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St. John’s Pointe Apartments – 284 Units Multifamily | Jacksonville, Fl

Value-Add Investment Opportunity

Time: October 5, 2020 from 1-2 pm Eastern Standard Time

PIA Residential is pleased to offer the opportunity to invest in St. John’s Pointe, a 284-unit multifamily asset located in a strategic infill location of Jacksonville, Florida. This Class-B property offers a tremendous value-add investment opportunity within the Orange Park submarket of Jacksonville.

At a purchase price of $33.4 million, the property will cost $117k/unit at a going-in CAP rate of 6%. Investors will have the opportunity to participate in the raise of $11.9 million, which will be used to finance both acquisition and capital improvements to the property.

The total capital requirement is estimated at $38.5 million which includes Agency required COVID escrows, capital improvements, financing, and closing costs. Of the total, $26.6 million will be financed with agency loans and $11.9 million will be sourced with private equity. Included in our budget are $3 million in interior and exterior CAPEX considerations that will enhance the current yield in years to come.

Key Discussion Points:

1.Workforce Housing 

• Working Class Residential is a basic need: From our experience, during the 2009 crisis, we learned that even while the unemployment rate was very high, the resilience of the working class rental market allowed it to weather and even thrived in such conditions. So far, six months into the pandemic, delinquencies remain low at sub 3%, vacancies are also low, and the supply has not caught up with demand, and will not for the foreseeable future.
• Working Class Residential will not be disrupted by technology or COVID: The COVID crisis upended and has caused significant issues in other asset classes such as commercial, office, hotels, and retail. However, the pandemic has had no impact on working-class residential. There is and will continue to be a fundamental shift in the allocation of capital from those hard-hit asset classes to the residential asset class, causing a compression of cap rates. We expect institutional capital to move from a disrupted asset class to one that is a basic need and provides substantial cash on cash returns.

2. Great leverage environment: 

• Although many investors are justifying investments in real estate due to the low cost of debt through agency loans (Freddie and Fannie), our position is that low-cost debt cannot substantiate reasons for investment. The property must exhibit excellent economic behavior unleveraged; leverage is just an additional benefit. The agencies (Freddie and Fannie) not only provide excellent access to leverage (high LTV, low fixed rates) but equally important, they recognize the importance of this asset class. They have been able to maintain open credit lines even during the recession or times of crisis like COVID. Perhaps, the most crucial factor that people are overlooking in this asset class is that we implicitly have a “put option” given by the government. When the COVID crisis hit, the agencies reached out to all of their borrowers to open up the possibility of renegotiating the loans if needed.

3. St. Johns Pointe:

• Conservative underwriting. We have underwritten St. John’s Pointe with extremely conservative assumptions: First-year assumptions: 10% vacancy and 10% delinquency. (typically 5% vacancy and 1% delinquency)
• The lender (Freddie/Fannie) requires we escrow a significant amount of reserves to counteract any economic issues that may arise in the next few years.
• The “Quality of IRR” is one of the most important factors in our analysis of the property. This metric allows us to understand whether the project is mainly creating value by (a) the income generated through the current operations or (b) the speculation with the sale price in the future. In the case of St. John’s Pointe the operations are generating roughly 80% of the value, evident by the cash on cash return of 11%, while the IRR, estimated north of 14%, is not the strongest component of the return.

4. Appealing risk-adjusted returns:

• The property is currently stabilized at 97% occupancy.
• The tenant base is reliable.
• Delinquencies during COVID have been less than 3% well below industry average
• The property is in excellent shape as the previous owner has made most of the major property improvements. The capital expense budget concentrates mainly on changing cosmetics around units, like kitchens, and flooring but does not carry a significant construction risk.
• Many properties in the area have already demonstrated that upgraded units command at least a premium of about $125 per month.

5. Jacksonville MSA: Jacksonville is an up-and-coming market that is positioning itself as a growing medical and financial hub. With a diversified economy, the property sits near the Naval Air Station “NAS JAX,” which brings economic stability, being one of the largest employers in the city. We understand the importance of having a large military component, as we own a similar property in Pensacola, that has behaved exceptionally well during COVID

PIA Residential is a private equity real estate firm with a proven track record, buying and managing residential properties in the Southeast United States. During the last decade, PIA invested heavily in the single-family and medium-sized multifamily market; and through successful management and repositioning, PIA reaped the benefits of tremendous value appreciation.

PIA’s seasoned team of professionals brings over 180 years of combined experience in selecting, evaluating, structuring, financing, improving, managing, and selling multifamily assets. With an institutional mindset and entrepreneurial spirit, conservative underwriting, and defensive acquisition strategies, PIA strives to produce above average, risk-adjusted market returns for our Family Office and HNW individual investors.

Speakers:

Jimmy Levy – Managing Partner, Operations

Mr. Levy founded PIA Group in 2009 and has been its CEO since its creation; in this role he has been responsible for the overall organization of the company and all real estate investments in Single-family and Multi-family opportunities. Having purchased more than 1,000 houses and 500 multifamily units, Jimmy has extensive experience in acquisitions, remodeling, flipping, financing, managing and all other aspects related to residential real estate investment.

Prior to forming PIA Group, Mr. Levy owned several franchises of the We BUY Ugly brand in South Florida; experience that helped him acquire a deep understanding of the market and develop underwriting skills parallel to none. During all his working life, Mr. Levy has always been an entrepreneur, excelling in various industries such as textiles, trading, commodity exports and telecommunications.

Mr. Levy holds a B.A. Degree in Finance and Real Estate from the University of Texas at Austin.

Daniel Kattan– Managing Partner, Capital Markets

Mr. Kattan has more than 15 years of experience in Real Estate. He has acquired more than 900 single-family and multifamily units and has extensive knowledge of the different variables that affect the market. He was instrumental in the financing and refinancing of PIA’s portfolio and was responsible for structuring more than $140 million in non-recourse debt.

Before starting PIA, Mr. Kattan worked with Countrywide Financial and advised investors consulting on several non-performing note pools. Over his professional career Mr. Kattan has launched an internet services company, an advanced telecommunications company and a biotechnology company. He has also served as regional managing director for a Pan-American Investment Fund for Chile’s Grupo CB focusing on the financial, real estate, transportation and infrastructure sectors.

Mr. Kattan graduated cum laude from Northeastern University with a B.A. in Industrial Engineering. Later he obtained an MBA from Wharton School at the University of Pennsylvania where he majored in Finance.

Saul Levy – Managing Partner, Investments

Mr. Levy has 20 years of experience in real estate. During his tenure at PIA Group USA he has headed PIA Construction Services responsible for deep remodeling of more than 800 single family and multifamily units. Leveraging his expertise in multifamily assets Mr. Levy is now heading the expansion of the company in to the acquisition of market rate multifamily properties in the South-East U.S.

Before joining PIA Mr. Levy founded Stanton-Pender Development Group which specialized in ground up development of high end residential units. Mr. Levy has extensive experience in residential construction, land acquisition, financing and marketing, and has a keen ability in analyzing market conditions, and identifying real estate investment opportunities.

Mr. Levy holds a Bachelor of Arts in Economics from Boston University, a GCS from London School of Economics and a Business Degree from the Norwegian Shipping Academy in Oslo.

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