Advantages of Investing in Real Estate LL REALTY
Executive Summary Advantages of Investing in Real Estate Pittsburgh’s Posed for Growth Key Investment Considerations Experienced Management Team Investment Process Synergy Capital Investment Portfolio Investment Risks
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Why Invest in Real Estate?
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Diversification Stocks help grow your portfolio
Bonds bring in income
Real estate provides a hedge against inflation and has a low "correlation" with stocks
International investments provide growth and help maintain buying power in an increasing globalized world
Cash gives you and your portfolio security and stability
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Stocks vs. Real Estate Stock Market Intangible Asset Uninsured Invest at market price Returns are unknown Return subject to market conditions • Liquid Asset What about REITs? • • • • •
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Private Lending for Real Estate Tangible asset you can visit Secured by mortgage deed Collateral is insured Collateralized below market value (equity position) • Returns are known, fixed and agreed upon • Illiquid asset • • • •
Investment Comparison Barclays US Treasury Aggregate Bond T-Bill Synergy Index 10 Yr Capital
Inflation
S&P 500
Russell 2000
5 Year
1.80%
4.83%
6.83%
5.89%
5.55%
-
3 Year
2.06%
11.66%
9.66%
5.73%
8.28%
7.00%
1 Year
1.75%
15.60%
15.97%
3.86%
5.02%
7.00%
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Why Pittsburgh?
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Pittsburgh Accolades
America’s Most Livable City, The Economist and Forbes.com Best Commercial Real Estate Market, Moody’s Investor Service North American City of the Future, fDi Economically Strongest U.S. Metros, The Brookings Institution Top 10 City for Job Growth, Forbes.com America’s Best Housing Market, Forbes.com Best Cities for Recent Graduates, Huffington Post Safe Havens in Real Estate, Kiplinger Magazine
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About Pittsburgh
Quality of Life Named among the “Best Trips for 2012” by National Geographic Traveler Ranked #1 as America's Most Livable City by The Economist in 2011 and
Forbes in 2010
Green Leader Affordable Housing Safety & Comfort World-Class Health Care Transportation Infrastructure
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Pittsburgh Population by Age 65+ yrs.; 17% Under 10 yrs.; 11%
55-64 yrs.; 14%
10-17 yrs.; 10%
18-24 yrs.; 9%
25-34 yrs.; 12% 45-54 yrs.; 16% 35-44 yrs.; 12%
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Crime Index 2010 (rate per 100,000 inhabitants)
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Metro Area Pittsburgh, PA Boston, MA San Diego, CA Raleigh, NC Richmond, VA Washington, DC Philadelphia, PA Denver, CO Cleveland, OH Minneapolis, MN Portland, OR Detroit, MI Baltimore, MD St. Louis, MO Cincinnati, OH Milwaukee, WI Atlanta, GA Kansas City, MO Phoenix, AZ Indianapolis, IN Charlotte, NC Seattle, WA
Violent Crime Property Crime 319.5 1,975.6 406.0 2,189.5 378.5 2,206.4 242.6 2,442.6 269.3 2,542.9 380.0 2,550.6 551.8 2,662.7 337.1 2,771.4 415.7 2,835.6 2,894.2 268.5 2,929.0 2,950.3 635.4 685.3 3,090.7 497.4 3,159.5 314.1 3,340.7 464.1 3,360.3 413.8 3,462.6 461.3 3,476.1 Source: FBI Uniform 2010 370.8 Crime Report 3,534.6 627.9 3,827.1 528.2 3,902.2 353.0 3,905.8
Pittsburgh Investment & Development
According to the Brookings Institute, one of only three U.S. metros to be deemed fully recovered from the Recession In the last 5 years 217 companies technology companies attracted $1.3 billion in total investment Five Years and Running as Top 10 U.S. Location for Business Investment Pittsburgh Metro Tops National Average for Job Growth in High-Wage Industries Record-High Employment in 2012 LL Realty
Pittsburgh Key Economic Sectors Advanced Manufacturing
Energy
Financial & Business Services
Health Care & Life Sciences
Information & Communications Technology
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Pittsburgh Residential Market
Measured in dollars, Pittsburgh’s December 2012 home sale activity rose $101.2 million, or 34%, from $299.8 million in December 2011 to $401.8 million in December 2012 (RealSTATs: December 2012) Residential purchase dollars have jumped 17% in the first ten months of 2012 compared to 2011 (RealSTATs: January 2012 – October 2012) In the first ten months of 2012 the Pittsburgh commercial market thrived with non-residential sales activity climbing 28.3% to $1.1 billion in 2012 from $855.4 million in 2011 (RealSTATs: January 2012 – October 2012) Pittsburgh topped the U-Haul 2012 National Migration Trend Report with a reported 9.04% increase for the year (Pittsburgh Business Times, April 2013) According to a study completed by the Pittsburgh Downtown Partnership, Downtown Pittsburgh's resident population has increased by more than 30% in the past 12 years, and its population is getting younger (Pop City Media, April 2013) Lot 24, a 96-unit apartment building built as a second phase of the Cork Factory Lofts in the Strip District, leased up in less than 120 days during typically slow leasing months from December 2012 – March 2013 (Pittsburgh Business Times, April 2013)
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Median Sales Price of Existing Single-Family Homes (4Q 2011) $350,000
Average Asking Monthly Apartment Rent (1Q, 2012) $2,500
$300,000 $2,000 $250,000 $1,500
$200,000 $150,000
$1,000
$100,000 $500 $50,000 $-
$-
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Pittsburgh Commercial Market
The Pittsburgh office market vacancy rate for Q1 of 2013 was 8.0% compared to a national average of 11.8% (CoStar first quarter 2013, Pittsburgh Market Reports) Class A office vacancy remains very low at 6.3% for Q1 of 2013 (CoStar first quarter 2013, Pittsburgh Market Reports) Pittsburgh’s retail vacancy rate declined in Q1 of 2013 by 40 basis points to 4.1% which is 260 basis points lower than the national average of 6.7% (CoStar first quarter 2013, Pittsburgh Market Reports) Pittsburgh’s industrial market vacancy rate declined in Q1 of 2013 by 20 basis points to 7.9% which is 70 basis points below the national average of 8.6% (CoStar first quarter 2013, Pittsburgh Market Reports)
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Pittsburgh’s Posed for Growth Stability, rising occupancy and rental rates, job growth, and strong key economic sectors- like energy, financial services and health care - all make for a strong Pittsburgh real estate market.
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Investment Opportunity Investment Conditions:
Synergy Capital
ďƒ˜ Fixed 7% Annual Return
Management Team
Residential
ďƒ˜ Three-Year Commitment Investors
Commercial
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Private Lending
Three-Year Return Investment Amount
Compounded 3-Year Return
Annual Interest Rate
Annual Return
Aggregate Annual Return
$ 25,000
7%
$
5,626
$ 1,750
$
$ 50,000
7%
$
11,252
$ 3,500
$ 10,500
$ 100,000
7%
$
22,504
$ 7,000
$ 21,000
$ 250,000
7%
$
56,261
$ 17,500
$ 52,500
$ 500,000
7%
$
112,522
$ 35,000
$ 105,000
$ 750,000
7%
$
168,782
$ 52,500
$ 157,500
$ 1,000,000
7%
$
225,043
$ 70,000
$ 210,000
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5,250
Key Investment Considerations Experienced Management Team Value Added Strategy Unique Deal Flow Capital Preservation Risk Mitigation Alignment of Interests LL Realty
Experienced Management Team Josh Adamek – Managing Partner • • • • •
Ten year track record 2003-2010 built personal portfolio of rental properties Full-time since 2010 Has been the principal in over 100 transactions Vice President of ACRE of Pittsburgh
Scott Hastings – Managing Partner • • • • • • •
Eleven years of experience, completing over 500 transactions Accumulated 50 rental units in first year of investing 2002-2007 was the 2nd largest wholesaler in Pittsburgh with over 200 transactions 2008-2010 opened Pittsburgh regional office for a national private lending company 2010-2011 started own investment company and bought, renovated, sold 30 properties Reputable real estate agent Mentor to Pittsburgh area real estate investors
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Key Investment Considerations Experienced Management Team Value Added Strategy Unique Deal Flow Capital Preservation Risk Mitigation Alignment of Interests LL Realty
Synergy Capital Track Record Raised over $3.5 million in private funds Sold more than 30 single family homes Over $4.5 million in gross sales revenues Synergy Capital has never defaulted on an agreement with an investor All investors have reinvested funds
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Residential Investment Process Sourcing Properties
Evaluating Deals
Due Diligence
Renovating
Selling
Closing
Average Investment Period from Due Diligence to Closing: 7 Months
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Residential Investment Process Sourcing Properties
Evaluating Deals
Due Diligence
Renovating
MLS – 60% • • • •
Foreclosures Estate Sales Distressed Sales Short Sales
Leads – 40%
• Wholesale leads (We Buy Houses etc.) • For Sale by Owner (FSBO): signs/online, craigslist, etc. • Referrals, Other Investors
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Selling
Closing
Residential Investment Process Sourcing Properties
Evaluating Deals
Due Diligence
Renovating
• Estimate Renovation Cost (highest best use, additions) • Potential After Repair Value (ARV), estimated resell price • Calculate ancillary costs (holding, financing, closing costs) • Offering Accordingly (adhering to set %’s / margins) • Meeting with Architects, Structural Engineers, Other Industry Consultants
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Selling
Closing
Residential Investment Process Sourcing Properties
Evaluating Deals
• Title Search & receive clear title • Home inspection • Finalize renovation plans • Selecting general contractor • Coordinate Funding • Insuring the property • Time Frame 30-60 days
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Due Diligence
Renovating
Selling
Closing
Residential Investment Process Sourcing Properties
Evaluating Deals
• Start & Manage Renovations • Home inspection after completion • Make final adjustments • Professional staging, photos, & video • Time Frame 6-12 weeks
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Due Diligence
Renovating
Selling
Closing
Residential Investment Process Sourcing Properties
Evaluating Deals
• Pricing it to sell • Listing on MLS through Re/Max • Online marketing • Networking with Local Agents • Finding the right buyer • Time Frame 1-4 months
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Due Diligence
Renovating
Selling
Closing
Residential Investment Process Sourcing Properties
Evaluating Deals
• Buyer’s appraisal, inspection • Working with buyer’s title agent • Coordinate loan payoff • Time Frame 30-60 days
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Due Diligence
Renovating
Selling
Closing
Residential Investment Portfolio Renovation Projects Wholesale Deals
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Residential Portfolio - Highlights
Aspinwall: 224 2nd Street
Monroeville: 608 Winterberry Rd
Lawrenceville: 4616 Plummer Street
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Aspinwall: 224 2nd Street
Purchased $92,500 Funded with $180,000 from private lender Total expenses $205,000 Sold for $299,900 in first week on the market Time frame from start to finish: 191 days
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Monroeville: 608 Winterberry
Purchased $20,000 from private seller Funded with $80,000 from private lender Total expenses $98,000 Sold for $139,900 in first week on the market Time frame from start to finish: 206 days
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Lawrenceville: 4616 Plummer
Purchased $61,000 from estate sale Funded with $118,000 from private lender Total expenses $120,000 Sold for $165,000 in first week on the market Time frame from start to finish: 216 days
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Commercial Investment Process Sourcing Properties
Evaluating Deals
Due Diligence
Renovating
Selling
Closing
Average Investment Period from Due Diligence to Closing: 18 Months
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Private Lending Process
Sourcing Borrowers
Evaluating Deals
Due Diligence
Average Rollover Rate: 8 Months
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Lending
Loan Payoff
Private Lending Process Sourcing Borrowers
Evaluating Deals
Due Diligence
Lending
Loan Payoff
• Synergy Capital will loan a max LTV of 65% which includes purchase costs, construction costs, closing costs, insurance, a six month interest reserve, and loan origination fees. • Subject-to-Repair Appraisal: based on construction plans and specs for the renovations to be completed
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Investment Risks
Availability of Investment Capital Identifying Suitable Investments Risks of Real Estate Investments Dependence on Key Individuals Illiquidity of Investments Lack of Diversification Use of Leverage
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