Broadview Investor Presentation

Presentation Contents
•  Why Invest in Real Estate?
•  Why Multi-Family Real Estate (Apartments)?
•  Why Multi- Family Now?
•  Broadview Team, Track Record & Investment Focus
•  Recent Deal:
Sandpiper Apartments
•  Future Investment Opportunities
•  Appendices:
-  Broadview Portfolio Properties
-  Investment Return Comparison
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Why Invest in Real Estate?
•  Attractive alternative to other investments
•  Tangible asset/predictable business model
•  Established valuation methodology
•  Accepted use of leverage to maximize return
•  Effective inflation hedge
•  Investment provides:
-  Short term cash flow
-  Long-term capital appreciation
-  Tax advantages
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Why Multi-Family Real Estate?
•  Predictable/stable tenant market
•  Broad/diversified tenant base
-  Each tenant represents only a small % of total occupancy
-  Contrast vs. commercial or single-family real estate
•  Flexible business model – can adjust rents quickly to match market
conditions
•  Economies of scale in property management
•  Stable/growing rental demand provides excellent risk/reward
proposition; solid long-term investment vehicle
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Why Multi-Family Now?
•  Home-ownership rate declining
•  4.5 million new renters in next 5 years
•  1 million new rental units built in the last 3 years
•  Nationwide vacancy rate currently at 6.6%, down from 8% a year
ago
•  Rents are increasing (up 2.3% in 2011)
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Why Multi-Family Now?
•  Financial crisis has created a unique opportunity
•  $1 Trillion of multi-family properties are in foreclosure
-  Former lenient loans maturing
-  Banks won t refinance under similar terms
•  Quality properties available at bargain values
-  <25% of replacement cost
-  Over-leveraged & financially stressed
-  Downward spiral
-  Bank owned or short sales
•  Current cash flow provides compelling opportunity now, with
long-term capital appreciation
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Broadview Team: D. Michal Ballard
•  Veteran real estate investor and deal maker
•  Real estate investment educator
•  Nationally recognized multi-family authority
•  Lifetime small business entrepreneur
•  Finance/economics educational background
•  University of Chicago MBA
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Broadview Team: Michael K. Matysik
•  Veteran real estate investor
•  25+ years of business experience
•  Public & private CFO/senior executive
•  Extensive deal experience
-  $250M in financing
-  $600M in M&A transactions
•  USC MBA
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Broadview Team: Jon Brody Black
•  Veteran real estate operator; with 22+ years in property
management
•  Current Owner, Providian Real Estate Management Co. (4 years)
-  2500 units across 3 states
•  Marcrum Management Company (19 years)
-  Director of Operations
-  7000 units across 14 states
•  BA – Birmingham-Southern College
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Broadview Track Record
•  Proven ability to buy right (7 deals to date; 620 units)
•  In-house property management has improved results
-  Reduced vacancies - properties averaging 85%+ occupancy
-  8% average annual rent increases
-  Reduced operating costs
•  Projects performing at or above original plan
-  3 at 17 - 24% IRR (purchased pre-financial crisis)
-  1 at 3% cash on cash, good property, but purchased at peak (3/09)
-  3 recent deals expected to provide > 25%+ IRR (purchase price per unit was at a
fraction of pre-recession deals)
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Broadview Focus
•  Emerging/strong secondary/tertiary metropolitan markets
•  Properties one grade lower than the local market (e.g. “C”
property in “B” market)
•  100 to 300 units; below institutional focus
•  Financially stressed properties, under-performing comps in same
markets
•  Mostly in the Southeast United States
-  Alabama, Georgia, the Carolinas, Tennessee, Kentucky
•  Compound annual rates of return of 25% +
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Recent Deal: Sandpiper
•  113 Units –
Birmingham, Alabama
•  Traded in 2006 for $6.5M
•  Under-managed, became
financially stressed
•  Bank foreclosed
•  Broadview purchased 9/7/11
for $1.9M
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Recent Deal: Sandpiper
•  Substantial discount to
fair-market value based on
all-cash deal/quick close
•  $2.4M equity
-  $1.9M purchase price
-  $0.5M improvements &
closing costs
•  Value once renovated/stabilized
is > $4.0 million
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Recent Deal: Sandpiper
•  Stabilization underway; 80%+ occupancy & improved tenant
quality
•  10%+ annual cash on cash until refinance
•  Refinance within 12 -18 months: return 75%+ of original principal
•  40% + annual cash on adjusted cash after refinance
•  Sale within 5 years, providing exit/capital gain
•  30% compound annual return
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Recent Deal: Augusta Arms
•  155 units, Lexington Kentucky
•  Desirable market; < 7%
unemployment, well known local
employers
•  Under-managed, financially
distressed, bank foreclosed
•  Purchased via auction 12/31/11
for $1.2M
Purchase price at $8K/unit
($11K w/renovation) vs.
local comps at $16 – 24K
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Recent Deal: Augusta Arms
•  Stabilization underway; 70%+ occupancy (up from 57% at closing)
& improved tenant quality
•  10%+ annual cash on cash until refinance
•  Refinance within 12 -18 months: targeted to return 80-100% of
original principal
•  Continued cash distributions after refinance
•  Sale within 5 years, providing exit/capital gain
•  28% projected compound annual return
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Future Investment Opportunities
•  $1- 4M equity required for cash purchase/quick close
•  Regulation D offering – accredited investors only
•  $50 -100K minimum investment
•  8% preferred cumulative annual equity return
•  70%/30% split with Sponsors after preferred return*
•  Five year hold for cash flow, capital appreciation via sale or
recapitalization
* Sponsors also receive a deal structuring fee, property management fee at a fair market rate and certain other fees
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Future Opportunities – Two Models
•  All Equity
-  Required for all cash transaction on distressed property at substantial discount
-  Purchase funded entirely with equity
-  Renovations funded by equity investment or small bank loan
-  Expected refinance within 18 months to return 65% or more of original capital
-  Hold for remainder of 5 year period for cash flow and capital appreciation
-  Total returns derived from turn-around, improved management, quick return of
capital and long-term market appreciation
•  Leveraged Transaction
-  Profitable/mildly distressed property supports immediate mortgage or bridge
- 
- 
- 
- 
financing
Less risk, more predictable leveraged returns
Generally affords larger deal size
Expect immediate cash flow plus long-term capital appreciation, with 5 year hold
(possible refinance after 24 to 36 months provides improved return potential)
Total returns derived from improved management, strong and predictable cash
flows and leveraged long-term market appreciation
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Future Opportunities - Process
•  Expect a transaction within the next 30 to 90 days
•  Soft commitments required in advance provide Broadview with
confidence to make cash offers
•  Firm commitments required at LOI stage, with short notice (7 to
10 days)
•  Funding required ~ 30 days after signing of purchase agreement
•  Broadview team will invest also (equity investment plus possible
bridge loan to enable close prior to full equity funding)
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Appendix 1: Broadview Properties
•  Cambridge Court;
- 
Huntsville, Alabama
60 units, purchased 6/1/07
•  Winchester Commons;
Huntsville Alabama
•  Warringwood Heights;
Hoover, Alabama
- 
- 
64 units, purchased 7/1/08
50 units, purchased 3/4/09
•  Stratham Place;
- 
Greenville, South Carolina
90 units, purchased 12/1/10
•  Creekwood Apartments*;
- 
Macon Georgia
92 units, purchased 6/17/11
•  Sandpiper Apartments; Birmingham, Alabama
- 
113 units, purchased 9/7/11
•  Augusta Arms Apartments; Lexington, Kentucky
- 
155 units, purchased 12/21/11
* Broadview advised, invested and is managing Creekwood (but did not syndicate)
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Appendix 1
Appendix 2: Return Comparison
•  25% compound annual growth rate (CAGR) triples investment
value in 5 years*
•  10 year stock market (S&P 500) CAGR has been 2.5%
$350,000
25% CAGR
$300,000
$250,000
$200,000
5% CAGR
$150,000
$100,000
$50,000
$0
1
2
3
* CAGR assumes distributions are reinvested at the same rate during the investment term
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Appendix 2
Appendix 3: Management Team
D. Michal Ballard, Broadview Principal
From 1986 until 2004 Mike bought, operated and sold several different businesses. Mike
worked as a consultant for several corporate turnarounds and even founded a company that has
since gone public. After that Mike turned his talents to real estate and attended several courses
at ForeclosureS.com. Having a bias toward action, Mike practiced what he was taught and
within two years of the ForeclosureS.com lab he bought and sold over 20 houses and helped
three times that many people stay in their homes. Mike then moved on to buying apartment
buildings in the southeastern United States where he now owns and/or operates over 620 units.
Mike is a real estate instructor and an investment coach for Foreclosures.com and has been
featured in articles in the Seattle Times, Forbes.com and The New York Times. Mike holds BS
degrees in Business Administration/Finance and Communications and a BA in Economics from
Central Washington University, as well as an MBA with concentrations in Finance, Economics,
and Statistics, from The University of Chicago. Prior to and during his undergraduate studies,
Mike was a United States Marine. Mike is currently the Chairman of the Education Fund of
North Seattle Community College, which operates an endowment of $7,000,000 and provides
scholarships for over 250 students annually.
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Appendix 3
Appendix 3: Management Team
Michael K. Matysik, Broadview Principal
With nearly 30 years of professional business experience, Mike has been a part-time real estate
investor for over five years, with investments in commercial, multi-family and single-family
properties. Since becoming a principal in Broadview during the first half of 2011, Mike has
helped structure and finance two properties, consisting of over 350 combined units. In
addition, Mike has invested in other properties under management by Broadview’s sister
company, Broadview Management, LLC and is actively involved in the day to activities of all
properties under management by Broadview Management, LLC, consisting of over 620 units.
Mike's professional experience includes service as Senior Vice President and Chief Financial
Officer (CFO) of Cardiac Science Corporation, a $200 million public company (Nasdaq: CSCX)
from 2002 to 2011, service as CFO for DMX Music, AEI Music and Corning Nichols, and
service for over 6 years as a CPA with the international accounting firm Deloitte and Touche.
Mike has raised over $250 million in debt and equity financing and has negotiated and structured
over $500 million in merger & acquisition transactions during his career. Mike has BA in
Business Administration from the University of Washington and an MBA from the University of
Southern California, where he was a Graduate Business Fellow and Rockwell International
Scholar.
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Appendix 3
Appendix 3: Management Team
Jon Brody Black, Broadview Business Partner
Brody has over 23 years experience directing and operating multi-family properties.
Brody’s experience includes 19 years with Marcrum Management Company, where he
was the Director of Operations for the last 12 of those years. The scope of Brody’s
responsibilities at Marcrum included 60 properties in 14 states (nearly 7,000 individual
units). For the last 4 years, Brody has operated his own company, Providian Real
Estate Management, which currently manages nearly 3,000 units, covering multiple
states. Through Providian, Brody partners with Broadview in property selection, due
diligence, deal structuring and day-to-day property management. Brody is a Certified
Property Manager (CPM) and has served on the Board of Directors of the Southeastern
Association of HUD Managing Agents. He resides in Birmingham, Alabama, and holds
a BA in Business Administration and Economics from Birmingham-Southern College.
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Appendix 3