impact: triple bottom line performance - lulu gordon

triple bottom line performanceCost-effectively providing desirable housing for people with workforce incomes

IMPACT:

DREVER CAPITAL MANAGEMENT

2

Drever Parallel FundsMarket Driven:

Impact Driven:

• The new rentership paradigm

Performance Driven:• Significant Cash Distributions• Above Market Returns• Minimized Risk

• 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.

Market Driven: The new rentership paradigm

DREVER FUND STRATEGY: MARKET DRIVEN

3

Drever Capital provides desirable apartments for the two most underserved populations:

Projected Occupancy Rates

��

��

��

��

��

��

��

��

��

��

��

��

Graph reflects estimates of under-supply of rental housing over the next 2 decades: Harvard JCHS/ U.S. Census Bureau

• Families with workforce incomes• Seniors

Best-in-Class

DREVER FUND STRATEGY: PERFORMANCE AND IMPACT

4

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 Team


5

With sustainable and cosmetic improvements, Orchard’s NOI monthly average jumped from $148,000 in 2010 to $217,000 in Q3 2012.

The Orchard, Austin, TX

NOI: 46% increase


6

Honey Creek’s NOI monthly average was $51,000 in 2011 and $112,000 in Q3 2012.

Honey Creek, Dallas, TX

NOI: 120% increase

Social Programs

• On-site financial planning• On-site job fairs

• On-site Health and wellness seminars

• On-site tutoring for school-age children

• On-site police and fire educational sessions

• Community involvement projects

SOCIAL IMPACT: TRANSFORMING PROPERTIES AND COMMUNITIES

7

Huntington Farms,Atlanta, GA

AT ACQUISITION WITHIN 18 MONTHS

ACTIVITY CENTER Boarded up Management efforts attracting newtenet base

SAFETY On-site gangs accountable for 40% of the town’s crime rate

Crime free

OCCUPANCY An abysmal 40% occupancy rate Raised to 91%

Activity Center

“Profi ts for your investors and enrichment of our urban environment go hand in hand...”

SOCIAL IMPACT: TRANSFORMING PROPERTIES AND COMMUNITIES

8

“... 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.

Weatherization• Exterior wall/ceiling insulation• Re-seal doors and windows• Dual pane or low-e glass windows

ENVIRONMENTAL IMPACT: REDEVELOPMENT CHECKLIST

9

Energy Consumption• Replace HVAC equipment with 13 SEER energy

efficient models• Replace incandescent lighting with fluorescent

or LED• Replace appliances with Energy Star rated• Energy Star rated appliances and water heating

Materials and Resources• Install hard surface flooring• Install Green label carpet

Transportation/Connectivity• Provide preferred parking for low emission &

fuel efficient vehicles

Water Consumption• High-efficiency drip irrigation• Irrigation controllers• Low-flow fixtures for all bathrooms and kitchens• Dual flush toilets• Treat storm water on-site to reduce demands

Indoor Environment• MERV rated filters• Install fresh air intake system for outside air use

with HVAC• Use low-VOC paints, sealants and adhesives for

all interior spaces• Water filtration system

Exterior Improvements• Landscaping• Storm water drainage and/or erosion control• Roofing material having a solar reflectance index

Signature Enhancements

CASE STUDY: SUBURBAN THE ENCLAVE | HOUSTON TX

10

• Inviting curb appeal

• Resort-style amenities

• Strategic, quality, deferred maintenance cures

• Social programs and sustainability measures

• 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 year

Performance

Plank Flooring Program


11

• Improves ambient air quality

• Eliminates CFCs and reduces energy consumption and C02 emissions

• Avoids future use and disposal of chemically treated (formaldehyde, etc.), non-degradable carpeting

* Plank Flooring enables a $25/month rent increase ** Based on a 7% cap rate.

TOTAL INSTALLATION

COST

CARPET REPLACEMENT

PLANK FLOORING*

$1465

$1920

0

$360

ADDITIONAL INCREMENTAL

COST

RELATED ANNUAL INCREASE IN NOI

($25/MONTH RENT INCREASE)

NA

$300

PAYBACK PERIOD

INCREASE IN VALUE PER

UNIT**

RETURN ON INVESTMENT(incremental

cost)

NA

1.2 YEARS

0

4,300

0

11.9x

• Increased Distributable Cash Flow• Increased Property Value• Improved Capitalization

Only $25/month: Creates significant additional profits

Creates significant positive environmental impact

• Reduces energy consumption and C02 emissions

***Based on an average 2 bedroom

Energy Star Appliances Program


12

• Increased Distributable Cash Flow• Increased Property Value

• Improved Capitalization Rate

** Based on a 7% cap rate.* New Energy Star appliance package enables a $90-120/month rent increase.

TOTAL COST

RELATED ANNUAL INCREASE IN NOI*

PAYBACK PERIOD

INCREASE IN VALUE**

RETURN ON INVESTMENT

ENERGY STAR APPLIANCE PACKAGE

PER UNIT

ENERGY STAR APPLIANCE PACKAGE

ALL 348 UNITS

$2,250

$783,000

$1,285

$446,800

8.15x$18, 340

$6,383,000

1.8 YEARS

1.8 YEARS

Only $90/month: Creates significant additional profits

Creates significant energy savings • 30% reduction in utilities

8.15x

Advantageous NPL Buy

CASE STUDY: URBAN 415 PREMIER APARTMENTS | EVANSTON, IL

13

On acquisition, replaced all un-insulated poured concrete exterior walls of all apartment units:

• 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

• Increasing R-Factor from <2 to >11• Resulting in a 20% savings on resident utilities

ORIGINAL DEVELOPER

OUR COST (APRIL 2010)

LENDER APPRAISAL (OCT 2010)

COST $55,000,000 $31, 500, 000 $44,000,000

UNIT $249,000 $84,000 $199,000

Energy Transformation

Best-in-Class Redevelopment


14

• +30% occupancy increase within 6 months

• Net income increase in excess of 300% within 6 months

• Proactive lease-up strategy

415 Premier Apartments

• Drever team rented 111 apartments in first 4 months after acquisition

• Prior management rented only 5 apartments in the 4 months prior

415: Additional Sustainable Improvements


15

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 refrigerators

Triple bottom line

CASE STUDY: SPECIAL OPPORTUNITY ASSET NYLO HOTEL | SAVANNAH, GA

16

• 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

• 32% LEVERAGED IRR at 78% LTV• RETENTION OF REAL ESTATE AFTER REIMBURSEMENT• ANNUAL CASH FLOW

• ADDITIONAL PROFIT AT SALE

• STIMULATE LOCAL ECONOMY• LOCAL TAX ROLL INCREASE• CONSTRUCTION JOB CREATION• SERVICE INDUSTRY JOB CREATION• LOCAL ART COLLEGE (SCAD) CONTRIBUTION IN DESIGN AND HISTORIC PRESERVATION

• PLATINUM LEED CERTIFICATION

• ENERGY CONSUMPTION CONTROL

• RECYCLED BUILDING MATERIALS• LOW VOC PAINTS, SEALANTS AND ADHESIVES FOR ALL INTERIOR SPACES• NYLO HOTEL – DESIGNED ACCORDING TO 2009 GOLD LEVEL LEED RATING SYSTEM

SOCIAL RESPONSIBILITY ENVIRONMENTAL RESPONSIBILITYFOR THE INVESTOR

THIRD BOTTOM LINE SECOND BOTTOM LINE FIRST BOTTOM LINE

PARALLEL FUND I: PERFORMANCE PROJECTIONS

17

Parallel Fund I: 7 PropertiesOpen 2009/ Closed 2011

Parallel Fund I Units Total Cost Redev/UnitEquity

Funds & JVIRR

Equity Multiple

Total/Average 2,462 $211,500,000 $3,000 $72,900,000 23% 1.9x

Mira Loma, San Antonio, TXBaseline Projected Cashflow: 9% per year

PARALLEL FUND II: PERFORMANCE PROJECTIONS & TERMS

18

• 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 annually

Fund II: Key Terms

Parallel Fund II UnitsHold Period

(Years)Total Cost Redev/Unit

Equity Funds & JV

IRREquity

Multiple

Total/Average 1,316 3-5 $118,700,000 $6,300 $48,100,000 17% 2.0x

Current Drever Fund Opportunity: Parallel Fund II

Mitchell Lofts of Dallas, Texas, and a night view of Dallas from the Lofts’ rooftop.

NOAH DREVERManaging Director / Parallel Funds 415.789.1773 / [email protected]

LULU GORDONVice President / Investor Relations415.789.1773 / [email protected]

The material presented herein is for informational purposes only and is not an off er to sell or a solicitation of an off er to buy any security or to invest in any fund managed by, or otherwise affi liated with, Drever Capital Management, LLC (“DCM”). This material may not be relied upon in connection with the purchase or sale of any security or investment in any fund. Securities and fund investments, if off ered, will only be available to persons who are “accredited investors” (as defi ned in Rule 501 of the Securities Act of 1933, as amended) and will be made only to qualifi ed prospective investors pursuant to a prospectus or private placement memorandum and a subscription agreement duly accepted by DCM. Potential investors must read and fully understand any and all prospectuses or private placement memoranda prior to purchasing any security or making any investment. This material may contain certain forward-looking statements concerning future fi nancial and business performance. Such statements may contain words such as “may,” “expects,” “should,” “believes,” “estimates,” “likely,” “potential,” “strong,” “favorable,” or similar expressions. These statements are 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 are subject to change, and actual results may be materially diff erent. DCM undertakes no obligation to update these forward-looking statements.

Investment Disclaimer

Drever Family CapitalDrever Capital Management, LLCThe Boat House2900 Paradise DriveTiburon, CA 94920

SHERRI HASKELLSenior Vice President / Portfolio Manager415. 789.1773 / 415 [email protected]

impact: triple bottom line performance - lulu gordon

Economy & Finance