10) Regency Park ( 08-11) Highline Club Apts ( 08-11) Northside Village Apts ( 10-11) RBS Portfolio ( 11-11) Park at Bellaire ( 09-12) The Enclave ( 09-12) Mansfield ( 10-12) Silverleaf ( 11-12) Some of Resource Real Estate s prior programs have experienced adverse business developments. For example, several programs have experienced lower than originally expected cash flows from operations and have had to utilize cash from reserves to supplement cash flow. In addition, several programs have had to fund distributions with combinations of operating cash flow, sale proceeds and reserves and advances from our sponsor or its affiliates. Finally, operating cash flow available after distributions has been adversely affected by timing issues with rent collection and the payment of expenses such as real estate taxes under appeal, causing either excess or deficit cash flows after distributions for a given period. Several of the properties listed above experienced negative operating results: details of those results are listed below:» Mill Spring Apartments was purchased in 1996 for $2,528,976. Due to an adverse operating environment and market challenges, the property resulted in a net loss of $23,360 when sold in 2003.» Locke Mill Plaza Condos was purchased in 1995 for $1,278,143. Due to a challenging market and unbudgeted expenses, the property resulted in a net loss of $1,109,962 when sold in 2006.» The Redick Hotel was purchased in 1997 for $3,545,421. Due to unforeseen expenses, the property resulted in a net loss of $272,724 when sold in 2006.» Regency Park was purchased in 2008 for $7,248,190. Due to challenging market conditions and higher than expected expenses, the property resulted in a net loss of $1,741,688 when sold in 2011.» The Enclave was purchased in 2009 for $6,893,530. Due to challenging market conditions and higher than expected expenses, the property resulted in a net loss of $1,070,867 when sold in Acquisition cost includes costs related to original purchase of 1st mortgage investment and costs incurred to maintain investment, including CAPX. Net cash is excess or deficient cash receipts, including sale proceeds, over cash expenditures. There may be post-close transactions that may impact the net cash flow and internal rate of return ( IRR ). Note: Past performance does not guarantee future results. Shares of Resource Real Estate, Inc. are not being offered. Resource Real Estate Opportunity REIT, Inc. does not own any of the properties referenced above. Resource Real Estate More Than 20 Years of Real Estate Investing Experience 3

6 Why Invest in Multifamily Real Estate Currently, There is an Increase in Demand for Apartments as Gen Y Enters Their Prime Rental Age Gen Y is the largest American demographic to enter the rental market since the Baby Boomers in the 1980s. 46 MM Gen Y in Prime Renting Life Stage 44 MM 42 MM 40 MM 38 MM 36 MM 34 MM 32 MM Expected Life Cycle of The Opportunity REIT 30 MM 28 MM 26 MM Source: National Center for Health Statistics, National Vital Statistics, Live Births in the United States. 4 Why Invest in Multifamily Real Estate

7 As Homeownership Rates Fall Across the U.S., More People are Moving into Apartments For a variety of reasons, but predominantly due to the recession, homeownership in the United States is on the decline, and the number of renters is on the rise. At the peak of the housing boom in 2004 and 2005, homeownership rates stood at approximately 69%. As of the middle of 2012, the rate had fallen to 65%. This implies that approximately 4 million people who were once homeowners have become renters over the past few years. 120 MM 70% 69% 110 MM Renters Homeownership Rate 68% Renters (in millions) 100 MM 90 MM 80 MM 70 MM 60 MM * The number of Americans who own their own home has dropped from a peak of 69% in late 2004 to 65% in One percentage point drop in homeownership rate equals approximately 1 million renters. This decline represents more than 4 million new renters to the market. Source: U.S. Census Bureau. Housing Vacancies and Homeownership, Q3, % 66% 65% 64% 63% 62% 61% 60% Why Invest in Multifamily Real Estate Homeownership Rate * 5

8 Why Invest in Multifamily Real Estate Today, There Is a Low Supply of Quality Apartments Available to Renters Currently, there is a lack of quality apartment housing on the market. Much of what is available is in disrepair and offers less than desirable living conditions because the communities are old and have not been managed properly. Additionally, due to the recession, new apartment construction is at historically low levels. As reflected in the chart below, the last major apartment building boom was in the mid-1980s Annual Completions (1,000s) Why Invest in Multifamily Real Estate Source: U.S Census Bureau. Survey of Market Absorption, Q2, 2012 Average Number of Annual Apartments Built Since 1970 = 214, *

9 Asset Currently Owned by the Opportunity REIT Arcadia at Westheimer

10 Economic Distress Creating Investment Opportunities Today Approximately $1.7 Trillion of Commercial Real Estate Related Debt is Maturing Between Over 400 Billion Underwater Holders of the debt that is underwater are looking for resolution either through refinancing, selling the debt or selling the property. In today s environment, refinancing is an unlikely option. $400 BN Maturing Balance (Billions) $300 BN $200 BN $100 BN $0 BN Within Terms Underwater* * Underwater defined as greater than 100% LTV ( Loan to Value Ratio ). Source: Trepp, LLC., Q4, Economic Distress Creating Investment Opportunities Today

11 There is Approximately $30 Billion of Distressed Multifamily Real Estate on the Market The loose lending standards of the 2000s fueled billions of dollars in real estate loans that are currently approaching or in default. In the beginning of 2012, there was more than $30 billion of distressed multifamily real estate on the market. And as a result of the credit crisis, banks have significantly reduced the amount of credit available to borrowers. This makes it difficult to secure new loans or refinance existing loans. Often, selling the debt at a significant discount to investors like the Opportunity REIT, is the only option for many of the current holders. $45 BN $40 BN $35 BN Outstanding Distress $30 BN $25 BN $20 BN $15 BN $10 BN $5 BN $0 BN Office Multifamily Retail Land Hotel Industrial Other Distressed real estate includes assets in foreclosures, bankruptcy, in the process of restructuring or modification, delinquent or defaulted, funding stopped, maturing or past due loan, abandoned, stalled or fraudulent. Source: Real Capital Analytics - Review & Lender Composition, October 2012 Economic Distress Creating Investment Opportunities Today 9

12 The Opportunity REIT Investing For Growth Through Distressed Multifamily Real Estate What is Distressed Real Estate? There are generally three types of Distressed real estate conditions: Market Distress, Seller Distress and Property Distress. Let s look at these in more detail. 1. Market Distress This refers to the general market conditions and how they impact real estate. If the overall economy is weak and the real estate market is depressed, this is considered Market Distress. 2. Seller Distress This refers to the scenario when a real estate owner s financial status is compromised and the owner is under significant pressure to sell a property into a low-priced environment. Often, the loan on the property is approaching default or is in default and the owner is forced to sell the property at a significant discount. 3. Property Distress This refers to when a property is mismanaged and falls into disrepair as a result of poor operating economics. Property distress is most often a result of the combination of seller distress and market distress. Multifamily housing is typically the most vulnerable sector to property distress. Scan to View Video Presentation 10 The Opportunity REIT Investing For Growth Through Distressed Multifamily Real Estate

13 Properties Acquired by the Opportunity REIT Seller Distress and Property Distress create most of the investment opportunities for the Opportunity REIT. The Opportunity REIT typically acquires a property by initially buying the distressed loan from a bank or financial institution. These institutions are often eager to unload these loans because...» They are ill-equipped to manage the real estate if they are required to foreclose on the property» Defaulted loans are destructive to their business negatively impacting their balance sheet, stock valuation and capital ratios.» Over Leveraged Properties» Weak Economy Market Distress 1 Campus Club Apartments; The Opportunity REIT 2 Cannery Lofts; 3 Vista Apartment Homes;» Typically Resulting from Market & Seller Distress» Apartments Typically Most Vulnerable» Poor Property Management & Economics 3 4 Property Distress» Typically Multifamily Properties Acquired Through Distressed Loans» Substantial Discount to Replacement Value» Target Deal Size of $5-$15 Million Seller Distress 4 Park Forest Apartments» Forced Sale into a Low Priced Environment» Troubled Loans 1 2 Assets Currently Owned by the Opportunity REIT The Opportunity REIT Investing For Growth Through Distressed Multifamily Real Estate 11

14 The Opportunity REIT s Investment Process The Opportunity REIT Has a Clearly Defined and Repeatable Four-step Investment Process. The Opportunity REIT is designed to generate investor returns through capital appreciation by buying, fixing, stabilizing and selling multifamily properties. 1 Step 1: Buy it Step 2: Fix it Step 3: Stabilize it Step 4: Sell it» Goal: Buy distressed» Goal: Fix the» Goal: Attempt» Goal: Sell the real estate related properties once to stabilize the property to income 2 investments at they are acquired. properties by reaching seeking investors significant discounts. The Opportunity REIT occupancy rates looking for stabilized, Typically this is done often takes possession of 90% and making cash flowing by initially acquiring through property the property apartment communities. the debt underlying foreclosure. profitable again. the properties. Asset Currently Owned by the Opportunity REIT Arcadia at Westheimer 1 There is no assurance that the Opportunity REIT will be able to achieve these objectives. 2 Any potential cash distributions are intended to be paid from property cash flow; however, our charter permits us to pay distributions from any source including offering proceeds, borrowings, sales of assets, or waivers or deferrals of fees otherwise owed to our advisor. 12 The Opportunity REIT s Investment Process

15 Asset Currently Owned by the Opportunity REIT Skyview at Palm Center

16 What Makes the Opportunity REIT Unique In Summary Why You Should Consider the Opportunity REIT» The Opportunity REIT is a growth REIT. It invests in distressed multifamily housing, with the objective of generating investor returns through capital appreciation.» The Opportunity REIT can serve as a complement to other investments. Often investors use the Opportunity REIT as a complement to their income REITs OR as an alternative to traditional equities.» The Opportunity REIT is actively managed. The REIT s objective is to buy properties at deep discounts, fix and attempt to stabilize them to create value, and then sell the properties after holding them for a period of two to six years. 1» The Opportunity REIT has a hurdle rate 2 of 10%. The REIT needs to return the investors original investment, plus an additional 10% for each year they are invested in the offering, before Resource Real Estate shares in any potential profits generated by the Opportunity REIT. Asset Currently Owned by the Opportunity REIT Deerfield Luxury Townhomes Asset Currently Owned by the Opportunity REIT Campus Club 1 Economic conditions and market conditions, and changes in REIT regulations, may cause us to adjust our expected holding period in order to maximize potential returns. 2 The sponsor s possible participation in profits is in addition to the fees and expenses paid to the sponsor as outlined in the prospectus. Returns are not guaranteed. 14 What Makes the Opportunity REIT Unique

17 The Opportunity REIT Offering Highlights Size of Offering: $750 million Price per Share: $10.00 Minimum Investment: Hurdle Rate: 10% 1 $2,500 per investor Historical Stock Distributions: 6% annualized paid quarterly 2 Q Distributions: 1.5% comprised of half cash and half stock 3 Q Distributions: 1.5% comprised of half cash paid monthly and half stock paid quarterly 4 Current Cash Distributions: $0.025 per share paid monthly 5 Investor Suitability: Net worth of at least $250,000 or gross annual income of at least $70,000 and a net worth of at least $70,000 6 Advisor Investment: Minimum of 1% investment up to $2.5 million Disposition Strategy: Anticipated liquidity event 3-6 years after the end of the offering 7 Asset Currently Owned by the Opportunity REIT Flagstone Gardens Asset Currently Owned by the Opportunity REIT The Redford Apartments 1 Investors need to achieve a 10% cumulative, non-compounded annual rate of return based on the price paid for each share before Resource Real Estate participates in sharing of profit. Resource Real Estate s possible participation in profits is in addition to the fees and expenses paid to the sponsor as outlined in the prospectus. Returns are not guaranteed. 2 This stock distribution is based on a 1.5% quarterly distribution paid to shareholders of record beginning 2/28/11 and ending 9/30/12. Stock distributions may have a dilutive effect on future shareholders and are not guaranteed. 3 The Q cash and stock distributions were based on a 1.5% quarterly distribution paid to shareholders of record as of 12/31/12. Cash and stock distributions are not guaranteed, are at the discretion of the Opportunity REIT board and are subject to change based on a number of variables. 4 The Q monthly cash and quarterly stock distributions were based on a 1.5% distribution paid to shareholders of record as of 1/31/13, 2/28/13 and 3/29/13, respectively. Cash and stock distributions are not guaranteed. 5 Current cash distributions equal $0.025 per share of common stock for shareholders of record as of 4/30/13, 5/31/13 and 6/28/13, respectively. Cash distributions are not guaranteed. 6 Suitability standards vary from the standards above in Alabama (AL), Iowa (IA), Kansas (KS), Kentucky (KY), Massachusetts (MA), Michigan (MI), Nebraska (NE), Ohio (OH), Oregon (OR), Pennsylvania (PA) and Tennessee (TN) and may vary in other states - please see prospectus for additional information. 7 Liquidity event is not guaranteed. What Makes the Opportunity REIT Unique 15

18 How a Growth REIT Like the Opportunity REIT Can Diversify Your Portfolio The Opportunity REIT A Complement to Your Income REITs As an investor you may already be investing in REITs as a means of gaining exposure to real estate, providing portfolio diversification, and potentially generating a stream of income. A growth REIT, such as the Opportunity REIT, can play an important role in your portfolio especially as you look to diversify across a number of different alternative investment options. A growth REIT, which most often distributes little or no income, can serve as a complement to an income REIT or as a substitute to a more traditional growth-oriented investment like a stock. As you review the real estate investments in your portfolio, be sure to consider adding the Opportunity REIT as a complement to your income REITs. This strategy can potentially increase the risk-adjusted total return of the real estate portion of your portfolio. This is a hypothetical illustration and does not suggest a specific portfolio allocation. 16 How a Growth REIT Like the Opportunity REIT Can Diversify Your Portfolio

19 Your Next Steps Work with your financial advisor to determine the role of a growth REIT in your investment portfolio and learn more about the Opportunity REIT. For more information, call (866) or visit us online at and How a Growth REIT Like the Opportunity REIT Can Diversify Your Portfolio 17

20 Suitability Standards The shares we are offering through the prospectus are suitable only as a long-term investment for persons of adequate financial means and who have no need for liquidity in this investment. Because there is no public market for our shares, you will have difficulty selling your shares. In consideration of these factors, we have established suitability standards for investors in this offering and subsequent purchasers of our shares. These suitability standards require that a purchaser of shares have either:» a net worth of at least $250,000; or» gross annual income of at least $70,000 and a net worth of at least $70,000. Suitability standards vary from the standards above in Alabama (AL), Iowa (IA), Kansas (KS), Kentucky (KY), Massachusetts (MA), Michigan (MI), Nebraska (NE), Ohio (OH), Oregon (OR), Pennsylvania (PA) and Tennessee (TN) and may vary in other states please see prospectus for additional information. RESOURCE REAL ESTATE, INC. One Commerce Square 2005 Market Street, 15th Floor Philadelphia, PA For information, call (866) or Sales@ResourceREIT.com IO-REIT1-L