Our Next Event: Alts Expo - Dec 13th
StarPoint Properties was a presenting partner at Alts Expo May 2023, a one-day virtual event hosted by WealthChannel. In this webinar, Taylor Trautloff presents several investments available on the StarPoint platform.
Interested In Learning More About This Opportunity?
Click here to visit the StarPoint Properties website.
- Investment criteria for StarPoint projects, including prime locations.
- Review of build-to-sell and build-to-hold opportunities on the StarPoint platform.
- Investment terms in StarPoint deals, including expenses and preferred returns.
- Review of an opportunistic project in the West Mesa submarket of Phoenix.
- Review of an Opportunity Zone industrial project in a north Denver submarket.
- Summary of an income fund that includes multiple assets with high quality tenants.
- Live Q&A with webinar attendees.
Connect With StarPoint Properties
- StarPoint Proeprties – Official Website
- StarPoint Properties on LinkedIn
- Taylor Trautloff on LinkedIn
Jimmy: Taylor’s gonna be presenting all of the different investment opportunities or a handful of the different investment opportunities available for real estate investors with StarPoint Properties. Taylor, there you are. Lighting looks great. Love the backdrop there from the view of your office in Beverly Hills. How are you doing today, Taylor? Great to see you.
Taylor: Good. Great to see you as well, Jimmy. Thank you for having me. Super excited for Alts Expo today. Before we begin, I need to share this disclosure. This presentation is for discussion purposes only. It does not constitute legal tax accounting advice. This presentation may include forward-looking statements that could be forecast opinions estimates which may or may not be realized. All viewers must perform their own independent due diligence and investigation. StarPoint Properties has been in business for about 30 years, and we are based out of Beverly Hills, California. We have about 50 full-time real estate professionals here in our corporate office, and we have about twice that on the field and property management. We have about $1 billion in assets under management, and this is split between 800 units of multi-family and about 2 million square feet of commercial. Commercial includes office, retail, and industrial. We have done over 150 transactions since its inception.
I believe that this slide speaks for itself. Since 1995, StarPoint has delivered an average annual net to-investor return of 24.6%. This is a little bit more than two times the average annual return of the S&P 500 over the same time period. While I could not fit everyone on this slide, I wanted to showcase a few of our senior team members. Paul Daneshrad, he’s a bold visionary leader. You know, he’s in the office day in, day out. He built this company from the ground up into what it is today. And Sandy and Ken lead our construction and development teams.
We consider our investments prime and prime because we’ve identified these four key attributes that we believe are essential for a prime investment. So, first, we look for prime major metros, then prime submarkets, prime asset classes, and prime design. With prime major metros, we closely follow macroeconomic data like CPI. We look at demographic trends. We try to see, you know, where are jobs moving to, you know, where are people moving, and we also like to try to stay, you know, in Texas West. We do have some assets outside of these markets, but overall, you know, we like to have a competitive advantage and know our markets well, so we typically focus on a few key markets. Within these markets, we look at, like, the micro-location of the assets. So, we like to be on the best street, on the best corner, you know, in that target market.
For multi-family, we will look at, like, proximity to retail amenities. We will look at proximity to major employers such as hospitals, schools, universities, and with industrial and multi-family, we will look for proximity to transportation infrastructure such as highways, airports, freeways, and things like that. We look at… For prime asset classes, we believe that industrial multi-family will outperform over the next decade. There are some tremendous secular tailwinds, you know, for driving those asset classes right now, and so that’s overall where we are focusing our attention, and we design our assets with the 21st-century tenant in mind, all leading to a prime investment.
I want to call out that all of the investments that I will be discussing today are currently owned by StarPoint and open for investment. We like to de-risk our investments before we bring on outside capital. What I mean by that is that we will go through the entitlements process ourself. We will meet with local council if need be. We’ll get that permitted and shovel-ready. Here are three different types of investment strategies, and these are the three strategies that I’ll be sharing with you today. And these are best suited for kind of different types of investors and different, you know, investment goals. So we’ve got Lotus Point, which is a multi-family built to sell, a two-year hold, and this is more opportunistic. We’ve got Point Central, which is in an Opportunity Zone, and this is a built-to-hold for somebody who’s looking for long-term tremendous tax benefits. And then we’ve got the StarPoint Income Fund, and this is an ongoing open-ended fund that’s better for somebody who’s more cash-on-cash current yield focused and that owns a few different assets.
Overall, Lotus Point and Point Central have the same terms, so I’ve consolidated that here. Our minimum investment size is $50,000. The asset management fee will not exceed 1.25%. The development fee will not exceed 5% of hard costs. We offer our investors a preferred return of a 10%. So once that 10% IRR hurdle is hit, then there’s an 80/20 split of the cash flows up to a 14% IRR and a 70/30 split thereafter. First, I’ll discuss our opportunistic investment offering. Lotus Point will be a 245-unit 4-story garden-style community within Mesa, Arizona. This is technically located within an Opportunity Zone, but to cater to all of our investors, we want to open this up as, like, a two-year hold opportunistic focus. What I really like about this micro-location is that it’s in West Mesa, which is ideal for multi-family.
It’s right next to Tempe ASU, so it’s closer to kind of, like, the downtown Phoenix area. Also, I want to call out that this property is right next to Arizona College, and it is within a five-minute walk to a Starbucks, a Walgreens, a Safeway, and various daily needs retail shops. It is also within walking distance to a light rail station, offering our residents direct access to the broader Phoenix metro region. And it’s less than 2 miles to the all, like, nearby interstate highways. The Phoenix MSA is the fastest-growing market in the U.S. since 2010. There is a lot going on in this market in terms of job growth, and this ties into kind of, like, this nearshoring trend that’s going on.
So for those of you who are a little bit less familiar with Phoenix and the story of what’s happening there, I want to mention that there are groups like Taiwan Semiconductor Manufacturing Company that pledged to invest at least 60 billion into the local economy, which will bring in thousands of new jobs. In late 2022, Apple announced that they will start buying their chips from these plants in Arizona. And all of the largest electric vehicle manufacturing companies are also relocating and building out their factories. So Forbes has called Phoenix the electric vehicle manufacturing hub of the country, and it’s also considered the semiconductor manufacturing hub now of North America. So it’s pretty powerful, and this will benefit multi-family and industrial and realistically all asset classes in this market.
This is our capital stack for the project. It’s about a $76 million project. We’re almost done with our equity raise, so we only have about 900,000 left to raise here. We’re targeting a net to-investor IRR of 28% and a 1.5x equity multiple. Definitely want to mention that we already have our lender term sheet signed up. We are weeks away from closing our construction loan. We started the grading and site work on this project last summer, and that’s been moving along nicely. As soon as the construction loan closes, we are going vertical.
Next, I will share our Opportunity Zone investment offering. For those of you who may be less familiar with Opportunity Zones, I want to give a quick refresher here on some of the powerful tax benefits. So high level, if you invest qualifying capital gains into a qualifying Opportunity Zone project, and if you hold that investment for at least 10 years, you may receive some tremendous tax benefits, you know, unparalleled, you know, and I haven’t seen anything like it in any other investment. First, you will have the option to defer your capital gains taxes until 2026, meaning the taxes you would’ve owed on that initial capital gain, that gets deferred to 2026. Secondly, you will 100% eliminate all capital gains taxes if the investment is held for that 10-year holding period. So, essentially, you’ll have tax-free growth, tax-free appreciation, and tax-free income, which brings us to our third point, depreciation recapture upon sale is eliminated.
So with a standard real estate deal, upon sale, you’re going to get hit with that capital gains tax and that depreciation recapture tax. Both are eliminated with OZs. So you can, you know, write off depreciation during the life of the asset to shield your cash flow, and you will not have the depreciation recapture at the end. Point Central will be a 157,000-square-foot industrial project located in the North Denver submarket. Some of the things I like about this micro-location is its proximity to downtown Denver. It’s within a core submarket North Denver, so it’s a little bit more insulated from some of the supply in the DIA airport market. This is just about a 10 to a 15-minute drive north of downtown Denver Union Station area, so it’s a prime urban infill site. It is also bounded by all regional interstate highways. As you can see in this photograph on this slide, it is adjacent to the I-25, I-270, and the I-76. Colorado is also the sixth fastest-growing state in America since 2010, and Denver is the fastest-growing city in the U.S. for millennial transplants with a 20% growth in this key demographic since 2014. And this is the same demographic that is the most likely to shop online, which is a major demand driver for industrial real estate.
Oh, I want to also mention that the property will be…it’ll be 2 buildings, each 80,000 square feet, with a 190-foot truck yard in the center. We are building this out to be multi-tenanted, so we are going to assume for two tenants in each building with four offices. So one small office pad for each tenant. And this is based on market demand, and we will be targeting 3PL tenants, third-party logistics tenants. This is the capital stack for Point Central. It is about a $36 million project. We have just over $1 million left to raise. Our net to-investor IRR is a 14.3%. We are targeting a 3x equity multiple. One of the key things that I definitely want to share with you all is that we closed our construction loan on this yesterday. So we have been working on this for the last couple of months now and got this closed yesterday with a large institutional lender. So we are ready to go vertical. Fencing on this site actually goes up tomorrow. So we are within days of going vertical.
The income fund features a few different cash-flowing assets with long-term leases. So we have five different assets. Some of the tenants… This is… The main tenants are Walgreens and Albertsons, and the WALT or weighted average lease term for all of these assets is at least 10 years. And most of these leases include annual rent escalations. And so this is great for investors that are really cash-on-cash-focused that want to, you know, have exposure to stabilized existing assets. We offer interval units and common units. Common units target a bit higher of a return, so I will speak more to the common units. With common units, you have a three-year sale lockout period. Common units target a 7% to an 8% annual cash-on-cash return, and this is paid out in the form of monthly dividends. There is some depreciation write-off, so with that depreciation write-off, you’re on track for about a 9% to a 10%, and these are, you know, targeted returns. And if you are to withdraw your money after 3 years, then we are targeting a 12% to a 14% IRR, you know, to account for the appreciation as well.
I hope that you choose to partner with StarPoint Properties, and I would be so excited to answer any of your questions. I’ve included my contact details, my phone number and my email address, right here.
Jimmy: Fantastic, Taylor. So please do reach out to Taylor if you’re interested in learning more about StarPoint properties and some of the offerings that Taylor presented today. I’m partial to the Opportunity Zone deal. I’m a big Opportunity Zone guys, you know, Taylor, and I think it’s the greatest tax incentive ever created, is what I’m famous for saying. It’s like a Super Roth IRA essentially, the ability to grow your wealth tax-free within that Opportunity Zone investment. It’s not for everyone, but if you have a capital gain that you want to defer, you can grow it tax-free and exit tax-free after a 10-year hold, it’s a heck of an opportunity. We got a question here from Brett. It is a couple more minutes. We’ll see if we can get to a couple questions here. Brett asks a, “Taylor, can you clarify Lotus Point. Is this part of an OZ fund, or if not, is a 1031 an option for that type of investment?”
Taylor: Yeah, so a 1031 wouldn’t necessarily be an option. I mean, I can connect with my team on that, but this is…so this asset actually is within an Opportunity Zone, and the way it’s structured is we have different tick entity owners of this project, and so one of the tick entities is on track for that 10-year hold, and that’s for people who have capital gains and want to invest capital gain dollars, you know, to reap those Opportunity Zone benefits, which as you mentioned, Jimmy, are pretty phenomenal. And then because we have like, you know, long-term investors that maybe they had additional money they wanted to invest but not all of that’s capital gains, we have another tick structure entity that’s targeting that two-year hold period. And so we realistically upon stabilization, we will either sell the asset, move the OZ people into another project, which will, you know, could in fact juice the total returns, like, it’s like a capital cycling strategy, or we will recapitalize the deal, meaning that we will exit the short-term investors and keep the long-term OZ people in the deal. I realize that might be a little bit confusing, so, you know, if you reach out to me, I’m happy to schedule a call and talk through that in greater detail.
Jimmy: Sounds good. One more question for you. You mentioned one of your deals is in the Phoenix Mesa MSA, lot of great tailwinds, lot of growth there in that part of the country. Are you concerned at all about an equity rush and some oversupply as a lot of developers have a similar focus there in that part of the country?
Taylor: No, I’m actually not concerned about that because I think that people are underestimating the demand side of the equation here. I strongly…I have a conviction that we are only just seeing the beginning of this, you know, Mexico industrial is booming. There is, like, a global restructuring of supply chain going on right now. People realized during COVID, you know, during the Suez Canal crisis and similar events that it doesn’t work to have everything manufactured in Asia and have it shipped over. It’s more efficient to have things manufactured in Mexico, not only from an environmental perspective but just from like a cost savings perspective. So there’s a massive boom going on within, like, Texas, Arizona for manufacturing and within Mexico as well. And I believe that the border cities and border kind of metros like Phoenix, you know, some markets in Texas could be net benefactors of this, like, global trend that’s going on.
Jimmy: Good answer. One more question here, and then I’ll cut you loose. This person wanted some clarification. Your OZ deal is… Can investors come into a QOF that you already have set up, or is it a QOZB? Does the investor need to have his or her own QOF to invest in or… How can we get the answer to that question?
Taylor: It is a Qualifying Opportunity Zone fund. No, investors do not need their own, like, Qualifying Opportunity Zone, you know, entity. They can just bring in capital gains and invest. So we went through that legal process ourself to get that qualified.
Jimmy: Excellent. Well, I think we’re outta time. We’re outta questions too, so we got them all answered. Thank you so much, Taylor, for joining us today with StarPoint Properties. I’m looking forward to seeing you here in the Dallas-Fort Worth area next month for Wealth Channel Summit. Thanks so much for joining today.
Taylor: Thank you. Bye, Jimmy.