How to Invest in Real Estate in a Growth Economy

Transcription

1 Origin Capital Acquisition Strategy March 2015 How to Invest in Real Estate in a Growth Economy 1

2 Investment Focus 8 U.S. Growth Markets 2

3 Market Opportunity Target Markets Attractive Target Markets Target markets generally exhibit strong demographic indicators of future demand, including job growth, population growth, and unemployment rates, relative to the national average. Source: Origin analysis based on Costar Market Reports 3

4 Investment Strategy Research-Driven Geographic Focus Target Market and Submarket Selection Investment strategy begins with market selection. Origin analyzes demand drivers such as job growth, population growth and forecasted growth rates in each of its target markets compared to the national average. Origin then further defines geographic investment boundaries within each target market by analyzing growth characteristics and long-term potential of each submarket within the city. Analysis: Case Study: Chicago Comparison of the Chicago Commercial Business District compared to the overall Chicago market Potential: Chicago has exhibited a low growth rate, but the Downtown Loop submarket has one of the highest growth rates in the country Surrounding Area Demographics 2014 Estimates 1-Mile Radius Chicago MSA Population ,232 9,461,105 Population ,250 9,557,430 Population ,075 9,665,731 Compound % Change % 0.3% Compound % Change % 0.2% Households ,423 3,475,726 Households ,268 3,531,674 Households ,065 3,589,679 Compound % Change % 0.4% Compound % Change % 0.3% Median Household Income 2014 $76,382 $57,972 Average Household Size College Graduate % 80% 34% Median Age Owner Occupied % 43% 66% Renter Occupied % 57% 34% Median Owner Occupied Housing Value $329,420 $222,691 Median Year Structure Built Avg. Travel Time to Work in Min Source: Claritas based on U.S. Census Data 4

5 Origin 2014/2015 Activity Deal Sourcing Over 400 Deals Presented Deal Review 200 Deals Underwritten Valued at Over $3 billion Due Diligence 150 Site Visits and Market Tours Investment Committee Approval 50 LOI/Terms Sheets Submitted Acquisitions 11 assets acquired for an aggregate $251 million Dispositions 6 assets sold for an aggregate $122 million $373 million total transactions in 18 months 5

6 2015 Transaction Pipeline MSA Size Status Price (mm) Risk Profile Comments Q3/Q4 Acquisition Pipeline Iroquois Club Chicago 264 units Purchased $38.0 Value-added City Center Buckhead Atlanta 33,406 SF Negotiating Purchase $13.4 Core-plus One University Place Charlotte 80,891 SF Under Contract $7.3 Value-added One Harrison Park Raleigh 56,933 SF Offer Submitted $6.1 Value-added Off-market acquisition of an apartment complex in Naperville. Off-market office asset in the heart of Buckhead. 4-story office building in the dynamic University submarket. Office acquisition adjacent to prestigious Weston Development. Q3/Q4 Disposition Pipeline Arbor on Richmond Houston 304 units Under Contract $12.6 Value-added Executed contract at $42/door. Marquis Crest Atlanta 300 units Sold $11.5 Value-added Disposition Closed 8/6/15 Centrum at Glenridge Atlanta 186,360 SF Preparing for Sale $35.4 Core-plus Engaged broker to market for sale Note: The above summary highlights some pending transactions in Origin s acquisition/disposition pipeline. There is no certainty that any of the above-described deals will close, and all pricing may be subject to change. 6

7 Investment Strategy Asset Management Drive Income Growth with Expert Asset management team formulates asset-level business plans, ensuring optimal ownership and exit strategies are integrated prior to delivery of letters of intent on new investments. Revenue Enhancements Position the asset to meet market demand Determine physical enhancement needs Identify rebranding oppor tunities Develop tactical marketing plan Cultivate ancillary revenue streams Cost Reductions Understand acceptable ranges of controlled expenses Improve efficiency Utilize economies of scale Pursue real estate tax appeals 7

8 Case Study Cambridge Corporate Center - Current Holding Cambridge Corporate Center CHARLOTTE OFFICE Acquisition Date: 8/14/2014 Total Acquisition Cost: $44.6mm Total Price Per Square Foot: $131 Going-in Cap Rate: 9.6% Stabilized Levered Yield (projected): 14.5% Projected Gross IRR: 27.8% Projected Gross Multiple: 2.6x Oppor tunity / Investment Thesis: Three-wing 339,244 SF office asset Acquired at substantial discount to replacement cost Large block vacancy meets large user demand Competitive advantages in above-market parking and redundant power system Predictable income from well-established tenant base (GM and Duke Energy) Market Fundamentals: Located 10 miles northeast of Charlotte City Center 2 nd largest employment center in the region 1 Value Enhancement / Results: Secured 97,000 SF 10-year lease valued at $20 million, increasing occupancy to 94% Executed 5-year renewal with Duke Energy for 31,000 SF with 11% rent increase Building re-measurement increased rentable area by 24,000 SF (7%) $60k in annual expense savings by implementing security camera system 1 Source: UniversityCityPartners.org based on U.S. Census Bureau Data 8

9 Case Study Lux24 - Current Holding Oppor tunity / Investment Thesis: Acquire a 67-unit failed condominium project directly from the lender 51% occupied with 25 unfinished units Significant value-added opportunity to complete build-out, lease up unfinished units and mark rents to market Lux24 CHICAGO MULTI-FAMILY Acquisition Date: 6/5/2013 Total Acquisition Cost: $19.22mm Total Price Per Unit: $251k Going-in Cap Rate: 4.3% Stabilized Levered Yield (projected): 27.7% Projected Gross IRR: 30.4% Projected Gross Multiple: 2.9x Market Fundamentals: West Loop submarket has experienced some of the strongest absorption and market rent growth 1 in the Chicago MSA strengthen demand from the target renter: well-educated, young professionals Value Enhancement / Results: Converted larger floorplans to create 5 additional units, $1million in value creation Relocation of fitness center added one unit, $400k in value creation Leased vacant retail space for 10 years generating $25k in annual revenue Repurchased condo units (averaged $270k per unit) achieving fee simple title Achieving rents PSF 15% higher than the year 3 proforma projection Refinanced asset for $17.4 million based on appraised value of $350k per door, reflecting a 40% increase in value Exploring sale, as competitive properties are trading at $425-$500k per door 1 Source: REIS 9

10 Fund I Performance Summary Origin Capital Opportunity Fund, LLC Investment Performance As of June 30, 2015 Initial Closing Date 2/28/2011 Reported Value Est. Residual Total Equity Commitments $19,000,000 Gross IRR 31.3% 27.7% Investments Acquired 11 Gross Multiple 2.2x 2.2x Investments Realized 6 Net IRR 26.8% 24.5% % of Capital Returned % Net Multiple 1.9x 2.0x Fund I Transactions As of June 30, 2015 Unrealized Unrealized Actual / Estimated Estimated Estimated Gross Date of Date of Property Invested Percent of Distributions Reported Value Reported Value Total Gross Residual Residual Investment Investment Liquidation Type MSA Capital Commitments to Date Gross IRR Gross Multiple Distributions Gross IRR Gross Multiple Realized Investments Food 4 Less Center Feb-11 Jan-14 Retail Chicago $2,042, % $4,444, % 2.6x $5,342, % 2.6x Residences at 3295 Apr-12 Jun-14 Multifamily Seattle $1,940, % $3,129, % 1.6x $3,129, % 1.6x Legacy Suites Jun-12 Jan-14 Student Housing Tallahassee $1,940, % $2,163, % 1.1x $2,163, % 1.1x Arium Edgewater Oct-12 Mar-15 Multifamily Houston $847, % $1,346, % 1.6x $1,346, % 1.6x Giordano s Portfolio Nov-11 Apr-15 Retail Chicago $1,965, % $9,883, % 4.5x $9,883, % 4.5x Marquis Crest [1] Jan-12 Aug-15 Multifamily Atlanta $1,940, % $4,030, % 2.3x $4,030, % 2.3x Total Realized $10,676, % $24,998, % 2.4x $25,896, % 2.4x Unrealized Investments Arbor on Richmond [3] Jul-11 Aug-15 Multifamily Houston $561, % $685, % 2.1x $1,131, % 2.0x Bay Club Apartments Feb-12 Sep-18 Multifamily Seattle $1,940, % $2,029, % 2.1x $4,615, % 2.4x Kingwood Medical Arts Oct-12 Dec-15 Medical Office Houston $1,940, % $3, % 1.6x $3,121, % 1.6x Arium North Point Dec-12 Jul-17 Multifamily Atlanta $1,940, % $2,025, % 2.1x $4,669, % 2.4x Marquis Trace Dec-12 Jul-17 Multifamily Atlanta $1,940, % $1,526, % 2.7x $5,122, % 2.9x Total Unrealized $8,323, % $6,270, % 2.1x $18.660, % 2.2x Total Portfolio $19,000, % $31,268, % 2.2x $44,556, % 2.2x [1] Investment in Marquis Crest returned via disposition on August 6, Asset was under contract for sale on June 30, 2015 and therefore is categorized as a realized investment. Note: Past performance is not indicative of future results. The above summary reflects the current performance of Origin s fund assets as if sold on June 30,

11 Fund II Performance Summary Origin Capital Fund II, LLC Investment Performance As of June 30, 2015 Initial Closing Date 6/5/2013 Reported Value Est. Residual Total Equity Commitments $31,599,910 Gross IRR 34.5% 24.7% Investments Acquired 13 Gross Multiple 1.4x 2.2x Investments Realized 0 Net IRR 29.3% 21.8% % of Capital Returned 14.1% Net Multiple 1.3x 1.9x Fund II Transactions As of June 30, 2015 Unrealized Unrealized Gross Actual / Estimated Gross Date of Date of Property Invested Percent of Distributions Reported Value Reported Value Total Gross Residual Residual Investment Investment Liquidation Type MSA Capital Commitments to Date Gross IRR Gross Multiple Distributions Gross IRR Gross Multiple Realized Investments Total Realized $0 0.0% $0 0.0% 0.0x $0 0.0% 0.0x Unrealized Investments Lux 24 Jun-13 Dec-18 Multifamily Chicago $3,757, % $2,479, % 2.1x $11,009, % 2.9x Naper Place Jun-13 Sep-18 Mixed Use Chicago $1,592, % $234, % 2.2x $5,266, % 3.3x Kingwood Medical Arts Jun-13 Dec-15 Medical Office Houston $913, % $0 27.3% 1.6x $1,466, % 1.6x Arium North Point Jun-13 Jul-17 Multifamily Atlanta $973, % $994, % 2.0x $2,432, % 2.5x Centrum at Glenridge Feb-14 Sep-15 Office Atlanta $1,026, % $109, % 2.0x $1,951, % 1.9x Austin Air Cargo May-14 May-19 Industrial Austin $2,067, % $523, % 1.6x $4,651, % 2.3x The Olmsted Jun-14 May-17 Multifamily Atlanta $3,000, % $0 n/a [1] 1.0x $5,460, % 1.8x Woodlands Bus. Park Jul-14 Mar-18 Industrial Dallas $1,460, % $86,996 n/a [1] 1.0x $2,216, % 1.5x Cambridge Corporate Aug-14 Jun-18 Office Charlotte $1,700, % $37,188 n/a [1] 1.0x $4,340, % 2.6x Collins Square Nov-14 Sep-19 Office Dallas $1,174, % $43,248 n/a [1] 1.0x $2,479, % 2.1x 2605 Meridian Feb-15 Dec-17 Office Raleigh $2,400, % $0 n/a [1] 1.0x $4,104, % 1.7x Orlando Industrial Feb-15 Jan-18 Industrial Orlando $546, % $0 n/a [1] 1.0x $852, % 1.6x Three South Executive Feb-15 Dec-19 Office Charlotte $2,200, % $0 n/a [1] 1.0x $4,488, % 2.0x Total Unrealized $22,813, % $4,507, % 1.4x $50,719, % 2.2x Total Portfolio $22,813, % $4,507, % 1.4x $50, % 2.2x [1] Current liquidation value equal to purchase price for recent acquisitions. Estimated Estimated Note: Past performance is not indicative of future results. The above summary reflects the current performance of Origin s fund assets as if sold on June 30,

12 Origin Capital Acquisition Strategy March