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2018 COMPANY PROFILEEXECUTIVE SUMMARY VERSION
1. EXECUTIVE SUMMARY
2. BUSINESS PLAN
3. SHAREHOLDERS & VALUATION
STATEMENT OF FORWARD LOOKING INFORMATION THIS DOCUMENT CONTAINS PROJECTIONS AND OTHER FORWARD-LOOKING STATEMENTS AND INFORMATION WITH RESPECT TO PLANS, PROJECTIONS AND FUTURE PERFORMANCE OF PSW, WHICH SPEAK ONLY AS OF DATE THEY ARE MADE. SUCH FORWARD-LOOKING INFORMATION INVOLVES IMPORTANT RISKS AND UNCERTAINTIES THAT COULD SIGNIFICANTLY AFFECT ACTUAL RESULTS AND CAUSE THEM TO DIFFER MATERIALLY FROM EXPECTATIONS EXPRESSED HEREIN AND IN OTHER STATEMENTS AND PRESENTATIONS. PSW UNDERTAKES NO OBLIGATION TO UPDATE ANY FORWARD-LOOKING STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE.
THIS DOCUMENT DOES NOT CONSTITUTE AN OFFER TO SELL SECURITIES, BUT DOES REFERENCE CERTAIN PRINCIPAL TERMS OF AN OFFERING FOR UP TO $100 MILLION OF MEMBERSHIP INTERESTS BY PSW REAL ESTATE, LLC. SUCH TERMS ARE DESCRIBED MORE FULLY IN A CONFIDENTIAL PRIVATE PLACEMENT MEMORANDUM (THE “MEMORANDUM”).
SHOULD PSW OFFER SUCH SECURITIES FOR SALE, QUALIFIED PROSPECTIVE INVESTORS WILL RECEIVE A COPY OF THE MEMORANDUM INCLUDING A COPY OF THE AGREEMENT OF PSW (THE “COMPANY AGREEMENT”), WHICH THEY ARE URGED TO READ IN ITS ENTIRETY.
IANNICK TORREZDIRECTOR OF INVESTOR [email protected](913) 908-0209
JIM BERNARDPSW HOMEOWNERCHIEF FINANCIAL [email protected](512) 351-1874
MIKE ANDRUSPSW HOMEOWNERMANAGING DIR. OF INVESTOR [email protected](512) 820-1497
CONTACT
ANTHONY SIELAPSW HOMEOWNERMANAGING [email protected](512) 577-5232
RYAN DIEPENBROCKMANAGING [email protected](480) 650-4501
TABLE OF CONTENTS
1-5
6-7
8-9
PSW 2017
1
PSW is one of Texas’s leading urban residential and commercial community developers. We started making
real estate investments in 2001. In 2009, we moved to Austin to build residential projects. Today, PSW is a
100-person company that is developing communities in premier urban locations in four markets (Austin, Dallas,
San Antonio and Seattle), and we are well structured to create value for our customers, partners and team
members for many years to come.
.
PSW IN BRIEF
SPICEWOOD, Austin, Texas
EXECUTIVE SUMMARY
2
PERFORMANCE AND VISION
PSW has built more than 30 communities and helped over 500 homeowners live in their favorite neighborhoods.
These efforts have generated over $250 million in revenue and more than $30 million in returns paid to its
investment partners.
Our vision is to increase profit while remaining innovative and creative enough to deliver the product that best
suits every urban development opportunity. To support that vision, PSW is developing a portfolio of commercial
real estate assets as a foundation to support the growth of our “For- Sale” business and our expansion into new
markets.
$40 M
900 S. FIRST STREET, Austin, Texas
$75 M
$125 M
$175 M
$200 M
FOR SALEREVENUE MILESTONES
FOR RENTASSET FOUNDATION
2016 2017 2018 2019 2020
100 M
25 M
EXECUTIVE SUMMARY
3
PSW URBAN ECOSYSTEM
The most significant differentiator of PSW’s business model is where we build. PSW is
exclusively focused on developing communities in thriving neighborhoods surrounding
major downtown markets, an area we describe as the PSW Urban Ecosystem. What we
build depends on the unique circumstances offered by each situation.
By continuously refining our design and construction skills to professionally deliver
multiple project types, we serve the greatest number of buyers and tenants. In other
words, we fit the product to the location and customer instead of finding a location for
our products.
We believe this strategy is the most sustainable, both environmentally and financially
because we build where demand has already been established, in areas that are
experiencing substantial growth in the United States. Additionally, property values have
often been resilient to downturns in the urban core.
f Austin, TX
f San Antonio, TX
f Dallas, TX
f Seattle, WA
f Denver, CO
f Mixed Use
f Condos
f Town Homes
f Commercial
f Apartments
f 1-4 Home Projects
f
URBAN ECOSYSTEM
EXECUTIVE SUMMARY
Detached Single-Family
Communities
Downtown
Suburbs
Rural Areas
4
FINANCIAL MODEL
2017 2018 2019 2020 2021-2030
$71,069 $129,386 $171,577 $202,338 $229,885
143 237 344 436 450
497 546 499 464 511
12,434 23,626 31,742 40,292 47,154
17% 18% 19% 20% 21%
For Sale Business Unit (in 000's)
Homes
Average price
Net income
Net Income %
Revenue
5,955 14,038 24,075 60,442 175,000
467 1,102 1,890 4,745 8,159
Asset costs
Net income
For Rent Business Unit (in 000's)
$12,901 $24,728 $33,632 $45,036 $55,313 Total Company Net Income
2017 2018 2019 2020 2021-2030 2007-2016
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
PSW has approximately $500 Million in revenue from the existing communities we currently own of the 1,182
homes we expect to close through 2020. Nearly 1,000 or 84% are already designed and permitted.
Company Valuation $250 Million $400 Million $500 Million $750 Million $1 Billion
EXECUTIVE SUMMARY
INVESTOR RETURNS
+30 Limited Partnerships 84% Existing Pipeline +20% IRR w/event
13%14% 14%
15%
17%
10 Year Average
15.8%
+ Liquidity Event (see pg. 9 for
value)
5
COMPETITIVE ADVANTAGE
PSW’s competitive advantage lies in its unique and conservative structure. The balance of our urban cash-
flowing assets with our for-sale communities, provides exceptional value for its customers, stability for investors,
and rewards for team members. This alignment has positioned us well ahead of any competition in the urban
infill market.
f MARKET POSITION
f WELL CAPITALIZED WITH A TRACK RECORD
f EXPERIENCED AND ALIGNED TEAM
• Urban living increasing in demand
• Leader in highly competitive Texas markets and successful entry into Seattle
• SOLE urban focus provides excellent downturn risk mitigation and opportunity
• ~$75 million in partner capital under PSW Management at 12/31/17
• ~$30M paid profits to investors to date
• ~$150M in bank financing committed via regional banks in TX, WA, and KS
• Leaders ONLY compensated via profits, reducing overhead and risk
• Vertically integrated team designed to serve urban customer (womb to tomb)
• Aligned team via comprehensive Profit Sharing Plan in lieu of bonuses
EXECUTIVE SUMMARY
FOR SALE
CASH FLOW
STRUCTURE
6
CAPITALIZATION
2017 2018 2019 2020
35,000 60,000 80,000 100,000
13,500 15,000 20,000 20,000
5,000 15,000 20,000 20,000
Capitalization Targets
(Mezz) Asset Portfolio LP
(LTCG) Land Acquisition LP
Class A
53,500 90,000 120,000 140,000 Total
72,000 125,000 190,000 260,000
57% 58% 61% 65%Bank Loans
Debt to Equity Ratio
Equity
Financing
125,000 215,000 310,000 400,000 Total (in 000's)
BUSINESS PLAN
Bank financing commitments total approximately $150M with $72M outstanding at the time of publication. The
company may expand its access and use of Mezz and LTCG equity beyond what is shown above as a way to
grow while reducing cost of equity. This 10% cost of equity is expected to be accretive to all shareholders.
CIMA HILLS, Austin, Texas
7
(-) 6% of 100,000 = 6,000
45,313
PROFITABILITY
PSW expects to be fully capitalized with 100 million dollars in 2020, and be able to
generate the income levels below. The company will first make Preferred Payments to
Class A partners, and then distribute the remaining as profits to the shareholders.
For Sale Business
Total Net Income (in 000's, Annual Avg.) 55,313
229,885Revenue
Homes
Average Price
Net Income
(-) Class A Preferred Payment
(-) (LTCG) Land Acquisition
Shareholder Profits
55,313
(-) 10% of 20,000 = 2,000
(-) 10% of 20,000 = 2,000(-) (Mezz) Asset Portfolio
Shareholder Profits
Class A Investor Partners
Class E/ee Employees
Class B Owners
45,313
Total Class A Return
Class A Preferred Payment
Profit Distribution
6,000
11,328
17,328
Gross Profit
Indirect Expenses
Net Income
450
511
58,654
(11,500)
47,154
For Rent Business
249,773Asset Values
Asset Costs
Yield on cost
Annual NOI
Less Financing
Net Income
175,000
7.85%
13,738
(5,578)
8,159
BUSINESS PLAN
17.3% return on $100 million =
25% = 11,328
25% = 11,328
50% = 22,657
8
SHAREHOLDER AND COMPANY ALIGNMENT
+/-20%
$8,800,000
Compensation
Savings
SHAREHOLDERS & VALUATION
CONSERVATIVE
Works with real estate cyclesHelps navigate slow periods
CONSISTENT
Aligned Profit Distribution
STRATEGICGROWTH
Exit Value
12-17%Annual Target
6% Base Pref.
Class A Class B Class E Employee
Base
$
Profit Interest
6% Pref.
25%
None
50%
1/2 Base Comp
2.5%
Base Comp
22.5%
-8,800,000
+8,800,000
PSW's company structure aligns the shareholders and the employee's financial interests. We believe this is to the
mutual benefit of both the Class A partners and the company's employees.
9 100,000 (900,000)
100 25,000 (2,500,000)
Class E (No Bonus)
Employees (No Bonus)
(8,800,000) Total Company Savings Compared to Traditional Org.
9 550,000 (4,950,000)
9 50,000 (450,000)
Class B (No Base or Bonus)Class E (Salary Reduced)
Avg. Count Reduced Comp Savings
9SHAREHOLDERS & VALUATION
LOCAL
LP
5 SELECT CITIES
CLASS A
NATIONAL
IPO
2010 2015 2020 2025 2030
Multiple Value Cap Rate Value
COMPANY VALUATION
Net Income Multiple
For Sale Business Unit For Rent Business Unit
EBITDA Multiple
Revenue Multiple
Average For Sale Valuation
12
10
565,845
551,997
574,713
564,185
2.5
Institutional Buyer
Average Market Cap
Average For Rent Valuation
4.5%
5.0%
305,278
274,750
290,014
Total Company Value (in 000's) 854,199
CLASS A SUMMARY
Investment Distributions Gain on Sale Total
100,000 140,000 178,550 418,550
($100,000 invested over 10 years, with a successful exit = 4x multiple)
PSW's capitalization structure is helping us position the company for a future liquidity event, such as an IPO, sale
or shareholder recapitalization.
COMPANY VALUATION ANALYSIS (derived from Profitability on page 7)