OZ Pitch Day - March 23rd
Prime & Prime OZ Investing, With StarPoint Properties
In this webinar, Sandy Schmid highlights two appealing OZ deals in the StarPoint pipeline.
- An overview of StarPoint’s 25 year operating history and values;
- StarPoint’s Prime & Prime program, which allows investment in multiple projects;
- Investment criteria for the markets targeted by StarPoint;
- The highly selective nature of StarPoint’s investment process;
- Summary of the Lotus Point multifamily development in Phoenix, which features a coveted tax incentive;
- Summary of the Point Central industrial development in Denver;
- Live Q&A with webinar attendees.
Industry Spotlight: StarPoint Properties
StarPoint Properties is an ‘uncommonly innovative’ real estate firm, combining exceptional operating expertise with creativity in asset transformation to drive superior outcomes for its investors.
Learn More About StarPoint Properties
- Visit StarPointProperties.com
Jimmy: Sandy Schmid from StarPoint Properties. The show is yours. You guys are gonna take us across the finish line here.
Sandy: Awesome. Jimmy, great to see you again. And thank you for hanging top on all long day. It’s good to to be with you on the program here. So, my name is Sandy Schmid. I am the director of acquisitions and development here at StartPoint Properties in Los Angeles, here to present our Prime and Prime OZ Program for investors, and my colleague Greg James in the Capital Markets department here as well working the slide deck. If we can move on, I’ll give you a quick background on us. Operating for 25 years plus, for us, core principles, expertise, integrity, and performance. We put those three together and those are the values that we look to live up to and live every day that we operate. For us, what we’re seeking to perpetuate is a reliable and repeatable process that delivers above market returns. I think the slide here speaks to the elements that go into our process that make for consistency of process and consistency of results.
Here’s a few notes about our track record over 25 years. I think it speaks for itself when investors are looking at their opportunity set of where they can invest other private real estate, private investment alternatives, private equity, stock market, public real estate, REITs, fixed income. We compare favorably with all other asset opportunities. Here’s our team, founded, led by Paul Daneshrad. He and I work closely together every day. Myself, I’ve got over 20 years in the real estate industry, started out in construction and have worked my way to where I am now. My right hand man, I’ve got a shout out for Ken Bernhard, our VP of construction. He makes things happen and these projects are really with me and with Ken at the outset of development.
So, we’ll share the program, the Prime and Prime Program, and this is an ability for investors to invest in one or multiple assets with us. Our Prime and Prime Program focuses on a number of things. We start off with prime major metros, we wanna be in high growth locations, job growth, population growth. These are places where we see a lot of tailwinds that assist real estate prime submarkets. We wanna be in infill locations where there are barriers to entry and we see job growth, we see a desirable place to be with the locate, whether you are a business or a homeowner or a home renter, as the case may be. Prime product type, industrial, multifamily. These are the product types we wanna develop today. Prime design, we are looking to develop the 21st century solution to the 21st century tenant. Whether they are a business tenant in logistics and warehousing in the industrial sector, or a young professional looking for a home, we need to meet their needs with class A product. This leads up to prime investment.
So, for us to get to prime investment, we need to screen a lot of deals. I think we’re familiar collectively, viewership audience here with, there’s a lot of opportunity zones in the country and many of them are probably not suitable for development for us. How this translates to and how we live up to our repeatable process in asymmetric returns is we’re screening deals. We’ve screened over $3 billion of deals since 2020, and the deals that you’ll see today are the ones that have survived our diligence and there’s more deals in our pipeline. One of the key attributes that we bring to the table that we think differentiate us is our expertise and opportunity zones. Since they came out the end of 2017, we’ve been spending a lot of time going through each and all of the regulations so that we can find ways to maximize the program, resulting in maximizing returns for our investors. And that’s our goal, is to know the program well enough so that we can use every facet of it to deliver for our investors.
Here’s a sample concept that we have is recycling capital. One deal development, you know, you build it, you stabilize, you hold for the 10 years, we’re very used to that, and that’s a great deal. Two deal development, you build, stabilize, sell, recycle the capital into another development project, build, stabilize and hold. And then third option, this is a two-times recycling, three development deals. By the time you get to your third development deal, you’re almost at the end of a 10-year clock that started when you first turned to shovel with the first project.
Summary of our terms here, we’re looking for a minimum investment of $50,000 from you and we’re hopeful that you’ll join us with our opportunities and investment deals here. We’re raising up to $250 million our asset management fee, 1.25%, the development fee 5% of hard costs, not total costs. And we think we offer an attractive waterfall here at 10% preferred return with an 80-20 split after the 10, up to a 14, IRR, and then a 70-30 split after the 14 IRR, and a crystallization on stabilization.
And here are our assets. So, available now, we’ll focus in on two specifically, multifamily in Phoenix, industrial in Denver. Lotus Point. This is a four-story garden style development on six acres. It has a tremendous advantage of a GPLET, which is an Arizona property tax abatement for eight years. It’s a huge financial advantage for the project. They’re very difficult to get, you get them through a discretionary act of city council. We secured one for this location, it’s right next to the light rail. We’re four blocks to downtown Tempe, great college town. We’re next to a grocery store, two more grocery stores across the street. It’s a great retail neighborhood serving location for residents, easy access to freeway, to jobs. And what we like about this is in the typology, four stories of garden. We’re not building high rise, we’re not building five-, six-, seven-story mid-rise projects where the construction complexity is much higher and the time to construct is much higher. This is a shorter build. We’ve got a ton of site for lay down. We can store materials on site and it’s a lower risk construction project.
The market itself of Phoenix, it’s a great market in West Mesa, great markets. The cap rates have really come down, we’re in low four cap rates in this market. And rent growth continues to outperform the nation and it continues to be among the best in the country. We’re excited about this market. And our capital stack for Lotus Point, $75-million total capitalization, $31-million in equity. We’re here hopefully raising the last $7-million with you. Just topping off the raise here, most of it’s done, so just a small amount of equity raise available and left. This is gonna be a great project in a great location.
Next Project, Point Central, industrial North Central Denver. First, I’d like to point out in the aerial here, you can see the location next to three interstates. So, we have great proximity to transportation infrastructure, that is key for warehouse and logistics industrial properties. Also, this is a project with 32-foot clear heights, 190-foot truck court. It’s designed for 21st century tenants. And the market here, North Central Denver, we in this submarket exceed the Denver metro in both having lower cap rates and higher rents. That’s a result of the infield location, very hard to find developable land here and the immediate access to all of Denver. A few renderings on the right hand side of the page. And again, a $10-million equity raise of which there’s $7-million left. We’re hopeful that you’ll join us on this project.
And my partner or my colleague, Greg James, here, not on camera, but please reach out to him, reach out to me. We will follow up with you and we’re hopeful that we’ll have a chance to have some great follow-up conversations in working on these projects.
Jimmy: Fantastic. Well, thank you, Sandy, and thank you, Greg. I can’t see you, but I know you’re there. Great job to both of you. If you have questions for Sandy or Greg, please do use the Q&A tool in your Zoom toolbar. We got time for maybe one question here, although I don’t see any that are coming in, so we may have to… Oh, here we go, we did just get one in. These people like to gimme the questions like right at the end here, so they gimme no time to prepare sometimes, but thanks for the question here. We’ll get to this one right now. What’s the timeline for the industrial project?
Sandy: So, I’ll interpret that as the construction timeline. That’s one year.
Jimmy: And then when does that get stabilized?
Sandy: Stabilized, we’ll have about 25% preleasing, which is a little bit less than what we’ve been seeing in the market. And then we think there’s another 9 to 12 months, you know, proforma for full stabilization.
Jimmy: Fantastic. Well, we are at time, couple minutes over actually, so I don’t see any more questions. So, Sandy and Greg, thank you so much again. Thanks for participating on OZ Pitch Day. Once again, you guys were on a few times ago. So, we did just get one more question here from Sandy. When will cash flow to investors be available? And then we’ll wind it down.
Sandy: Sure. Cash flow will be available upon stabilization of the projects, so that’ll be year two on the industrial, year three on the multifamily.
Jimmy: Fantastic. All right, well, I’ll cut you guys loose there. Thank you again so much.
Sandy: All right. Thank you so much, Jimmy. This is great.