ATLANTA NEIGHBORHOOD DEVELOPMENT PARTNERSHIP

ATLANTA NEIGHBO
DEVELOPMENT PAR

A LOOK AT PRIVATE EQUIT
AND THE ATLANTA FOREC
RESIDENTIAL MARKET

A ULI mTap by:
Chris Campbell
Katie Elliott
Ronit Hoffer
Mike Minutelli
Jon Toppen

ORHOOD
RTNERSHIP

TY INVESTORS
CLOSURE

May 1, 2013

RECENT HEADLIN

“Phoenix Picked Clean, Private
(Bloomberg

“A New A
(Bu

L

NES

e Equity Descends on Atlanta”
g, 10/17/12)

And Different Housing Bubble
Is Taking Shape”

usiness Insider, 3/19/13)

“Blackstone Buys
Atlanta Homes in
Largest Rental Trade
(Bloomberg, 4/25/13)”
2

30045 (LAWRENCE

• Over 7,500 transactions between

January 2011 and June 2012. 14

Nearly 90% were acquired by a companie

corporation.

• Of the corporate acquisitions, 17 c
over 90% of those were 27
mortgage companies and/or
banks.

• 138 (non-bank) corporations
purchased just over 500
properties priced at $350K or less

Source: SmartNumbers

EVILLE) ANALYSIS

10 companies 1 home
es 2 homes
3 or 4 homes
companies 70 companies 5 to 9 homes
7 companies 10 or more

3

WHO ARE THEY, WHA
BUYING?

Average Purchas

$120
$110
$100

$90
$80
$70
$60
$50
$40
$30

Source: SmartNumbers

AT ARE THEY

se Price (000’s)

Avg. Price

4

PRIVATELY HELD INV

Amalgamation of strategies of several firm

Financial Model

• Long hold period –10+ years
• Expect returns 6-8% annually
• Either sell assets when they have

made a mistake; or seek
appreciation but rent in meantime
• Continuously re-invest and
maintain asset

Management Strategy

• Some buy in concentrated
neighborhoods for economies of scale

• Subsidiary management company
• Home owner or public-sector worker

incentive programs

Now operating in several state

VESTMENT FIRMS 5

ms interviewed

Investment Strategy

• Detailed analytical approach to each
asset acquired

• Targeted homes in best school
districts, sometimes other areas if
Section 8 available

• Value-investors—mostly looking for
undervalued properties

Average Investments

• Avg. Rent - $1,000 – 1,400/month
• Avg. Purchase - $70,000 to 90,000
• Avg. Rehab costs – $20,000 to

$40,000

es but researching many others

SILVER BAY MOD

Financial Model

• Expect to see mid to high single digit
annual appreciation over the next 5 to 7
years

• For portfolio, yields are just over 11%
• Currently, using IPO funds to acquire, but

will eventually look at debt with 30 to 50%
LTV

Management Strategy

• Provide high quality rental homes with
best-in-class customer service

• Lease through brokers, newspaper
ads, website marketing

• Goal is to maintain 90% occupancy

Currently operating in 7 states

DEL (NYSE: SBY) 6

Investment Strategy

• Opportunistic stance toward investing
and maintaining disciplined approach to
growth

• Acquiring $40-$50 million per month or
300 – 400 properties

• Proximity to key employment centers
and school districts

• Stabilization process of approximately 6
months

Average Investments

• Typical investments approximately
15% of purchase price. Actual cost
depends age and condition of property

• In Atlanta, 313 leased properties with
$1,191 average rental rate

• In Atlanta, average cost basis per
property is $111,000

• Average age is 14.9 years and around
2,000 sf

s – AZ, GA, CA, FL, OH, TX, NC

MAPPING THE REN

Single Family Homes for Rent in Atlanta

17% 18%
45%
9% Colony
11% Sylvan
WayPo
Blacks
Silver B

Sing

Source: Information obtained from company websites.
If available, searched within the 20-mile metro radius.

NTAL MARKET

y 406 housing units for
n rent between 5 private
oint equity investment firms

stone

Bay

gle Family Homes for Rent by Price Point

9% 27%

21% $800 - $1,050
$1,050 - $1,350
43% $1,350 - $1,600
$1,600+

7

SINGLE FAMILY HO
RENT IN ATLANTA

OMES FOR 8

Blackstone
Silver Bay
Colony
WayPoint
Sylvan

Source: Company websites on April 30,2013

SINGLE FAMILY H
FOR RENT BY PR

HOMES 9
RICE POINT

$800 - $1,050
$1,050 - $1,350
$1,350 - $1,600
$1,600+

Source: Company websites on April 30,2013

HOW LONG TO RE
UNEMPLOYMENT

JOB GROWTH LABOR
63.0%

150,000/month 1.1 yrs

168,000/month 1.3 yrs

(Last 3 months)

250,000/month 0.3 yrs

Source: Bureau of Labor Statistics & Federal Reserve Bank of Atlanta

EACH 6.5%
T

R PARTICIPATION RATE

63.3% 66.4%
(Today) (2007)

3.5 yrs 16.7 yrs

2.2 yrs 12.3 yrs

1.1 yrs 4.8 yrs

10

SUMMARY

• Not every zip code is benefiting
• Room for small players in certain
• There is still a huge amount of re

as big investors cycle through the
• Vast majority of transactions in 30

foreclosure that haven’t been pur
• The big investors claim to be long

Small investor time horizon is unc
• Very few investors are willing to p

strategies
• Current capital markets climate w

investment thesis is likely to cont

n zip codes
ental stock coming to market
eir stabilization process
0045 zip code are still
rchased by investors yet
g-term holders for rental.
clear
publically share their

would indicate that this
tinue to be profitable

11

OPEN QUESTION

• Can larger investors successfully m
Atlanta MSA?

• Will the housing market improve su
houses bought speculatively?

• Will larger investors force smaller r
their properties and better leasing s
likely to cater to tenants with poor c
issues?

• What other large scale investors w
• Will any investors focus on lower in

can investment in these neighborho
• Is this large scale single-family inve

term result of the housing market c
shift in the housing market?

NS

manage properties over the vast

ufficiency to allow owners to flip

rental house owners to improve
standards? Or are they more
credit/criminal/immigration

will enter the Atlanta market?
ncome neighborhoods? How
oods be economically feasible?
estment model simply a short-
collapse or is it a permanent

12

ANNEX 1

Are Institutional Investors Driving t
bottom up?

• 29% increase in home prices in m
• 60% increase in home sale closin

2013
• 67% increase in number of buildin

February 2013
• 65% increase in number of buildin

February 2013

*all figures provided by SmartNumb
year over year

the Market in Atlanta from the

metro Atlanta in February 2013
ngs in metro Atlanta in January
ng permits in metro Atlanta in
ng permits in Cobb County in

bers, LLC and calculated as

13