Varia Us Properties Ag · SIX:VARN
Varia Us Properties — Shareholder Meeting (May 2018)
29 slides from Varia Us Properties's shareholder meeting presentation, May 24, 2018
Slide 1: General Assembly – Portfolio Review
General Assembly MAY 24TH 2018 PORTFOLIO REVIEW TOM BUCKLEY
Slide 2: The Past 15 Months
The Past 15 Months ▪ Acquired new investment-grade assets in targeted markets ▪ Established credibility with our lender ▪ Conceived and implemented a consistent value-add strategy ▪ Hired essential acquisition and asset management resources ▪ Created over 200 jobs with our property management partne
Slide 3: Investment Lifecycle – Acquisitions
Investment Lifecycle – Acquisitions Acquire – purchase assets that support our strategic and financial criteria, providing affordable workforce housing Varia Acquisition Strategy Objective Build a diversified portfolio of multifamily assets that provide affordable housing for the U.S Workforce Crite
Slide 4: U.S. Multifamily Recent Market Trends
U.S. Multifamily Recent Market Trends U.S. Multifamily Vacancy Rate U.S. Multifamily Rent Growth 8% U.S. vacancy rate in Q1 2018 (all grades of rental properties) 2.6% U.S. annual rent growth on Q1 2018 Varia Portfolio 6.2% vacancy rate in Q1 ‘18 average over all properties 4.2% annual rent increase
Slide 5: U.S. Multifamily Recent Market Trends
U.S. Multifamily Recent Market Trends U.S. Multifamily Transaction Volume (Billions) U.S. Multifamily Financing (Billions) $34.8 Billion sold during Q1 ‘18 Fannie Mae/Freddie Mac Cap rates compressed to 5.7% provided 65% of all financing Price/Unit up 10.4% yr/yr Varia Portfolio $132 m purchased or
Slide 6: U.S Portfolio – 2018
U.S Portfolio – 2018 Northwest West MidWest Southwest Southeast Varia’s 6 New Acquisitions in the South West and Mid-West at a Price of $132,170,000 50 assets with 9,162 rental units across 5 U.S. Regions, valued at approximately $698 million 6 05/2018
Slide 7: U.S Portfolio – 2018
U.S Portfolio – 2018 VARIA NEW ACQUISITIONS CURRENT RENT/UNIT & AFFORDABLE RENT/UNIT $1'600 $1'516 $1'400 $1'284 $1'200 $1'123 $1'096 $1'099 $'989 $1'010 $1'000 $'750 $'741 $'739 $'800 $'649 $'642 $'673 $'554 $'600 $'400 $'200 $- River Oaks Tierra Pointe Cinnamon Tree Meadows Woodridge Village at Ma
Slide 8: River Oaks Apartments
River Oaks Apartments 300 Units in Tucson, Arizona Price: $20,500,000 Location: Tucson, Arizona Units: 300 Built: 1982 Amenities: Clubhouse, Fitness Center, Pool Equity: $9,500,000 ($2.1 million capex) Debt: $13,325,000 (10 Yr, 4.09%) Yield: 9.4% average Investment Rationale: ▪ 3rd asset in Tucson m
Slide 9: Tierra Pointe Apartments
Tierra Pointe Apartments 352 Units in Albuquerque, New Mexico Price: $26,000,000 Location: Albuquerque, New Mexico Units: 352 Built: 1986 Amenities: Clubhouse, Fitness Center, 2 Pools Equity: $10,900,000 ($1.6 million capex) Debt: $16,900,000 (10 Yr, 3.96%) Yield: 9.2% average Investment Rationale:
Slide 10: Cinnamon Tree Apartments
Cinnamon Tree Apartments 398 Units in Albuquerque, New Mexico Price: $21,500,000 Location: Albuquerque, New Mexico Units: 398 Built: 1986 Amenities: Clubhouse, Fitness Center, Pool Equity: $9,400,000 ($1.7 million capex) Debt: $13,975,000 (7 Yr, 4.05%) Yield: 9.3% average Investment Rationale: ▪ 3rd
Slide 11: Meadows Apartments
Meadows Apartments 200 Units in Memphis, Tennessee Price: $13,500,000 Location: Memphis, Tennessee Units: 200 Built: 1986 Amenities: Business Center, Gym, Pool Equity: $6,200,000 ($1.1 million capex) Debt: $8,775,000 (10 Yr, 4.56%) Yield: 9.0% average Investment Rationale: ▪ 1st asset in the Memphis
Slide 12: Woodridge Apartments
Woodridge Apartments 336 Units in Cincinnati, Ohio Price: $23,520,000 Location: Cincinnati, Ohio Units: 336 Built: 1985-1988 Amenities: None Equity: $10,100,000 ($1.3 million capex) Debt: $15,288,000 (10 Yr, 4.50%) Yield: 9.8% average Investment Rationale: ▪ 2nd asset in Cincinnati Ohio market (popu
Slide 13: Village at Mayfield Apartments
Village at Mayfield Apartments 252 Units in Cleveland, Ohio Price: $27,150,000 Location: Cleveland, Ohio Units: 252 Built: 1966 (1996 Complete Rehab) Amenities: Clubhouse, Pool, Gym, Business Ctr Equity: $15,500,000 ($2.6 million capex) Debt: $15,000,000 (9 Yr, 3.5%, assumption) Yield: 9.3% average
Slide 14: Investment Lifecycle – Adding Value
Investment Lifecycle – Adding Value Add Value – make capital improvements at properties to attract residents, accelerate income, increase market value, & improve the quality of life for our tenants Value Add Capital Improvements ▪ Common Area Amenities ▪ Exterior Appearance ▪ Unit Rehabilitation 14
Slide 15: Common Area Amenities
Common Area Amenities Tennis Court Transformed to a Pet Park, Tanning Room Converted to a Pet Spa ▪ Cost: $22,000 ▪ Benefit: Repositioned as pet-friendly for new prospective tenants & received praise from existing tenants ▪ March 2018 Financials: Total Annualized Revenue up 6.3% from August 2017 to
Slide 16: Tenant Comment on Improvements
Tenant Comment on Improvements Veronica Gutzmer 11-April-2018 “My husband and I have been living here [Rolling Hills, Louisville Kentucky] for over a year now and recently signed for a second year. During our first year here, the complex was bought by a new company [Varia U.S. Properties] and the ma
Slide 17: Common Area Amenities
Common Area Amenities Leasing Office Adapted to a Tenant Lounge & Business Center ▪ Cost: $35,000 ▪ Benefit: Repositioned for new younger demographic, and delighted existing tenants that now use the space regularly ▪ March 2018 Financials: Total Annualized Revenue up 4.4% from April 2017 to March 20
Slide 18: Exterior Appearance
Exterior Appearance Exterior Siding Replacement, Roof Replacement, Exterior Painting ▪ Cost: $400,000 ▪ Benefit: Dramatically improved the exterior curb appeal of property that has resulted in property now 99% leased. ▪ Financials: Total Annualized Varia’s Woodstone Apartments Revenue up 16.7% from
Slide 19: Unit Rehabilitation
Unit Rehabilitation Renovated unit interiors: kitchens, bathrooms, living area ▪ Cost: $4,500 per unit, 3 units under rehab construction ▪ Benefit: $85-100/unit rent premium for a 23-27% ROCE. Varia’s River Oaks Apartments Tucson, Arizona 19 05/2018
Slide 20: Unit Rehabilitation Results and Plan Forward
Unit Rehabilitation Results and Plan Forward TOTAL REHAB MONTH TO START RENT PROPERTY LOCATION REHABS (BY MONTH COMPLETED STATED GOAL AVG RENT IN PROGRESS AS REHAB COST ROCE INVESTMENT RENT AT MARCH ▪ 321 units rehabbed TO DATE TO DATE PREMIUM OF APRIL 2018 PER UNIT THROUGH MARCH ACQUISTION 3 AFTER
Slide 21: Investment Lifecycle – Optimize & Stabilize
Investment Lifecycle – Acquisitions Optimize & Stabilize – apply operational improvements at a property to grow income, manage expenses, optimize performance, & make positive impact on the environment Operational Improvements ▪ Rent Optimization ▪ Utility Conservation ▪ Property Tax appeal 21 05/201
Slide 22: Rent Optimization
Rent Optimization 9,162 rental units across 50 properties 200 onsite staff employed 40-70% tenant turnover each year (U.S. range) optimize occupancy with rent 92-95% occupancy & 2.5-3.5% rent growth (U.S. range) Rent Optimization Process at Varia’s smaller assets Lower Rents if Occupancy Down Execut
Slide 23: Utility Conservation
Utility Conservation Green Improvements ▪ Low Flow Faucets ▪ Low Flow Showerheads ▪ Low Flow Toilets ▪ Smart Irrigation Systems ▪ LED Lighting ▪ Energy Efficient Appliances Varia Construction: 1970-1990 Most are not energy or water use efficient $6 million estimated utility costs in 2018 Fannie Mae
Slide 24: Utility Conservation
Utility Conservation Conventional versus Green Financial Impact Conventional Program - 7 Year Cash Projection Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Total 7 Years Effective Gross Income $ 2,137,751 $ 2,264,862 $ 2,369,892 $ 2,432,925 $ 2,492,538 $ 2,553,618 $ 2,616,199 Total Operating Expe
Slide 25: Property Tax Appeal
Property Tax Appeal Varia will pay more than $7 million in 2018 on property taxes 346 Unit Property in Dallas Texas ▪ Taxes Paid by Seller in 2016: $587,376 Varia Purchase Price in Dec 2016 ▪ Tax Estimate at 100% of Price: $802,747 $215,371 increase ▪ First Property Tax Notice: $881,064 $293,688 inc
Slide 26: Investment Lifecycle – Divest
Investment Lifecycle – Divest Divest – sell assets that do not fully support our strategic and financial objectives or provide investors with superior returns 2018 Selling Opportunities ▪ Smaller, Isolated Location Assets 26 05/2018
Slide 27: Disposition Candidates – Small, remotely located Candidates
Disposition Candidates – Small, remotely located Candidates Strategy: small scale assets (less than 100 units) or remote/sparsely populated locations Eagle’s Nest LIHTC Units: 30 Units Location: Rifle, Colorado Population: 9,700 Value: $1.65 million Stonegate Village LIHTC Units: 55 Units Location:
Slide 28: Summary
Summary ▪ Acquire value-add assets in strategic locations throughout the U.S. ▪ Work with our lenders to find creative financing solutions ▪ Accelerate our unit rehabilitation & operational improvement programs ▪ Reinforce our company’s brand for competence in affordable housing market ▪ Continue on
Slide 29: Thank You For Your Attention
THANK YOU FOR YOUR ATTENTION MANAGED BY STONEWEG @v)