Creating Tailored Housing for Today’s Millennial Family ...

Creating Tailored Housing for Today’s Millennial Family

Turning Point Investments

Repositioning Underperforming Apartment Properties to Serve Bay Area Millennial Families


Turning Point Investments focuses on the acquisition of class B/C, undervalued multifamily assets that can be improved and repositioned towards working millennials now having children and relocating out of San Francisco and the Silicon Valley

The company leverages 30+ years of commercial real estate experience of its managers and advisors. Our team has the proven expertise to identify, improve, and operate multifamily assets in order to maximize investor returns

which “up and coming” submarkets are likely to experience increased housing demand and higher rental rates in the next 3-7 years

unique, bespoke hous-ing solutions catered directly to the fast-grow-ing Bay Area millennial family community

the asset towards controlled costs and increased revenues

the investment in 5-7 years

COMPANY OVERVIEW

Operate OperateResearch Deliver Operate Exit


MANAGEMENT PROFILE

Riccardo Gale General Partner

Riccardo has been a leading member of San Francisco’s commercial real estate industry for over 13 years. He has advised over 150 tenants seeking rental space around the Bay Area, supporting both private and institutional owners and investors throughout the course of his career.

He has worked extensively with top architects, general contractors, construction managers, and property managers to ensure his clients maximize the value of their improvements while keeping costs to a minimum. He has performed complex real estate portfolio valuations, negotiated lease and purchase & sale agreements, and marketed properties to agents and users throughout the Bay Area.

Riccardo received his MBA from Pepperdine University in 2003, and his bachelors degree from Lafayette College in 1995.

Aaron ReuterGeneral Partner

Aaron brings a long tenure of real estate investment management experience to Turning Point. Most recently Aaron has held executive positions in investment management at Swift Real Estate Partners, a private equity real estate investment manager that focuses on value add office opportunities on the West Coast.

Prior to Swift Real Estate Partners, Aaron was Director of Asset Management at Portland Oregon based Gerd-ing Edlen, where he was responsible for the firm’s asset management and disposition function for their sustain-ably focused office and multi-family private capital funds and strategic joint ventures. Prior to his time at Gerding Edlen, Aaron was Vice President of Fund Management at AMB/Prologis, where he oversaw approximately $2.0 Billon of industrial real estate located in the U.S., Mexico and Brazil.

Aaron holds a BA from UCLA and an MBA from the Kelley School of Business at Indiana University.


Turning Point Investments LLC acquired 1441 University Avenue in Berkeley, CA, in early August 2017. This 12-unit mixed use property aligned strongly with our strate-gic search criteria due to its location, unit mix (10 one-bedrooms plus two retail), distressed seller dynamics, and price. The property is well suited to our target users, millennials and millennial families, particularly given its proximity to one of California’s largest (and still growing) universities. Further, the asset is located just 3 blocks from the North Berkeley BART station, suggesting that demand will always be high in this area. Attractive nearby amenities including an adjacent café and pizza restaurant, a nearby Trader Joe’s, and a Target opening across the street this fall further buoyed our confidence in this location.

TPI secured the asset at a below-asking cost of $2,150,000 (from a listing price of $2.2M) despite competition from 6 other buyers because we agreed to a shorter close, which proved to be the seller’s primary concern. We have since stabilized the asset with new property management, a major renovation of the one vacant unit, and preparations for the mandated soft story retrofit. Despite our conservative as-sumptions, the asset is on track to yield a 5 year property IRR of 15%.

A loan was secured with Chase in the amount of $1.0 million, representing ±$38% of the total capital raise. This represents a low LTV, reducing the risk associated with a market downturn. We raised the equity through 13 investors whose investments ranged between $50K-$200K each, totaling ±$1.5M (including $200K of GP capital).

A renovation of the vacant unit (in order to secure the highest rent possible) was recently completed (see before and after photos), and we are marketing the unit at $2,400/month, approximately 9% above our proforma underwriting. Total investment in improvements was $21K, below our proforma underwriting of $25K. Initial market response to the unit has been very positive.

In conclusion, Turning Point Investments has demonstrated its ability to establish a sound investment strategy and identify an asset meeting those criteria, secure the asset at below ask in a very competitive environment, source the necessary debt and equity in a timely fashion, and perform value-add improvements on time and on budget. We feel confident 1441 University will provide an outstanding return for our valued investors.

Investment Profile: 1441 University Avenue, Berkeley CA


Unit 8 Renovation Photographs

AFTERBEFORE

Living Room

Kitchen

BedroomBedroom Bathroom

Living Room

Bathroom

Kitchen


INVESTMENT STRATEGY

Within each target market, secure underperforming assets resulting from mismanagement/distressed ownership which are located within a 7 minute “rush hour” drive of a BART or Caltrain station

Improve/reposition assets in order to drive increased rents, while seeking to reduce operating expenses (thus increasing cash flow and asset value)

Perform improvements specifically positioned to meet the unique and largely unmet needs of young Bay Area millen-nial families

Exit the investment at such time that increased rents and/or general market dynam-ics have resulted in significant capital appreciation: target hold period of 5-7 years

53 421Target currently affordable Bay Area submarkets poised for market appreciation


SUBMARKET CRITERIA

• BART/Caltrain proximity• Current affordability• Reputable public schools• Vibrant town center• Employment Drivers:

- Major new employers entering a submarket (IE, proposed Stanford Adult Hos- pital in Palo Alto, Faraday Futures electric vehicle manufacturing plant in Vallejo)

- Major civic improvement initiatives (IE, CenterCal’s 375K RSF mall at theshuttered Chevron refinery)

- Public transit expansion (IE, BART expanding into Livermore, Antiochand Milpitas in 2018)

ASSET CRITERIA

• B/C Asset class• 50%+ ratio of 2 bed/1 bath plans (Ideal for small families)• Ability to increase rents through cost-effective improvements• Open area for conversion to family friendly communal spaces and storage

The number one indicator that a market is ready to explode is… it’s population and growth (metrics) -Ken McElroy: The Advanced Guide to Real Estate Investing

“ ”


WHY TARGET THE MILLENNIAL MARKET TODAY?

Millennials (those born roughly between 1982-2004; average age: +/-24) are the largest generation in US history. They make up 40% of the housing market, and of those, 90% will be renters1

➤ Many millennials are now reaching the age thatthey are having children, marking an urgentneed for new affordable housing solutions outsidedense urban centers like San Francisco

➤ Millennial housing needs are not adequately met today

➤ We will provide millennials with the unique housing theywant and need, presenting a tremendous market opportunity

The real problem here is that nobody in the homebuilding industry is giving them a product they want. -Adam Ducker, managing director at RCLCO, a real estate consultancy

“”

1“The Millennial Renter is Here! Are you Ready?” Inman News, file:///C:/Users/Riccardo/Downloads/apmwebinarmillenialrenter103014final2-141030162732-conversion-gate01.pdf”

Creating Tailored Housing for Today’s Millennial FamilyCreating Tailored Housing for Today’s Millennial Family

Urban (or urban-proximate) and SmallerLocated within or near major cities, and willing to downsize in square footage and cost accordingly

Open, multifunctional spaces Prefer casual, social living, and maximizing space in smaller units

Natural light, bold colors Grays and bold accent colors are in, beige/white everywhere is out

Less PrivacyTheir living space is all the privacy they require- they don’t require private outdoor spaces

TechnologicallyEfficient,Green,andHealthy They want robust Wi-Fi and cell phone connectivity/ reception, and fiber-speed web access. They expect to be able to work efficiently from home. Environm- entally oriented, millennials care about water and electrical conservation

Focused only on submarkets with immediate BART/SMART/FERRY access, preferably within walking distance of town center. 50%+ 2 bed/1 bath units mix to maximize space ef-ficiency for young families

Use selective demo to convert existing apartments to wide open plan with open kitchen layout

Paint apartments with select, bold accent colors. Provide a cut sheet with alternative paint scheme palettes

Identify properties which do not waste space through large private areas, and provide fun/functional communal outdoor space

Strong Wi-Fi, lots of power outlets, LED (T24) lighting, wood flooring, etc. Online rent pay/service request. Smart controls for HVAC, security systems

WHAT DO MILLINNEIALS WANT? & HOW WE UNIQUELY MEET THAT NEED

We ProvideMillennials Want2

1

2

3

4

52 “The Millennial Renter is Here! Are you Ready?” Inman News, file:///C:/Users/Riccardo/Downloads/apmwebinarmillenialrenter103014final2-141030162732-conversion-gate01.pdf”

WHAT DO MILLINNEIALS WANT? & HOW WE UNIQUELY MEET THAT NEEDWHAT DO MILLINNEIALS WANT? & HOW WE UNIQUELY MEET THAT NEED

Social interactionInherently social, millennials crave fun/functional shared outdoor areas to hang with family and friends

Pets57% of millennial households own a cat or dog

Quality Kitchens76% of millennials say they enjoy cooking and cook at least 4 times per week

Bicycle AccessThey prefer bicycling to driving, when possible

ConvenienceEasy access to stores and services, either nearby or via quick delivery

Convert outdoor spaces into synthetic, environmentally (and pet) friendly grass and play areas for children, featuring outdoor gas grilling amenities, bocce/corn hole games, fire pits, etc

Pet-friendly leasing policy, communal pet washing station, and waste disposal stations

Updated kitchens featuring granite countertops, stainless appliances, and quality lighting

Designated, secure bike storage (in suite or out), shared bike repair/tool station

In-suite washer/dryers, abundant storage on site or partnered with local storage facility

We ProvideMillennials Want6

7

8

9

10



Caltrain Map

Utilize proven marketing and management strategies to reposition underperforming properties

• Implement lifestyle community approach• Engage local market team of professionals• Grow NOI through proven revenue maximizing

strategies

Additional strategies to increase revenues

• Add interior washer & dryers• Provide efficient storage solutions• Implement utility bill back system• Employ premium rent pricing• Reduce unit turnover

Our first acquisition will be located within a 1 hour drive of San Francisco, with focus on Contra Costa, Solano, Alameda, Santa Clara and San Mateo Counties

Submarket and Properties will feature:

➤ Within 7 minute rush hour drive of BARTor Caltrain, including existing stationsand those currently under construction(Antioch/Livermore/Milpitas/Santa Clara)

➤ Good public schools(per www.greatschools.net)

➤ Charming town center within easy walk or short drive

FOCUSED ASSET MANAGEMENT APPROACH

LOCATION

Bay Area Rapid Transit

www.greatschools.net


Our Process Model allows us to generate passive income and long term wealth for those who wish to continue to re-invest in a growing portfolio over time

INVESTMENT LIFECYCLE PROCESS MODEL

Buy Property

Raise Rents

Renovate Property

IncreaseOccupancy

HoldProperty

DistributeMonthly

Cash Flow

DistributeProfitstoInvestors

Exit Investment

(SellorRefinance)


Turning Point Investments empowers you to participate in multifamily real estate ownership and enjoy it’s many lifetime cash flow, tax, and capital appreciation benefits

Strike While The Iron’s Hot

Investment Strategy:

➤ Employs a niche marketing strategy toattract the fast growing millennial familydemographic

➤ Generates cash ROI through savvyacquisition, strategic reposition, andprofessional property operation andmanagement

➤ Allows investors to buy today intotomorrow’s Bay Area boom-towns

➤ Leverages our team of seasonedprofessionals to maximize the value ofour shared investment

This is the right strategy, in the right place, at the right time


Riccardo GaleTURNING POINT INVESTMENTS222 Monte Vista AveLarkspur, CA 94939(415) [email protected]

CONTACT INFORMATION

Nothing herein shall be construed as offering literature or a prospectus. No representation or warranties of any kind are intended to be made herein or should be inferred with respect to the economic returns or tax consequences associated with an investment with Turn-ing Point Investments.

This presentation may contain forward-looking statements relating to future events or the future performance of prior investment or the joint venture. In some cases, forward looking statements may be identified by the use of terminology such as “may”, “will”, “should”, “plan”, “intend” “anticipate”, “believe”, “estimate”, “predict”, “potential” or ”continue”, the negative of such terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially.

Certain of the factual statements made in the enclosed materials are based upon information from various sources. While such in-formation is believed to be reliable, neither Turning Point Investments, nor any of its affiliates has independently verified any of such information.

The enclosed materials and their contents are strictly confidential. By acceptance of these materials, each recipient agrees to keep the materials and their contents confidential and not to disclose them to anyone except such recipients legal and financial advisors, which advisors such recipient will instruct to maintain these materials in confidence.

COMPANY DISCLAIMER

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