High Growth OZ Opportunities In The Western U.S., With Starpoint Properties

In this webinar, Neil Sherlock and Sandy Schmid discuss Starpoint Properties, which is investing in high growth markets in the western U.S.

Webinar Highlights

  • An overview of Starpoint Properties, which started as a family office and has grown to do $1.5 billion in transaction volume.
  • Starpoint’s commitment to source superb real estate deals, and statistics on the percentage of evaluated projects that they ultimately take on.
  • An overview of the current portfolio, including projects in Mesa, Salt Lake City, and Southern California.
  • The unique aspects of these markets and projects that made them attractive to Starpoint.
  • Timeline and financials for the current Starpoint OZ projects.
  • Q&A with webinar attendees.

Featured On This Webinar

Industry Spotlight: Starpoint Properties

StarPoint Properties is a real estate investment and operating company with a 25 year track record of delivering outstanding and above market returns to its investors by focusing on the acquisition, development and redevelopment of under-valued multifamily and commercial properties. The primary goal of the firm is to deliver asymmetrical returns vs risk and to outperform most other alternative investment vehicles, which the firm has done during its entire history.

Learn More About Starpoint

Webinar Transcript

Jimmy: Sandy and Neil, Starpoint Properties. You’ve got the presentation deck up there. Thank you for joining us today. You have the stage for 10 minutes, go for it.

Neil: Great. Jimmy, thanks, and thanks for everyone who’s, you know, able to attend today. It’s a pleasure to be able to present you all. My name is Neil Sherlock. I am the vice president of capital markets for Starpoint Properties. And we have a fairly limited time to present.

So, our two primary objectives for this call are, number one, I want to introduce everybody to Starpoint, our history, track record, and what makes us a great partner. And second, I want to discuss the current QOZ opportunities for which we’re now accepting commitments. And the second part will be heavily focused on our assets, and at that point, I’ll hand it over to Sandy, who’s our SVP of acquisitions and development.

So, Starpoint was originally founded over 25 years ago. We’ve completed over $1.5 billion in real estate transaction volume over that time. And we’ve been very successful in doing so, having delivered returns to investors of approximately, 25% per annum since inception. And obviously, not surprisingly, we’ve had an extremely high rate of reinvestment from our LPs as a result.

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We’ve done deals with some large institutional investors, including Goldman Sachs and KeyBanc, but we also have our retail investor base with whom we’ve done dozens of deals with over the years.

The firm started as a small family office and has grown significantly, and we are now, really, vertically integrated with acquisitions development, property management, and investment management capabilities and expertise.

Our current portfolio consists of 30 properties, primarily multi-family and commercial, and is worth slightly North of $1 billion in terms of market value. And operationally, we currently employ over 60 real estate professionals.

We’re led by Paul Daneshrad, who’s the company’s founder and CEO, and he’s obviously, been instrumental in driving the company’s growth over the past 25 years. But in addition to Paul, you know, we have a very strong senior management team that has decades of experience. Many have come from other large recognizable and reputable real estate firms.

Starpoint has, you know, really established itself as an efficient machine in sourcing, closing, and managing assets, and consistently delivering above-market returns to our investor base. And this is a function of a few things. First, you know, we’re incredibly disciplined with our acquisition strategy. We take a long-term perspective and evaluate the individual merits of each asset, sector trends, market dynamics, and the broader macroeconomic environment. We have our own proprietary systems and underwriting processes that are designed to minimize risks and identify only top-tier investment opportunities. And lastly, we have a very deep network for sourcing deals. We have access to on and off-market deals, the first-looks, last-looks. And in fact, to illustrate that point, we’ve actually evaluated over $3 billion worth of QOZ opportunities over the last 18 months alone. So, obviously, no shortage of potential opportunities for us.

Bottom line is everything we do here is designed to acquire great real estate and real estate that we believe in. And we proved that by investing alongside our investors in each deal, and this is something that we continue to do with our QOZ projects that we have.

So, I’ll skip over the QOZ details since I think at this point everybody is very familiar with them, so, you know, I’ll introduce our funds.

So, we launched our QOZ Funds to grant investors an opportunity to take advantage of the tax benefits offered by the program. And to do so with a highly experienced and fully integrated team that has a terrific track record. We utilized a build core strategy with a focus on developing multi-family and industrial properties, which have been some of the best performing, you know, classes in real estate, and they are expected to continue to be some of the top-performing over the next couple of years. And we invested in some of the most attractive and sought-after markets in the U.S. You know, for us though, the OZ designation is just a kicker, first and foremost, we focus on the merits of the real estate. Our typical deal size is approximately, $25 million to $75 million in total capitalization. And we are targeting for our current projects that Sandy we’ll go over here momentarily, a total equity raise of approximately $100 million.

So with that, I’m gonna hand it over to Sandy, who is Starpoint’s SVP of acquisitions and development.

Sandy: Awesome. Thank you, Neil. And Jimmy, great to see you again, good to connect here on this…in the presentation. So, let’s go to the next slide if you could, Neil.

And I guess this is our footprint in terms of the seed assets that we’ve got identified, we either own these, or we have them under contract.

If we keep going next slide. And we’ll keep going here…I mean, this is a little bit about the acquisition criteria. The basic criteria being high growth markets in the Western U.S. where we’re building multi-family or industrial projects, where we think there’s substantial demand from the tenant side and enduring demand.

The projects here are presented in order of construction start date. So, we’ll start with the projects that are nearest to the construction start, and then flow from there.

So, Dobson Station in Mesa, this one is a early Q1, 2022 construction start. And we love this project because, you know, we’re infill location with a four-story garden-style product. It’s a simpler design typology. It’s all on-grade, it’s quick in terms of building it and getting the first units open and start to getting into that cash flow, getting into operations.

And we’re in a great location, we’re across the street from light rail. We’re next door to a grocery-anchored center, there’s restaurants, there’s neighborhood-serving retail. And, you know, within three stops on the light rail, you’re in Downtown Tempe, but this is a, you know, substantial discount on the rents to Downtown Tempe rents. So, we think we can appeal to a pretty wide range of renter households, who, you know, by the way, that they’re spending 15% to 20% of their income on housing. And that means that there’s a lot of ability for rent growth here.

And the big stories for 2021, is, you know, one, right, re-emergence of the economy from the COVID lockdown. That was…that’s been huge, right? And then two, in our real estate world, construction costs, we’ve been feeling that like crazy, right? And along with all the supply chain backups that we’ve seen, right? Everything…you know, you can’t get…everything’s, you know, out of stock on backorder or, and, you know, wood and metal commodities are pricing through the roof. This is one of the few places where rent growth has actually exceeded construction cost growth. So, we think there’s a compelling story here with this location. Let’s keep going, Neil.

This one, another great location for very different reasons. We’re in Southern California coastal in Downtown Long Beach, so, it’s very walkable, very vibrant downtown. And we’re on 7th Street, so for those commuters, you shoot out 7th Street onto the 710 freeway, and you get north to LA, you go south to Orange County. And that’s the reason that people love living in Long Beach is you’re on the water, and you’re in between LA and Orange County, easy to get to both. And you’ve got this great vibrant downtown.

Our project is grandfathered in, so, none of our units are deed-restricted, they’re all fully market rate. All the projects following us will end up having a portion of their units deed-restricted, and this is all market rate. Neil, let’s go, next one.

If I’m going back in the city of Mesa, Germann, and Hawes, this is an industrial development. We’re just south of the Mesa Gateway Airport. There’s a lot of freight that moves in and out of that airport. And we’re just across the street from the SkyBridge. The SkyBridge is a customs clearinghouse for goods moving between the U.S. and Mexico. So, if your business is being in part of that supply chain and part of that trade, this is a great location.

It’s also a great location being in the Southeast Valley, where you’ve got access to a lot of high-income households and into… For anybody who is a national distributor, or regional, or business in need of warehousing space, or local manufacturing, you know, we have space that will meet your requirements.

We went through 13 different site plans on this month to come up with a solution that really can accommodate the widest array of tenant requirements here.

So, it’s our biggest building. It’s 150,000 square feet, 200-foot deep, 32-foot clear height, it’s subdivisible, so, it could go multi-tenant or single-tenant. And then our smallest building is 40,000 square feet with a 24-foot clear height, so that, you know, that would be a great single tenant manufacturing type tenant there. So, we think that we’re bringing to market product that is…can accommodate a very wide range of users in a very hot market. We’ve been doing our sales comps research here, and we are building well below replacement costs. Next one, Neil.

Jimmy: And you guys do have about one or two more minutes left.

Sandy: Okay, then I’ll be quick. This one’s further back in the pipeline, late Q2, early Q3 construction start, suburban Salt Lake. The demographics are fantastic, and the rent growth here has been really strong. The job growth in the Silicon Slopes or Downtown Salt Lake, that’s fantastic, you know. Neil, let’s keep going on the next one.

And this one is closed. This one is scheduled to start in December. And we think it’s representative of the kinds of returns that we are targeting with all of our projects. So, I think it’s a good one to share with all the audience.

And I think that, you know, that’s it on the pipeline deals right now, we’re still working on more and building more. Neil, do you have, you know, closing statements, I guess we got our minute.

Neil: Yeah. You know, we’re pretty excited about, you know, all the assets that we have right now, both the owned ones, ones that we have in the pipeline, as well as some of the other opportunities that we’re currently evaluating. We’ve had a ton of interest. Obviously, we closed out San Bernardino, the industrial asset that Sandy just addressed. And we’ve had a, you know, a lot of strong interest in the other assets that we’re currently raising for as well.

So, we believe in real estate, big pipeline, and, you know, we believe in our ability to execute.

And the last thing, you know, that we really wanna focus on here is, you know, we aligned our interests alongside our investors. We generally hold the land on our balance sheet until it’s fully entitled which is another added benefit to de-risk the projects materially. We try and be as transparent as possible with all of our reporting having partnered with Juniper Square.

And then lastly, you know, we…this is not our first rodeo, we’ve done this time and again, and we expect to continue to be able to execute.

Sorry, Jimmy, if we went a little bit over there.

Jimmy: No, fantastic. That’s all right. Where can our viewers go to learn more about you and Starpoint Properties?

Neil: Yeah, so, you can either reach out to me directly, I can be reached either at our general, you know, IR inbox here, or Neil, [email protected] Or alternately, you know, please feel free to visit our website, which is starpointproperties.com.

Jimmy: Fantastic. Oh, one quick question from Charles, he wants to know, do you have GMP contracts, guaranteed maximum payment contracts, very important this day and age with the rise of materials costs. Do you have those contracts in place for the properties that are already there?

Sandy: So, what we have are selected GCs on these who are going through a design-assist process with us under our pre-con agreement, and we will get to a GMP. But right now, it’s a pre-con process, and happy to explain more about that in…you know, with Charles at any time.

Jimmy: Yeah, so, Charles, if you…if you wanna learn more about that, email them at the address there on the screen. Gentlemen, I’m gonna cut you loose. Sandy and Neil, thank you so much for this.

Sandy: Great, awesome.

Jimmy: Starpoint Properties, really good job, and, we’ll be in touch soon. All right, thanks, guys.

Neil: Thanks, Jimmy.

Sandy: Thank you.