Quarters at Cedar Falls Investor Update Quarter 4 2020 Michael Sather, CFO Tailwind Group
Good News
Students are back on campus. The clubhouse is seeing much more activity. 280% increase in inquiries in the week of February 8th. Turned game room into study lounge and saw a big jump in use. Signed 47 leases so far in February compared to 17 in December and January combined.
Challenges
•
Declining enrollment amid continued COVID-19 uncertainty. Spring semester dropped to 8,900 students from a high of 12,000 just 4 years ago.
•
Current Occupancy (94%); below 3 year historical average of 100%
•
Pre-leasing well behind prior year data. Adding sales support from Mankato teams. Expect clubhouse updates will be well received and boost leasing.
•
Students were off campus for 60 days due to Covid shutdown.
Property Updates
30%
Pre-Leasing Velocity 2021-2022 100.00% 90.00% 80.00% 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00%
Pre-Lease
As of February 15th
1-Oct 15-Oct 1-Nov 15-Nov 1-Dec 15-Dec 1-Jan 15-Jan 1-Feb 15-Feb 1-Mar 15-Mar 1-Apr 15-Apr 1-May 15-May 1-Jun 15-Jun 1-Jul 15-Jul 1-Aug 15-Aug 31-Aug
Pre-leasing trending well below last years pace
2016-2017
2017-2018
2018-2019
2019-2020
Current Lease-Up
Decline in college enrollment
×
2020 enrollment dropped 10%
×
Per The Gazzette¹, spring enrollment decline of 9%
Enrollment is forecasted to increase for the upcoming year, per Axiometrics There are zero beds in the pipeline for development in Cedar Falls.
¹Gazette Link *Enrollment data from University of Northern Iowa website
Metrics & KPIs
Executive Summary Metrics & KPIs
Operating Cash Flow
Net Operating Income
Rental Income
Q4 2020: $136
Q4 2020: $321
Q4 2020: $628
Q3 2020: $85
Q1 2020: $364
Q3 2020: $623
Q2 2020: $143
2020 Avg: $340
Q2 2020: $613
Metrics and KPIs [ Oct - Dec ]
[ Jul - Sep ]
[ Apr - Jun ]
[ Jan - Mar ]
Q4
Q3
Q2
Q1
YTD Average
Prior Year Average
OOP
NOI
$
321 $
330 $
344 $
363 $
340 $
323 $
325
Cash Flow
$
136 $
85 $
143 $
142 $
127 $
107 $
152
53%
52%
56%
59%
55%
53%
47%
7.33%
7.55%
7.87%
8.30%
7.76%
7.39%
7.42%
Occupancy
94%
94%
100%
100%
n/a
100%
95%
Pre-Leasing
17%
1%
92%
81%
n/a
n/a
n/a
Profit Margin YOC*
Dollars in thousands *Annualized **Original Operating Plan for the 2020 Academic Year
Metrics and KPIs Recap Q4 Net Operating Income (NOI) compared to 2020 YTD average Q4 2020 NOI 6% below 2020 Average Positives: Setbacks: ×
Controlling expenses and minimizing large, one-time expenses Effectively increased Market Rents by 1% Collecting on delinquent accounts (<1% bad debt in December) Current Occupancy at 94% for 2020-2021 term compared to 100% in 2019-2020
Full-Year 2020 5% growth from the Original Operating Plan (OOP) Positives:
Gross Potential Market Rent in-line Vacancy/Concessions In-line (Note: 6% Occupancy reduction for current term compared to historical) Expenses 89% of Original Operating Plan Maintenance & Repairs Security Payroll
Metrics and KPIs Recap cont. Full-Year 2020 to Original Operating Plan (OOP) continued.. Setbacks: × × ×
Management Income projected ~$162k annually vs. current ~$87k annually Increase in Property Taxes – project ~72k quarterly vs. ~91 Did not budget for Cap Ex or One-time expenses in Original Operating Plan (~150k currently)
Q4 2020 Cash Flow compared to 2020 YTD average Positives:
Setbacks: × × ×
Increase in Gross Potential Rent by 2%
Vacancy (currently 6% vs. 0% in Q1 & Q2) Cap Ex/Replacements One-Time Expenses
Balance Sheet Recap Current Assets $561,000
Current Ratio
• • •
Cash: $165,000 Accounts Receivable: $15,300 Allowance: ($14,000)
• •
Escrow: $354,000 Prepaids: $23,000
Current Liabilities $340,000 • • •
Accounts Payable: $36,400 Prepaid Rent: $71,000 Accrued Expenses: $167,000
Current Ratio is calculated by dividing Current Assets over Current Liabilities. Our goal is to create a liquidity position of 1X.
Investment Performance
Investor Summary
5.0% Preferred Return
Current Distribution Payout
•
Distributions were adjusted to a 5% payout rate effective January 10, 2021
•
Capital Balance: $7,065,000
•
Current Distribution: $30,000 (current)
Driving factor is Occupancy – Currently 94% vs. 100% 3 yr historical average
Bank Financing •
Lender: Commercial Mortgage Backed Securities (CMBS)
•
Loan Amount: $10,500,000
•
Monthly Principal and Interest Payment: $57,721.52
•
Maturity Date: December 1, 2023
•
Interest Rate: 5.21%
•
New rent special for Spring Semester Leasing - expect to see short-term impacts to pre-leasing
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Navigate College Enrollment decline
•
Students Returning to Campus •
Whats Next
Leasing Specialist from Tailwind Mankato properties on-site to assist in leasing strategies and executing leases
Michael Sather, CFO Tailwind Group msather@thetailwindgroup.com investors@thetailwindgroup.com