IMPACT: Triple Bottom Line Performance - Lulu Gordon

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TBLI CONFERENCE™ EUROPE 2012 - Zurich - Switzerland

TBLI CONFERENCE™ EUROPE 2012 - Zurich - Switzerland

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  • 1. IMPACT:triple bottom line performanceCost-effectively providing desirable housing for people with workforce incomes
  • 2. DREVER CAPITAL MANAGEMENT Drever Parallel Funds Market Driven: • The new rentership paradigm Performance Driven: • Significant Cash Distributions • Above Market Returns • Minimized Risk Impact Driven: • Serving the Underserved • Transforming Communities • Greening Communities • New developments LEED certified Our club fund of life insurance companies and pension funds (New York Life and TIAA CREF) agree: Out of 60 funds ours is the only one in which they have reinvested.2
  • 3. DREVER FUND STRATEGY: MARKET DRIVEN Market Driven: The new rentership paradigm Drever Capital provides desirable apartments for the two most underserved populations: • Families with workforce incomes • Seniors Projected Occupancy Rates ���� ��������������������������� ��������������������������� ������������ ������������ ���� ���� ���� ���� ��� Graph reflects estimates of under- supply of rental housing over the ��� next 2 decades: Harvard JCHS/ U.S. Census Bureau ��� ��� ���� ���� ���� ���� ���� ���� ���� ���� ���� ���� ����3
  • 4. DREVER FUND STRATEGY: PERFORMANCE AND IMPACT Best-in-Class Transforming workforce apartments • Acquiring underperforming multifamily assets or NPLs at a significant discount to replacement cost • Cost effectively redeveloping with impact • Acquired, developed, transformed and managed more than 71,000 apartments Demonstrated Performance • Out-Performed consistently through multiple market cycles • Generating significant cash distributions • Property level above market average annual returns of 16.6% over 25 years Impact Driven—Value Add Triple Bottom Line Strategy • Profit boosting 2nd and 3rd bottom line programs Vertically Integrated Team4
  • 5. DREVER FUND STRATEGY: PERFORMANCE AND IMPACT NOI: 46% increase The Orchard, Austin, TX With sustainable and cosmetic improvements, Orchard’s NOI monthly average jumped from $148,000 in 2010 to $217,000 in Q3 2012.5
  • 6. DREVER FUND STRATEGY: PERFORMANCE AND IMPACT NOI: 120% increase Honey Creek, Dallas, TX Honey Creek’s NOI monthly average was $51,000 in 2011 and $112,000 in Q3 2012.6
  • 7. SOCIAL IMPACT: TRANSFORMING PROPERTIES AND COMMUNITIES Social Programs • On-site financial planning • On-site job fairs • On-site Health and wellness seminars • On-site tutoring for school-age children Activity Center • On-site police and fire educational sessions • Community involvement projects Huntington Farms, Atlanta, GA AT ACQUISITION WITHIN 18 MONTHS ACTIVITY CENTER Boarded up Management efforts attracting new tenet base SAFETY On-site gangs accountable for Crime free 40% of the town’s crime rate OCCUPANCY An abysmal 40% occupancy rate Raised to 91%7
  • 8. SOCIAL IMPACT: TRANSFORMING PROPERTIES AND COMMUNITIES “Profits for your investors and enrichment of our urban environment go hand in hand...” “... This has not only ensured the very survival of neighborhoods, ... with others now following your lead ... Their turnaround into viable communities.”* * Drever entities have successfully redeveloped over 60 challenged apartment communities in Houston.8
  • 9. ENVIRONMENTAL IMPACT: REDEVELOPMENT CHECKLIST Weatherization Exterior Improvements • Exterior wall/ceiling insulation • Landscaping • Re-seal doors and windows • Storm water drainage and/or erosion control • Dual pane or low-e glass windows • Roofing material having a solar reflectance index Energy Consumption Indoor Environment • Replace HVAC equipment with 13 SEER energy • MERV rated filters efficient models • Install fresh air intake system for outside air use • Replace incandescent lighting with fluorescent with HVAC or LED • Use low-VOC paints, sealants and adhesives for • Replace appliances with Energy Star rated all interior spaces • Energy Star rated appliances and water heating • Water filtration system Materials and Resources Water Consumption • Install hard surface flooring • High-efficiency drip irrigation • Install Green label carpet • Irrigation controllers • Low-flow fixtures for all bathrooms and kitchens Transportation/Connectivity • Dual flush toilets • Provide preferred parking for low emission & • Treat storm water on-site to reduce demands fuel efficient vehicles9
  • 10. CASE STUDY: SUBURBAN THE ENCLAVE | HOUSTON TX Signature Enhancements • Inviting curb appeal • Resort-style amenities • Strategic, quality, deferred maintenance cures • Social programs and sustainability measures Performance • NOI • $154,000 in Q3 2011—at acquisition • $179,000 in Q3 2012—upgrades continue in process • Stabilized cash flow distributions on track to exceed baseline projections of 9% per year10
  • 11. CASE STUDY: SUBURBAN THE ENCLAVE | HOUSTON TX Plank Flooring Program Only $25/month: Creates significant additional profits • Increased Distributable Cash Flow • Increased Property Value • Improved Capitalization Creates significant positive environmental impact • Improves ambient air quality • Eliminates CFCs and reduces energy consumption and C02 emissions • Reduces energy consumption and C02 emissions • Avoids future use and disposal of chemically treated (formaldehyde, etc.), non-degradable carpeting TOTAL ADDITIONAL RELATED ANNUAL PAYBACK INCREASE IN RETURN ON INSTALLATION INCREMENTAL INCREASE IN NOI PERIOD VALUE PER INVESTMENT COST COST ($25/MONTH UNIT** (incremental RENT INCREASE) cost) CARPET $1465 0 NA NA 0 0 REPLACEMENT PLANK $1920 $360 $300 1.2 YEARS 4,300 11.9x FLOORING*11 * Plank Flooring enables a $25/month rent increase ** Based on a 7% cap rate. ***Based on an average 2 bedroom
  • 12. CASE STUDY: SUBURBAN THE ENCLAVE | HOUSTON TX Energy Star Appliances Program Only $90/month: Creates significant additional profits • Increased Distributable Cash Flow • Increased Property Value • Improved Capitalization Rate Creates significant energy savings • 30% reduction in utilities TOTAL RELATED ANNUAL PAYBACK INCREASE IN RETURN ON COST INCREASE IN NOI* PERIOD VALUE** INVESTMENT ENERGY STAR APPLIANCE PACKAGE $2,250 $1,285 1.8 YEARS $18, 340 8.15x PER UNIT ENERGY STAR APPLIANCE PACKAGE $783,000 $446,800 1.8 YEARS $6,383,000 8.15x ALL 348 UNITS * New Energy Star appliance package enables a $90-120/month rent increase. ** Based on a 7% cap rate.12
  • 13. CASE STUDY: URBAN 415 PREMIER APARTMENTS | EVANSTON, IL Advantageous NPL Buy • 221-unit, 17-story high-rise in an urban redevelopment district in Evanston, IL • Acquired for $100,000 per unit less than the original cost • Redeveloped into a core, class A- asset ORIGINAL OUR COST LENDER DEVELOPER (APRIL 2010) APPRAISAL (OCT 2010) COST $55,000,000 $31, 500, 000 $44,000,000 UNIT $249,000 $84,000 $199,000 Energy Transformation On acquisition, replaced all un-insulated poured concrete exterior walls of all apartment units: • Increasing R-Factor from <2 to >11 • Resulting in a 20% savings on resident utilities13
  • 14. CASE STUDY: URBAN 415 PREMIER APARTMENTS | EVANSTON, IL Best-in-Class Redevelopment • Proactive lease-up strategy • +30% occupancy increase within 6 months • Drever team rented 111 apartments in first 4 months after acquisition • Prior management rented only 5 apartments in the 4 months prior • Net income increase in excess of 300% within 6 months 415 Premier Apartments14
  • 15. CASE STUDY: URBAN 415 PREMIER APARTMENTS | EVANSTON, IL 415: Additional Sustainable Improvements Carpet ‘tiles’ to extend lifespan (by 2x) and reduce landfill burden Repaired and reprogrammed greater efficiency air conditioner systems Replaced black EPDM roof with white EPDM roof reducing urban Heat Island effect LED lighting entry sign/canopy; dedicated control programming Installed exhaust demand engaged system (variable speed) Upgraded high efficiency heat systems Installed microwaves through out Installed energy star refrigerators15
  • 16. CASE STUDY: SPECIAL OPPORTUNITY ASSET NYLO HOTEL | SAVANNAH, GA Triple bottom line • Total investment $40,950,000 • Unleveraged IRR at 16.51% • 5-year cumulative net income $27,824,573 • Historic tax credits available $4,968,000 FIRST BOTTOM LINE SECOND BOTTOM LINE THIRD BOTTOM LINE FOR THE INVESTOR SOCIAL RESPONSIBILITY ENVIRONMENTAL RESPONSIBILITY • 32% LEVERAGED IRR at 78% LTV • STIMULATE LOCAL ECONOMY • PLATINUM LEED CERTIFICATION • RETENTION OF REAL ESTATE AFTER • LOCAL TAX ROLL INCREASE • ENERGY CONSUMPTION CONTROL REIMBURSEMENT • CONSTRUCTION JOB CREATION • RECYCLED BUILDING MATERIALS • ANNUAL CASH FLOW • SERVICE INDUSTRY JOB CREATION • LOW VOC PAINTS, SEALANTS AND • ADDITIONAL PROFIT AT SALE • LOCAL ART COLLEGE (SCAD) CONTRIBUTION ADHESIVES FOR ALL INTERIOR SPACES IN DESIGN AND HISTORIC PRESERVATION • NYLO HOTEL – DESIGNED ACCORDING TO 2009 GOLD LEVEL LEED RATING SYSTEM16
  • 17. PARALLEL FUND I: PERFORMANCE PROJECTIONS Parallel Fund I: 7 Properties Open 2009/ Closed 2011 Equity Equity Parallel Fund I Units Total Cost Redev/Unit IRR Funds & JV Multiple Total/Average 2,462 $211,500,000 $3,000 $72,900,000 23% 1.9x Mira Loma, San Antonio, TX Baseline Projected Cashflow: 9% per year17
  • 18. PARALLEL FUND II: PERFORMANCE PROJECTIONS & TERMS Current Drever Fund Opportunity: Parallel Fund II Hold Period Equity Equity Parallel Fund II Units Total Cost Redev/Unit IRR (Years) Funds & JV Multiple Total/Average 1,316 3-5 $118,700,000 $6,300 $48,100,000 17% 2.0x Fund II: Key Terms • Asset Type: Apartments/NPLs/Special Opportunity Assets • Fund Size: +100 Million • Project Leverage : Target 50-75% • Investment Hold : ± 5 years • Anticipated stabilized cash flows of 7% to +11% per year • Targeted Total Returns: Mid-teens at the property level • Preferred Rate of Return: 9% per annum, compounded annually18
  • 19. Mitchell Lofts of Dallas, Texas, and a night view of Dallas from the Lofts’ rooftop.Drever Family CapitalDrever Capital Management, LLCThe Boat House2900 Paradise DriveTiburon, CA 94920LULU GORDON SHERRI HASKELL NOAH DREVERVice President / Senior Vice President / Managing Director /Investor Relations Portfolio Manager Parallel Funds415.789.1773 / 415.317.4477 415. 789.1773 / 415 722.4849 415.789.1773 / 415.497.6773lulu@drever.net sherri@drever.net noah@drever.netInvestment DisclaimerThe material presented herein is for informational purposes only and is not an offer to sell or a solicitation of an offer to buy any security or to invest in any fund managedby, or otherwise affiliated with, Drever Capital Management, LLC (“DCM”). This material may not be relied upon in connection with the purchase or sale of any security orinvestment in any fund. Securities and fund investments, if offered, will only be available to persons who are “accredited investors” (as defined in Rule 501 of theSecurities Act of 1933, as amended) and will be made only to qualified prospective investors pursuant to a prospectus or private placement memorandum and asubscription agreement duly accepted by DCM. Potential investors must read and fully understand any and all prospectuses or private placement memoranda prior topurchasing any security or making any investment. This material may contain certain forward-looking statements concerning future financial and business performance.Such statements may contain words such as “may,” “expects,” “should,” “believes,” “estimates,” “likely,” “potential,” “strong,” “favorable,” or similar expressions. These statementsare opinions and beliefs of DCM as of the date of the material. They are subject to business, economic, and competitive uncertainties beyond the control of DCM, or aresubject to change, and actual results may be materially different. DCM undertakes no obligation to update these forward-looking statements.