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INVESTMENT FOCUS: MULTIFAMILY HOUSING AND APARTMENT BUILDINGSLooking at one of the most active corners of real estate from a family office investor perspective.
Sponsored by the Family Office Club & Multifamily Lending Partners
WHAT IS MULTIFAMILY REAL ESTATE
What is multifamily residential real estate?
In contrast to single family real estate, multifamily real estate is built for multiple-unit occupancy. An apartment is an example of multifamily real estate, where there are many occupants living in the same building in different housing units.
WHO IS BUYING MULTIFAMILY?
Multifamily Properties
Investment Funds
Sponsors
Family Offices
REITs
Foreign Buyers
STRATEGIES
• Ground-up development• Value-add• Buy and Hold• Fix and Flip• Opportunistic• Distressed investing• Passive allocation• Emerging markets (UK
residential)
FAMILY OFFICES
• Building a portfolio of income-producing properties
• Vertical integration from property management to brokerage
• Geographic focus• Increasing direct investments,
managing the deal• Open to sponsored deals, but
need a strong incentive/justification
• 10+% of portfolio, can be much higher
PARTNERING ON DEALS
• Family offices looking to own assets directly
• Open to co-investments• Shifting away from strictly
passive investments (general trend)
• Sponsors need to justify share of the economics and structure
ECONOMICS
Source: https://www.slideshare.net/ljwicks9/unlisted-real-estate-funds-lecture-1-1
• Family offices might seek preferential terms, especially in new “blind” fund and independent sponsor
• Pressure on sponsors to reduce fees or more flexible terms
CAP RATES
Source: JLL U.S. Multifamily Investment Outlook | Q4 2016
SECURING AGENCY FINANCING
Fannie Mae
• Primary and secondary markets
• Stabilized properties only with a min of $750,000 loan amount
• Fixed or floating
• Traditional multifamily properties
• student housing
• affordable housing
• independent senior living.
• Max LTV of 80%, 75% on refinancings.
• Recourse or non recourse
Freddie Mac
• First position mortgage
• traditional
• student housing
• senior housing
• affordable housing property
• Either held in Freddie portfolio or sold to investors
• Fixed or floating
• Usually amortized to 25-30 years
• Max LTV of 80%
• Term of 5-30 years
HUD/FHA
• Purchase/Refi
• Multifamily
• Construction/Rehab
• Healthcare
• Non-Recourse
• Competitive Rates w/ 35-40 year fixed terms and amortization
• Longer diligence/underwriting period than most loans
• Typically either healthcare or multifamily
MULTIFAMILY
MULTIFAMILY
CASE STUDY – MULTIFAMILY PORTFOLIO
• $50m+ purchase price target • 600 unit deal in Southeast US• Needed 7 and 10 year debt
options• Repeat/Preferred agency
borrower • Negotiated exclusively to avoid
bidding war, offered better relationship than aggressive funds
UNIQUE STRATEGIES BY FAMILY OFFICES
• Lending through the construction phase to earn equity when stabilized/cash-flowing
• Dominating a secondary/tertiary market
• Taking advantage of green incentives and energy efficiency
• Developing a proprietary broker/seller network
• Use of technology on properties• Negotiating sweetheart deals w/
contractors across multiple properties, leveraging a 3000 unit portfolio etc.
• Different lease agreement term lengths
MISTAKES
• Undefined co-investing terms• Poor due diligence• Tax inefficiency• Buying at the top or in an
oversaturated market• Failing to budget for rehab or
problems within the portfolio (fire, repair, etc.)
• One family office: “I always invest with the understanding that I’ll have to commit more than the initial ask.”
• Poor attention to tenants.• First-time property manager• Cost overrun
Key Biscayne, FL
Our Offices
Richard C. WilsonFounder - Wilson Holding Company
Direct Line: (503) 922-1811328 Crandon Blvd. #223Key Biscayne, FL 33149
Theodore O’BrienManaging Partner – Multifamily Lending Partners
Direct Line: (305) 677-3338328 Crandon Blvd. #223Key Biscayne, FL 33149
VISIT OUR OFFICES
DISCLAIMERThis document does not represent an offer to sell or a solicitation of an offer to buy any security. Any such offer must be made pursuant to a private placement memorandum or other definitive legal documentation prepared by the company offering the securities (the “Offering Documents”), and the securities are only available in states in which the offering of the securities is registered or is exempt from registration and only by a broker/dealer authorized to do so. This document contains excerpts from the Offering Documents, and should be read in conjunction with the Offering Documents prior to making any investment decision.
The securities offered in the Offering Documents (“Securities”) are offered through Rainmaker Securities, LLC – a registered broker dealer, Member FINRA/SIPC, 2045 S. BARRINGTON AVE SUITE A, LOS ANGELES, CA 90025 (“RMS”). These Securities involve a high degree of risk, are speculative and involve a high degree of risk. The Securities have not been approved or disapproved by either the SEC or any state agency, nor has either the SEC or any state securities commission endorsed the accuracy or adequacy of the referenced Offering Documents. Any representation to the contrary is a criminal offense.
An investment in these Securities should not be made by any person or entity that is not in a position to lose the entire amount of such investment, or one who needs liquidity of the investment. Only individuals and entities qualifying as “accredited investors” or “qualified institutional buyers”, as defined by the Securities Exchange Commission (“SEC”) are allowed to invest in these Securities. Potential investors in the company should carefully consider the risk factors contained in the Offering Documents to evaluate the company and its prospects before purchasing the Securities. This document and the referenced Offering Documents both contain forward-looking statements that are not historical facts, and are based on the company’s attempt to describe the outcome if it executes well on its business plan. They are not guarantees of future performance and are subject to risks and uncertainties beyond the company’s control or ability to predict. Potential investors are cautioned not to place undue reliance on these forward-looking statements, which reflect the company’s management’s view only, as of the date of this document and the referenced Offering Documents.