multifamily investments overview · 2018-04-03 · multifamily investments overview stewart hsu...

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Multifamily Investments OverviewStewart Hsu

CONTI Organization, Principal / CFOHouston FPA March 3, 2015

This presentation contains statements about operating and financial plans, terms and performance of CONTI and other statements that may be deemed projections of future

results. Forward-looking statements may be identified by the use of words such as "expect," "anticipate," "intend," "plan," "assume," "will," "may" and similar

expressions. The forward-looking statements are based on various assumptions and these assumptions may prove to be incorrect. Accordingly, such forward-looking

statements might not accurately predict future events or the actual performance of an investment in the interests.

Thi t ti i f i f ti l l d h ll t tit t ff

Conti Organization - CONFIDENTIAL 2

This presentation is for informational purposes only and shall not constitute an offer to sell or solicitation to buy an offering. Such offers may only be made to qualified

investors by means of a private placement document or similar prospectus.

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• About CONTI / Biography• Commercial Property Types / What is Multifamily• What Impacts Values?

• Part 1: Macro Picture / Supply & Demand• Part 2: Net Operating Income / Value Add

• Multifamily Disadvantages & Advantages• Investment-Property Life Cycle

4 C St di


• 4 Case Studies• Q&A

STEWART HSU – Principal & CFO

Mr. Hsu is Principal & CFO of CONTI Organization, a multifamily real estate investment firm based in Dallas, TX.

Since 2008, CONTI has acquired over 4,100 units in Texas, and currently manages a portfolio of approx. 3,100 units. Stewart has been responsible for acquisitions & management of over $220M of multifamily real estate assets since 2003.

He was excited to team up with Carlos Vaz, his partner, in 2008 due to their complementary skills while sharing the same core values and vision.

Stewart attended Washington University in St. Louis and graduated magna cum laude with dual degrees in Finance and Accounting. He was formerly a Sr. P j t M f t ti Sili V ll t h l i f 7


Project Manager for top-tier Silicon Valley technology companies for over 7 years and worked as a consultant for Price Waterhouse.

He is a board member of National Multi Housing Council (NMHC), and a member of Urban Land Institute (ULI) and Entrepreneur’s Organization.

He lives in Dallas, TX and together with Xi Wang, his wife, they have two young children - Ethan & Sophie.

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11 196%11,196%vs.

751 113%


751,113%

• Retail• Office• Office• Industrial • Warehouse/Storage• Mixed Use


• Land• Multifamily (Apartments)

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Villa Ana176-unitsHouston

Villa Sierra336-unitsHouston

Champions Village256-units

Hunters Cove192-units

Houston


Houston Waxahachie(Dallas)

Enclave466-unitsDallas

Villa Siena256-unitsCarrollton

Santa Fe237-unitsDallas

Lakeside at Northpark424-units

Carrollton(Dallas)


Dallas

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S l & D d• Supply & Demand

• Net Operating Income (NOI) growth


Supply & Demand


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1. DFW 138,0002. NYC 129,4003. Houston 120,6004. Los Angeles 104,1005 Mi i 72 800


5. Miami 72,800Source: Steve Brown, Dallas Morning News, Fidelity Title Broker Presentation 2/26/15

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1. Houston 392,7022 DFW 384 7032. DFW 384,7033. NYC 383,0844. Los Angeles 302,5895. Miami 263,5346. Atlanta 236,210


6. Atlanta 236,2107. Phoenix 205,874

Source: Steve Brown, Dallas Morning News, Fidelity Title Broker Presentation 2/26/15


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Market #�of�Apt�Units�(1)

Units�Added�as�of�Jan�2015 (2)

%�Supply�Added

2014�Jobs�(3) 2015�Jobs

Ratio�of�2015�Jobs�/�New�Supply

S

2015�(2) Supply

Houston 578,651 13,992 2.40% 120,600 62,900�(4) 4.50�

Dallas�/�617,044 14,398 2.30% 138,000 105,800�(5) 7.35�

Ft�Worth


Sources:(1) ARA Houston Multifamily Overview June 2014(2) ALN Apartment Data Jan 2015 Reports – Units added last 12 months(3) Source: Steve Brown, Dallas Morning News, Fidelity Title Broker Presentation 2/26/15(4) 2015 Houston Employment Forecast 12/11/14(5) AXIOMetrics Inc - Apartment Market Performance Outlook for DFW 12/4/14


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Net Operating Income (NOI) Growth


Revenue: Gross Income (Rents & other income)

Less: Operating Expenses (Payroll, utilities, taxes,

maintenance, insurance, etc.)

Equals: Net Operating Income (NOI)

Excludes: Capital Expenditures (major rehab, etc.)


Excludes: Capital Expenditures (major rehab, etc.)

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1. Illiquid asset

2. Inefficient Market (compared to stock mkt)

3. Lender Risk (Hard money)

4. Over Supply


5. Property Taxes

1. Value Add / “Forced” Appreciation Opportunities - Properties bought forless than market value due to poor management, deferred maintenance, etc.offer a great opportunity to increase value by “fixing” these problems.

1. Cash Flow - When bought right, multifamily can generate positive cash flowg g y g pday one.

1. Tax Benefits – Cash distributions during holding years may be sheltered dueto IRS approved depreciation expenses. (Heads-up: there is a depreciationrecapture at sale.) 1031 Exchanges allow tax deferral of capital gains.

1. Leverage: Time & Capital – Compared to buying a single family house (SFH),it does not take 100x more time to buy a 100-unit apartment vs. 1 SFH. Ingeneral, of all the commercial real estate asset types, the best loan terms areavailable for multifamily properties. Typically can get loans at 70%-80% LTV.


1. Maintenance & Operational Efficiency – Compared with SFHs, since all units are in one location, it is easier to manage an apartment community than a vast number of single family homes. A 150+ unit community is easier to manage than a 20-unit property.

1. Less Risk - Compared with SFHs, different from a single family home rental that loses 100% of its income when a resident moves out, multifamily properties lose a small fraction of its income when a single resident moves out.

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1. Identification / Finding Deals2. Evaluation3. Due Diligence & Contract Negotiations4. Capital Stack & Funding Projects5. Post Closing

• Value AddA t M t


• Asset Management• Reporting

6. Sale / Disposition

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1. Prior Name: Eastfield Village2. 1969 YOC, 232 units, central chiller3. Foreclosed Oct 20074. Loan Servicer Relationship5. Prior Loan $6.8M6. Occupancy at takeover: 77%7. Acquired Mar 20098. Purchase $1.7M, Rehab $2.3M+9. Hard money debt

1. Lender risk


10. Challenging tenant profile due to location

1. Rehab & unit turn costs2. Property Stabilization

11. Sold Aug 2013

1. Prior Name: Lenox Court2. 1979 YOC, 266 units, individual HVAC3. Seller AIG4. Off-market Broker Relationship5. Prior Loan $6.2M6. Occupancy at takeover: 43%7. Acquired Sept 20098. Purchase price $2.8M, Rehab $2.7M+9. Weatherization Funds $1.1M+10. Hard money debt


11. Challenging tenant profile due to location

12. Sold March 2013

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1. Prior Name: Euless Square2. 1971 YOC, 150 units, central chiller3 Foreclosed Oct 20073. Foreclosed Oct 20074. Loan Servicer Relationship5. Asking Price $4.35M6. Occupancy at takeover: 88%7. Acquired Dec 20088. Purchase price $2.35M9. Rehab $500K+10. Hard money debt


0 a d o ey deb11. Year 5 projected cash on cash: 10%12. Year 5 actual cash on cash: 15.3%13. Holding for Cash Flow

1. 1978 YOC, 466 units, indiv. HVACs2. Limited off market relationship3. Occupancy at takeover: 90%4 Acquired April 20144. Acquired April 20145. Acquisition Cap Rate 6.07% (T6 inc)6. Purchase price $28.45M ($61K/unit)7. Rehab $1.2M+8. CMBS 10 Year 4.95% fixed loan9. Year 1 projected & actual (CoC): 7%10. Since acquisition, NOI ahead of pro-

forma ($100K+)


forma ($100K+)11. Value Add

1. Operations2. Exteriors – Paint, Signage3. Interiors – Kitchens, Lighting

12. 5 Year Exit $74K/unit

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“…Charlie and I have always considered a “bet” on ever-rising U.S. prosperity to be very close to a sure thing.

…In my lifetime alone, real per-capita U.S. output has sextupled.

…The dynamism embedded in our market economy will continue to work its magic. Gains won’t come in a smooth or uninterrupted manner; they never have. And we will


uninterrupted manner; they never have. And we will regularly grumble about our government. But, most assuredly, America’s best days lie ahead.”

-Warren Buffett 2014 Berkshire Hathaway Letter to Shareholders

• Q&A

Contact Information

Stewart Hsu, CONTI Organization

Email: [email protected]

Direct: (972) 331-6883


Address: 5080 Spectrum Dr Suite 1050W

Addison, TX 75001

multifamily investments overview · 2018-04-03 · multifamily investments overview stewart hsu...

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