OZ Pitch Day - July 20, 2023
Investing in Denver Industrial OZ Real Estate, StarPoint Properties
In this webinar, Taylor Trautloff presents an industrial real estate project located in a Denver, Colorado Opportunity Zone.
Interested In Learning More About This Opportunity?
You can visit the Official OpportunityDb Partner Page for the StarPoint OZ fund to:
- View beautiful high-resolution images.
- Learn key details about the fund and related projects.
- Request more information from the fund sponsor.
- An overview of StarPoint Properties, founded 28 years ago and based in Southern California;
- Starpoint’s focus on delivering consistent outperformance;
- Review of StarPoint’s investment thesis and process;
- Summary of the terms for StarPoint’s OZ fund;
- Overview of StarPoint’s industrial development located 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. StarPoint is a leader among its peers and seeks to outperform other investment vehicles, year after year.
Learn More About StarPoint Properties
- Visit StarPointProperties.com
Jimmy: Taylor Trautloff with StarPoint Properties. There you are. How are you doing today, Taylor?
Taylor: Great, Jimmy. Thank you for the introduction. I am so excited to be here with you today. It’s been a pretty long day for me actually, as I’m sure it has been for you as well. My history fans out there in the audience will appreciate how I was up late last night preparing. I was watching Ronald Reagan’s speech at the Brandenburg Gate in 1987, and I also watched a couple of Winston Churchill’s speeches as well. So, trying to draw on inspiration from some of the greatest leaders over the last century. A little bit about myself before we get started. I grew up in Newport Beach, and I graduated from the University of Southern California. I started out my career with JLL on the debt and equity team here in Los Angeles. I came over to StarPoint Properties to work on our capital markets and acquisitions departments.
My biggest passions in life are skiing, traveling, and helping our investors build generational wealth. With that said, let’s get started. StarPoint Properties was founded 28 years ago, and we’re based out of Beverly Hills, California. We have about $1 billion in assets under management, and this is split between two million square feet of commercial and 800 units of residential. Some of our notable transactions include our acquisition of 433 North Camden. We acquired this Class A office property for $200 million back in 2018, and this is our global headquarters. If you are ever in the Beverly Hills area, I would love to give you a tour and show you around. So, please feel free to reach out. We also recently completed the development of our Inland Empire Industrial property. And our core company principles are expertise, integrity, and performance. We would not be where we are today without our investors’ faith in us. Our reinvestment rate is over 90%, and our longest investor has been with us for over 20 years. We also curate unique programming for our investors, including our monthly educational newsletter, our monthly webinar series. And we’re putting together something called “The StarPoint Investor Appreciation Days” for our local investors.
We are a vertically-integrated real estate development and investment firm. We have in-house legal, acquisitions, operations, property management, and accounting departments. And this vertical integration helps differentiate ourselves. I believe our 28-year track record speaks for itself. Since 1995, we’ve delivered an average annual return of 24.6%. This is just over double the average annual return of the S&P 500 and the MSCI REIT Index. And this is about four times the average annual return that you would’ve received if you were a 10-year treasury holder.
I believe that building generational wealth is not about having one or two home runs. It is about investing based on tried-and-true fundamentals and on achieving consistent outperformance. This shows our projected going forward investor returns. We are targeting a net-to-investor IRR of a 14 to a 16% depending on our opportunity zone project. And on a taxable equivalent basis, this is an 18 to a 20%. This is also a 35% taxable-equivalent annualized ROI. And this annualized ROI figure takes into account the annual cash flows and the cash-out stabilization, I mean, the cash-out refinance post-stabilization.
I don’t wanna spend too much time on this slide because for you to all be here today, I’m sure you’re familiar with the benefits of not paying taxes on your investments. The left side shows an example with a taxable real estate investment at a 30% tax rate, and the right shows an example with an opportunity zone deal. One of my favorite authors, Mark Twain, once said, “The difference between a taxidermist and a tax collector is that the taxidermist takes only your skin, and the tax collector takes everything.”
We have over 50 people in our Beverly Hills global headquarters, so I could not unfortunately include everybody on this slide. But this is a snapshot of some of our key executives. Paul Daneshrad founded StarPoint Properties, and he built this company from the ground up into what it is today. He’s a unique, bold, visionary leader. We are also aligned with our investors, and that the partners of StarPoint have over $200 million of their own capital invested in our projects. Sandy Schmid and Ken Bernhard lead our construction and development teams, and they collectively have about 40 years of architecture, construction, and development experience.
We consider our investments prime and prime because we’ve identified these four key attributes that we believe are essential for having an optimal real estate investment. First, we look for prime major metros. We hone in on demographic trends in macroeconomic data to determine what we believe will be the key outperforming metros within the US. Within these metros, we look for prime submarkets, meaning, we look for urban infill supply-constrained locations. And we also look for proximity to transportation such as trans… Proximity to airports, railroad stations, and interstate highways. We believe industrial and multi-family will outperform over the next decade, so these are the asset classes that we focus on. And we also design our assets with the 21st-century tenant in mind. Since 2020, StarPoint Properties has evaluated over $3 billion of opportunity zone investments. All of the investments that you’ll see in this presentation have gone through a rigorous due diligence process.
This is a summary of our terms. We have a minimum check size of $50,000, and we underwrite to a whole period of 10 years. This whole period is due to the opportunities on regulations, which mandate that you hold the asset for at least 10 years to reap the full tax-saving benefits of the program. We offer a reasonable preferred return of a 10%. After a 10% IRR is hit, there’s an 80/20 split of the cash flows up to a 14, and a 70/30 split thereafter. I want to call out that all of our investments are already owned by StarPoint in that we own the land. We have de-risked these by getting through the entitlements process, meeting with neighbors, meeting with local council. All these assets are shovel-ready. The GMAX or Guaranteed Maximum Pricing is in final form, and permits are ready to be pulled. Lotus Point and Point Central are available for equity commitments right now. But for the purposes of this presentation, I’ll be focused on Point Central. Point Central is our industrial development located in Denver, Lotus Point is our multi-family development in Phoenix, Arizona.
Point Central will be a 157,000-square-foot industrial project located in the North Denver submarket. This will be comprised of two buildings each about 80,000 square feet with a 190 square foot truck yard in the center. One of the things that I like about this asset is its proximity to all the interstate freeways. As you can see in this photograph, it is directly adjacent to the I-25, I-270, and I-76. This unique urban infill location will help us attract a best-in-class tenant. It is also located about a 10-minute drive north of downtown Denver Union Station area.
We like a few things about the Denver and Greater Colorado market. For one, Colorado is a pro-business-friendly state. The state has started a tax credit program, and they’ve used this as a way to attract and lure in new companies and bring in new jobs. For example, Zoom has received about $5 million in tax credits from the state of Colorado to relocate and bring in a couple of hundred new jobs. And there are companies moving every day to Colorado. Denver was also ranked as the second-best place to live by US News. The other thing that’s key is that Denver is ranked as the number one city for millennial transplants since 2014, and there’s been a 20% growth in this demographic since 2014. This is key for industrial real estate because the millennial demographic is also the demographic that is most likely to shop online.
This summarizes our capital stack for Point Central. The total project cost is $35.9 million. We have about $1.06 million of equity left to raise, so just over a million dollars. This is a first come, first serve investment opportunity. And once we close this, we’ll have to close it to new commitments. So, I would hate for some of you to miss out on this. We’re targeting a net-to-investor return of a 14% IRR, a 3X equity multiple, and a 20% annualized ROI. We are underwriting a cash-out refinance at the end of year two, which will return about 30% of investor capital back to our investors. And there’ll be annual cash flow post-stabilization. I also want to call out how we were able to get this signed up with a large institutional lender. We are at 65% loan to cost at SOFR Plus 600. A lot of groups are having trouble getting favorable debt financing right now considering the adverse capital markets. But due to StarPoint’s strong long-term institutional relationships, we were able to get a loan signed up that we’re pretty happy with. And this is about to close.
We hope that you choose to partner with StarPoint Properties. And I look forward to having the chance to speak with you all. I have attached my cell phone number here, and my email address. So, please reach out if you’d like to discuss StarPoint or any of our investment opportunities. Jimmy, do we have time for a couple of questions?
Jimmy: Yeah. Fantastic job there, Taylor. Thank you. Love the Winston Churchill and the Ronald Reagan and the Mark Twain references. Got a chuckle outta me with the Mark Twain quote back toward the start of your presentation. We do have a few minutes for some questions. So, if you have any questions for Taylor about StarPoint Properties, please use the Q&A tool in your Zoom toolbar, or just send them in the chat. I’ll find them either way. But let’s see, we got a couple questions in last few minutes here. First question asks, can you give a quick overview of StarPoint’s due diligence process that you mentioned earlier? What goes into your due diligence?
Taylor: Yes. So, we have a full acquisitions team here. And at the start, we’ll underwrite the deal. We’ll look into… we’ll pull comms, we’ll see what, you know, comparable properties are trading at. We’ll call the local leasing brokers to get to understand, you know, where the TIs would shake out at for that kind of development. And we’ll try to understand what kind of tenant we would attract, whether it’ll be a single tenant or, you know, let’s say four tenants and one asset. And then, we also go through investigating the entitlements process if that needs to be done. So, we’ll connect with a local council or policy member. So, it’s a pretty rigorous type of due diligence process. And that’s why when we close on an asset, you know, it’s something that we’re pretty confident about.
Jimmy: Excellent. We had a couple questions about the financing. Let’s see. What are the terms of the debt for the industrial project? And someone else asks, is the financing that you have based on a floating rate?
Taylor: Well, typically for all construction financing, the rate is floating. It’s typically a spread over SOFR is how it’s quoted. Usually, just for stabilized loans, you know, and a project would have to be fully occupied and stabilized to usually get that kind of financing. And that would be typically a fixed-rate loan. And so, we… but we’re pretty happy with the spread. So, it’s SOFR Plus 600, and that is floating. But after stabilization, then we’ll take out the construction loan and replace it with stabilized debt. And so, the term is a three plus one, plus one, meaning, three years with two optional one-year extensions. But we anticipate a building timeline of about 11 to 12 months. And then we’re giving ourselves about a year-long period to, you know, to give ourselves ample cushion time to lease up the asset. And then after this, we’ll take out that construction loan. And that is where the cash-out refinance will occur.
Jimmy: Perfect. Uh, we’ve got time for one more question before I cut you loose, Taylor. Could you give a quick summary of that other project that you mentioned?
Jimmy: Tell us a little more about it.
Taylor: Yes. I would be happy to. Lotus Point is our multi-family development located in Mesa. It’s in the greater Phoenix MSA. What I like about this asset is that it’s within a five-minute walk to a railroad station. It’s also within a five-minute walk to a Starbucks, a Safeway, and a lot of daily needs retailers. It will be a 245-unit, multi-family, garden-style community, and it’ll be four stories. And it is also directly adjacent to all freeways, and a lot of different large companies.
Taylor: Oh, I just wanted to also add for that asset, we could have about $4 to $5 million left to raise for that, so please feel free to reach out to me if you have an interest on either asset or if you were looking for diversification.
Jimmy: Terrific. And I did just post your email address and your cell phone number, Taylor, in the chat for anybody who has any additional questions, or if they wanna take the next step with StarPoint, reach out to and request subscription documents. I got a couple more questions here from Elliot. Elliot asks me, will presentations be shared after OZ Pitch Day? Yes. We will have slide decks for most of our presenting sponsors on our website at ozpitchday.com or opportunitydb.com. We’re gonna start getting those up tomorrow. Not all of our sponsors will share their presentations, but the majority of them should. Taylor, do you know if you’re sharing this deck with our audience?
Taylor: Yes. I would love to share it with the audience. If you need me to, I can email you the PDF.
Jimmy: That’s fantastic. Yeah. Please do, and we’ll get that posted to our website. And then question for you, Taylor, from Elliot… this’ll be the last question, then I’ll cut you loose. For your multi-family deal, Lotus Point, what’s the waterfall?
Taylor: I’d have to connect with the acquisitions team on that. I’ve been running point more on the capital market side. But if you would like to, Jimmy, if you could pass along his email address, I can connect with my team and get back to Elliot on that.
Jimmy: Yeah. I will do so after the event today. Elliot, we’ll reach out to you, or if you want to, just email Taylor right now. I’ve got her email address in the chat. Taylor, great presentation. Thanks for participating on OZ Pitch Day. Great to hear from StarPoint Properties as always. Thank you so much.
Taylor: Thank you.