A Multifamily Residential REIT - Inland Real Estate Investment

Inland Residential Properties Trust, Inc.
A Multifamily
Residential REIT
Inland: A Leader In Residential Real Estate Since 1968
Creative. Well-Structured. Differentiated Products.
inland-investments.com
This material is neither an offer to sell nor a solicitation of an offer to buy any security, which can only be made by a prospectus, as supplemented, filed with the appropriate state and federal regulatory agencies.
This material must be preceded or accompanied by a prospectus, as supplemented, in order to understand fully all of the implications and risks of the offering to which it relates. Neither the Securities and Exchange
Commission nor any state securities regulator has passed on or endorsed the merits of this offering. Any representation to the contrary is unlawful. The multifamily residential buildings depicted are not owned by
Inland Residential Properties Trust, Inc. or its affiliates, but are representative of the types of properties the REIT expects to acquire.
*Inland refers to The Inland Real Estate Group of Companies, Inc. “Inland.”
Risk Factors – Consider Before Investing
Some of the risks related to investing in commercial real estate include, but are not limited to: market risks
such as local property supply and demand conditions; tenants’ inability to pay rent; tenant turnover; inflation
and other increases in operating costs; adverse changes in laws and regulations; relative illiquidity of real estate
investments; changing market demographics; acts of God such as earthquakes, floods or other uninsured
losses; interest rate fluctuations; and availability of financing.
An investment in Inland Residential Properties Trust, Inc.’s (Inland Residential Trust) shares involves significant
risks. If Inland Residential Trust is unable to effectively manage these risks, it may not meet its investment
objectives and investors may lose some or all of their investment. Please consult the “Risk Factors” and
“Conflicts of Interest” sections of the prospectus for a more detailed discussion. Material risks of an investment
in Inland Residential Trust’s common stock include, but are not limited to, the following:
• No public market currently exists, and one may never exist, for our shares. Our board does not have any
current plans to list our shares or pursue any other liquidity event, and we cannot guarantee that a liquidity
event will occur.
• The offering prices are not indicative of the prices at which investors may be able to sell shares, and are
not based on the book value or net asset value of our current or expected investments or our current or
expected cash flow.
• We cannot guarantee that we will continue to pay distributions.
• We have paid and may continue to pay distributions from sources other than cash flow from operations,
including borrowings and net offering proceeds. We have not limited our use of any of these other sources.
Payments of distributions using offering or financing proceeds will reduce the amount of capital we
ultimately invest in real estate assets.
• The number of real estate assets we acquire will depend, in part, on the net proceeds raised in this offering.
• We do not have employees and will rely on our business manager and real estate manager to manage our
business and assets.
• Persons performing services for our business manager and our real estate manager are employed by Inland
Real Estate Investment Corporation (“Inland Investments”) or its affiliates and will face competing demands
for their time and service.
• We do not have arm’s-length agreements with our business manager, real estate manager or other affiliates
of our sponsor.
• We will pay fees, which may be significant, to our business manager, real estate manager and other
affiliates of Inland Investments.
• We have not identified all of the specific real estate assets that we will acquire with the net proceeds raised
in this offering, thus this is a “blind pool” offering.
• On acquiring shares, investors will experience dilution in the net tangible book value of their investment.
• Principal and interest payments on any borrowings will reduce the funds available for distribution or
investment in additional real estate assets.
• There are limits on the ownership and transferability of our shares.
• We may fail to continue to qualify as a real estate investment trust (“REIT”) and thus be required to
pay federal, state and local taxes, which may reduce the amount of cash available for distributions to
stockholders.
The Inland Difference
Standing Shoulder-to-Shoulder with Investors for 48 Years
Integrity, expertise and 48 years of experience define the Inland difference. Putting stockholders first always has
been our greatest priority. Our management acumen, financial strength and operational expertise allows us to focus
on the operations of our properties and the fundamentals of our business to create real value for stockholders.
e
cles
Cy
Ec
o
48
Years
In
te
re
st
R a te C y cle
s
Alignment with Investors
$113 million investment in Inland-sponsored programs*
One of the nation’s largest investment, commercial
real estate and financial institutions
Management team cumulatively has more than 100
years of experience
Extensive network of valuable industry
relationships allows us to reduce capital outlays and
strengthen yield opportunities
End-to-end real estate services provide the ability
to generate value and increase earnings potential at
individual properties using asset management and asset
enhancement
• Acquisition
• Financing
• Leasing
• Disposition
• Development/
Redevelopment
7
Nonlisted REITs Sponsored
Full Cycle Success
Cycles
mic
no
Real E
sta
t
Management that has anticipated the
evolutionary changes in the real estate market
• Property Management
• Construction
• Marketing Properties
• Investment Services
*Includes contributions from Inland employees, spouses, directors and affiliated
employees, as of September 30, 2015.
4 REIT liquidity events completed to
create value for investors
10.5 Billion
$
Institutional Transactions
704
Sponsored
Programs
(7 REITs – 3 nonlisted, 1 merged,
1 sold, 2 listed), (687 Private LPs,
LLCs and DSTs), (10 Public LPs)
490,000
Investors
$
22 Billion
Capital Raised
Own &
Manage
property in
43 States
25
Million
Square Feet
Currently Own & Manage
All data as of June 30, 2016
Inland Residential Trust is a legal entity that is separate and distinct from other Inland-related entities.
An investment in Inland Residential Trust is not an investment in Inland Investments or any other Inlandrelated entity. Returns from an investment in Inland Residential Trust may differ materially from the returns
of an investment in any other entity owned, controlled or sponsored by Inland Investments.
3
Inland Residential Properties Trust, Inc. | 1
Asset Allocation and REITs
Diversification with REITs
REITs traditionally are thought of as a good investment for diversifying assets. Modern portfolio theory
advocates diversification to minimize overall risk. In other words, investors should allocate their portfolios among
a variety of investments in order to weather different market conditions. It is believed that such a diversified
portfolio may limit overall portfolio volatility or risk.
Traditional Asset Classes Used for Diversification
Stocks
Bonds
Cash
Real Estate
For illustration only. This is not a recommendation of how to allocate a portfolio.
Real Estate Has the Potential to Reduce Standard Deviation and Increase Return
2006 to 2016 (10 Years)
Stocks/Bonds/Cash
With 10% Direct Real Estate
5%
5%
40%
10%
20%
45%
55%
With 20% Direct Real Estate
35%
5
%
40%
40%
Return..........................8.11%
Standard Deviation.....10.92%
Stocks
Return......................... 8.22%
Standard Deviation.... 10.22%
Bonds
Cash
Return......................... 8.33%
Standard Deviation����� 9.52%
Direct Real Estate
Investing 10 or 20 percent in direct real estate both increased the portfolio’s total return and lowered the portfolio’s overall standard deviation.
The charts above compare the returns of the S&P 500 Index, Barclays U.S. Aggregate Bond Index and the NCREIF (National Council of Real Estate Investment Fiduciaries) Index, with and without an asset allocation
to direct real estate, over a 10-year time period. An investment in NCREIF is not the same as an investment in a nonlisted REIT. These charts also reflect the standard deviation for each allocation example.
Standard deviation is a measurement of the variability of an investment, derived from its historical returns. A higher standard deviation indicates a greater variability of an investment. The S&P 500 Index is a market
capitalization weighted index of 500 widely held equity securities, designed to measure broad U.S. equity performance. The Barclays U.S. Aggregate Bond Index is a broad-based flagship benchmark that measures
the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market. The Index includes Treasuries, government-related and corporate securities, mortgage backed securities, adjustable rate mortgage
pass-through asset backed securities, and commercial mortgage backed securities. NCREIF Property Index (NPI) is the accepted index created to provide an instrument to gauge the investment performance of the
commercial real estate market. Originally developed in 1982, the unleveraged index is made up of more than 7,353 properties, worth a total of about $505 billion (as of Q2 2016) from all the U.S. regions and real
estate land uses. NPI is an index that reflects the returns of a large pool of individual commercial real estate properties, is leverage free with no fees and includes a blended pool of institutional quality properties.
Shares of a nonlisted REIT have limited liquidity. An investment in a listed company is liquid, as shares can be bought or sold on an exchange at any time. Investing in shares of a nonlisted REIT also differs from
investing directly in real estate, as represented by the NPI, including the expenses related to a nonlisted REIT offering and other fees and expenses that the issuer may pay.
Past performance is no guarantee of future results. These charts are for illustrative purposes only. Each index provides a broad representation of a particular asset class and is not indicative of any investment. Asset
allocation does not ensure a profit or protect against a loss. The rates of returns shown do not reflect the deduction of fees and expenses inherent in investing. An investment cannot be made directly in an index.
2 | Inland Residential Properties Trust, Inc.
Multifamily Residential – A Demand Story
Sustainable Strong Demographic Shift
The multifamily apartment sector is experiencing significant demand driven by changing demographics.
Millennials, the largest generation ever, are choosing to rent versus own and Baby Boomers, the second largest
generation, are showing interest in downsizing after many years of living in their own homes.
Generation
Ages
Size (Millions)
% of U.S. Population
Greatest
68+
35.2
11
Baby Boomers
48-67
80.3
25
Generation X
38-47
40.9
13
Millennials
18-37
86.0
27
iGen
0-17
74.0
23
Source: US Census projections for 2013 based on 2010 Census. Barron’s, “On the Rise,” April 29, 2013
Renters by Choice – Millennials and Baby Boomers
Millennials and Baby Boomers continue to rent by choice. A majority of newly formed households chose rental
housing, a consistent trend since 2007.
2,500
Change over four
quarters, thousands
Household Formation
2,000
Renter
Owner
1,500
1,000
500
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
-500
-1,000
-1,500
Source: U.S. Census Bureau, Haver Analytics, 2015
Share of All U.S. Households that Rent
This represents the highest level since the mid-1960’s
37%
31%
mid-1960’s
2015
Source: America’s Rental Housing, Joint Center for Housing Studies of Harvard University, 2015
Inland Residential Properties Trust, Inc. | 3
Millennials and Baby Boomers – A Landlord’s Delight
Millennials
Love of Amenities
Including electric car
charging ports, gyms
and cellphone reception
in all areas
Love of Community
Including community
and shared spaces
and proximity to
culture and nightlife
Love of Flexibility
Being able to terminate
lease or choose not to
renew for any reason,
especially career reasons
Love of Convenience
Keeping home
maintenance and yard
work out of budgets, and
out of weekend to-do lists
Love of Convenience
No responsibility for
maintenance, which is a
lifestyle perk that
apartments offer
Love of Savings
Renting saves thousands
of dollars a year to enjoy
life, travel and spend time
with family versus the
upkeep required for homes
Why Millennials Prefer Renting:
• High levels of student debt*
• Desire for mobility to pursue job opportunities
• Mortgage lending standards continue to be restrictive
*Source: Federal Reserve Bank of New York, $1.2 trillion of debt as of 9/30/15
Baby Boomers
Love of Activity
Including walkability and
easy transportation to jobs
and activities they love
Love of Luxury
Apartments offer a more
luxurious place to live
with high-end amenities
often not affordable with
owning a home
Why Baby Boomers Prefer Renting:
• Ready to downsize – an easy first step to retirement living options
• Buying is often more expensive than renting
• Selling a home later in life can be stressful and is a disincentive for baby boomers
4 | Inland Residential Properties Trust, Inc.
Overall Population Growth
Existing demographic data shows the population of the United States is slated to grow by 45 million over the
next 20 years.
U.S. Population Projection
359M
380M
398M
416M
Millions
335M
2020
2030
2040
2050
2060
Source: U.S. Census Bureau
Household Formations Trend Toward Renting
The growth in renter households reflects new households deciding to rent along with a growing number of
households leaving homeownership.
Renter Household Growth Has Surged with the Drop in Homeownership
Renter Households (Millions)
Homeownership Rate (Percent)
■
20
15
20
14
20
13
11
20
12
10
20
09
20
20
20
08
20
07
20
06
04
20
05
20
03
02
20
01
20
20
20
19
19
91
■ Renter Households
00
60
99
62
30
19
98
64
32
19
97
34
19
96
66
19
95
68
36
19
94
70
38
19
93
72
40
19
92
74
42
19
90
44
Homeownership Rate
Note: Data as of 3Q 2015
Source: U.S. Census Bureau, Housing Vacancy Surveys
Multifamily
Homeownership
As the rate of
homeownership
continues to
decrease, the rate
of apartment living
continues to increase.
Inland Residential Properties Trust, Inc. | 5
Reasons to Own Multifamily Real Estate in a
Diversified Portfolio
Risk Adjusted Returns
Multifamily is the second largest sector of commercial real estate representing $137 billion in equity1.
Historically, multifamily real estate has outperformed nearly all other primary sectors of commercial real estate,
according to research from the National Council of Real Estate Investment Fiduciaries (NCREIF).
Since Inception NPI Standard Deviation and Return (1984)
10%
Retail
Multifamily
Annual Return
9%
Industrial
8%
Office
7%
6%
6%
7%
8%
9%
10%
Standard Deviation
Source: Analysis based on data from NCREIF website as of Q2 2016 (1984 is the first year all four primary property types, including multifamily, were represented in NCREIF’s Detailed
Property Report); primary property types are defined as retail, office, industrial and multifamily.
The NPI is an index of quarterly returns on an unleveraged basis reported by institutional investors on investment grade commercial properties owned by those investors. While not a
measure of nonlisted REIT performance, REIT management generally believes that the NPI is an appropriate and accepted index for the purpose of evaluating real estate growth rates.
The NPI does not reflect management fees and other investment-entity fees and expenses, which lower returns. Index performance may differ significantly from a REIT. Indices are not
available for direct investment. Past performance does not guarantee future returns.
1
NAREIT, REITWatch, August 2016
Economic Resilience
Overall U.S. population growth is expected to grow by 45 million over the next 20 years. These people will need
a place to live regardless of the economic cycle.2 The multifamily sector has maintained one of the lowest
vacancy rates among the other core commercial real estate asset classes.
Vacancy Rate by Property Type
18%
14%
12%
FORECAST
RECESSIONS
16%
Apartments
Warehouse
10%
Office
8%
Retail
RECESSIONS
6%
4%
2%
Historic data sources: NCREIF Data as of Q1 2015
Forceast data source: LaSalle Investment Management, June 2015
2
CoStar and National Association of Realtors
6 | Inland Residential Properties Trust, Inc.
2017
2015
2013
2011
2009
2007
2005
2003
2001
0%
Multifamily is 2nd Largest Commercial Real Estate Allocation by Institutional
Pension Investors
Property Type
2014
2013
2012
Office
26.9%
27.4%
27.7%
Multifamily
22.1%
22.4%
21.3%
Retail
19.8%
19.6%
18.9%
Source:
Pension
Real Estate
August 2015Investor Report, September 2014
Source:
Pension
RealAssociation,
Estate Association.
Multifamily – A Net Operating Income Story
Multifamily is a strong net operating income (“NOI”)* story for experienced real estate asset managers with a long
track record over multiple market cycles.
Rents projected to increase – Increasing rents are a cornerstone component of NOI growth. Short-term leases
allow owners of multifamily properties to regularly raise rents to align with market conditions.
2016 Rent Forecast
6%
4.4%
4.4%
4.6%
4.6%
Q1 2016
Q2 2016
Q3 2016
Q4 2016
Rent Growth
5%
4%
3%
2%
1%
0%
Forecasts are subject to change.
Source: Statista 2016
*NOI equals all revenue from the property minus operating expenses.
Class B Apartments becoming Option A for Millennials – Effective rents at class B rental communities
hover nearly 30 percent below those of class A, making them especially appealing to Millennials and other
cost-conscious renters. Many class B properties are newly renovated and include similar features of newly
constructed class A buildings. Millennials realize they can pay class B rents and occupy units that look and feel
like class A.
Class A
Class B
• Well designed
• Functional design
• Well maintained
• Average to good maintenance
• Above average materials
• Industry standard materials
• Above average workmanship and finishes
• Industry standard workmanship and finishes
• Less than 10 years old
• More than 10 years old
Inland Residential Properties Trust, Inc. | 7
Benefits
Current Distributions – Nonlisted REITs can provide distributions generated from the
rents of the properties held in the portfolio.
Professional Management – Individual investors can indirectly own high quality,
commercial real estate managed by professional asset managers who acquire and
maintain the properties.
Inflation Hedge – Rental increases can allow commercial real estate to keep pace
with inflation.
Portfolio Diversification – Adding real estate to a diversified portfolio has the potential to
increase the portfolio’s return and lower the portfolio’s overall volatility.
Low Correlated Investments – By combining assets that exhibit low correlation, investors
can work to reduce portfolio risk without sacrificing return potential. Low or negative
correlation means that investments behave differently from each other through changing
market environments.
There are many potential risks with investing in real estate. Distributions are not guaranteed. Nonlisted REIT distributions may be paid from sources other than cash flow from
operations including borrowings and net offering proceeds, which constitutes a return of capital to stockholders and reduces the proceeds available for other purposes. Please
consult the prospectus for a complete discussion of risk factors.
Sponsor Experience
Multifamily is an Inland Core Competency
High demand, strong occupancy and favorable financing represent an opportunity to enter the multifamily
space. The Inland Real Estate Group of Companies, Inc. (“Inland”) has more than 48 years of real estate
experience. In fact, multifamily real estate is an Inland core competency.
Since 1968, Inland has acquired and managed over 71,000 multifamily units for an aggregate purchase price
of approximately $4 billion, an expertise that continues across its operations today.
Experienced Asset Management Team
Rents are likely to moderate as supply slowly increases, but this will take some time. Our management team
cumulatively has more than 100 years of experience and is practiced at finding the best properties, in the right
markets, at prices that we believe position multifamily real estate to benefit from long-term demographic trends.
8 | Inland Residential Properties Trust, Inc.
What is Inland Residential Properties
Trust, Inc.?
Inland Residential Properties Trust, Inc. is a nonlisted REIT sponsored by Inland Real Estate Investment
Corporation that intends to acquire a portfolio of geographically diverse Class A and B multifamily properties
with the following characteristics:
• Top 100 Metropolitan Statistical Areas (MSAs)1 – generally metro areas greater than 500,000 people
• Close proximity, within larger MSAs, to universities, corporate headquarters, convention centers
• Stabilized (90% occupancy or higher) apartments with sought-after amenities and features in
desirable neighborhoods
An MSA is a geographical region with a relatively high population density at its core and close economic ties throughout the area. MSAs are
defined by the U.S. Office of Management and Budget (OMB), and used by the U.S. Census Bureau and other federal government agencies for
statistical purposes.
1
Market Opportunities
Inland Residential Trust intends to invest in suburban, commuter locations in growing MSAs with access to
public transportation. Target markets are primarily those with high job and/or income growth and low singlefamily affordability.
Target Markets
(subject to change)
Seattle, WA
Boston, MA
No. NJ
Oakland, CA
Washington, D.C.
Denver, CO
So. CA (L.A., Orange Co.)
Nashville, TN
Atlanta, GA
Phoenix, AZ
Charleston, SC
Dallas, TX
Primary Target Markets
Austin, TX
Houston, TX
Orlando, FL
Secondary Target Markets
Investment Objectives
• Preserve and protect stockholder capital
• Acquire a quality portfolio of class A and B multifamily properties that generate sufficient cash flow from
operations to fund sustainable and predictable distributions
• Realize capital appreciation with a potential liquidity event
We cannot guarantee that we will achieve any of these investment objectives, that distributions will be paid or that a liquidity event will occur.
Inland Residential Properties Trust, Inc. | 9
Potential Tax Deferral / Cost Segregation
Investors in some states could see their combined tax rate exceed 50%.
Through a strategy called Cost Segregation, we believe we can potentially help stockholders defer taxes and
ultimately pay taxes at a reduced rate under most circumstances.
Cost Segregation is an Internal Revenue Service-approved valuation analysis of the different components of
a real estate asset that has been used by public and private companies for over 50 years. It is our intent that,
through this valuation process, we will reduce the taxable distribution liability to stockholders.
The premise behind a Cost Segregation analysis is that some real estate components have a shorter useful life
than the bricks and mortar of a building, and are depreciated over a shorter time. This could result in a REIT
taking a larger depreciation expense for tax purposes sooner in the life of the asset.
$1,000
$900
$800
Thousands
$700
$600
$500
$400
$300
$200
$100
Straight Line Depreciation
Year 10
Year 9
Year 8
Year 7
Year 6
Year 5
Year 4
Year 3
Year 2
Year 1
$-
Cost Segregation
On an asset-by-asset basis, Cost Segregation should increase depreciation deductions for a REIT in the early
years after a real estate asset is acquired. As a result, a stockholder’s taxable dividend liability should be reduced
to the extent the REIT otherwise would have had current or accumulated taxable earnings and profits.
Accordingly, a REIT’s stockholders should be able to defer paying taxes to a later period, and ultimately should be
able to pay taxes at the reduced capital gains rate in the early years under most circumstances.
10 | Inland Residential Properties Trust, Inc.
Hypothetical Form 1099-DIV
PAYER’S name, street address, city or town, province or state, country, ZIP
or foreign postal code, and telephone no.
1a Total ordinary dividends
NOTE 1
OMB No. 1545-0110
16
1b Qualified dividends
Form 1099-DIV
$
PAYER’S federal identification number
RECIPIENT’S identification number
2a Total capital gain distr.
$
2b Unrecap. Sec. 1250 gain
$
2c Section 1202 gain
2d Collectibles (28%) gain
$
RECIPIENT’S name
$
3 Nondividend distributions
NOTE
2
4 Federal income tax withheld
$
5 Investment expenses
$
Street address (including apt. no.)
6 Foreign tax paid
7 Foreign country or U.S.
possession
$
City or town, province or state, country, and ZIP or foreign postal code
8 Cash liquidation distributions
$
10 Exempt-interest dividends
$
Account number (see instructions)
12 State
13 State identification no
9 Noncash liquidation
distributions
$
11 Specified private activity
bond interest dividends
$
Dividends and
Distributions
Copy B
For Recipient
Department of the
Treasury - Internal
Revenue Service
This is important tax
information and is being
furnished to the Internal
Revenue Service. If you
are required to file a
return, a negligence
penalty or other sanction
may be imposed on you if
this income is taxable and
the IRS determines that it
has not been reported.
14 State tax withheld
$
$
(keep for your records) www.irs.gov/form1099div Department of the Treasury - Internal Revenue Service
Note 1:
Ordinary REIT dividends are taxed at the maximum ordinary federal income tax rate. The use of Cost
Segregation may allow investors to push out ordinary tax liability into the future and may re-characterize
ordinary income into long-term capital gains.
Note 2:
A stockholder’s distribution that is determined to be a non-dividend distribution for federal income tax
purposes is not taxed until that stockholder’s tax basis in the REIT stock is fully recovered. Once the tax
basis of the stock is reduced to zero, provided the applicable holding period is met, any non-dividend
distribution would be reported as long-term capital gain and taxed at the lower applicable federal capital gain
tax rates. In the event the stockholder sells his or her stock for a price in excess of the stock tax basis, the
excess of the sale price over his or her tax basis (the amount paid for his or her stock reduced by any nondividend distributions received) would be reported as capital gain and, provided the applicable holding period
is met, taxed at only a 20% rate for federal income tax purposes.
There is no assurance that Cost Segregation will reduce the tax rate.
There is no assurance that the results of a Cost Segregation study will cause the amount of earnings and profits to be reduced, which would result in a portion of the
distribution being treated as a return of capital, and therefore would be taxed at a lower rate than ordinary income.
This information does not constitute tax advice. Each stockholder’s tax circumstances are unique, and this information does not constitute tax advice for any particular
stockholder. Stockholders must consult with their own tax or financial advisors for an in-depth discussion regarding the tax deferral strategies that are applicable to them.
Cost Segregation generally benefits investors that are stockholders at the time the REIT acquires the assets because the depreciation deductions from an asset are greater
in the earlier years after the acquisition of the asset. In addition, a greater percentage of distributions in these earlier years likely will be characterized as a return of capital,
reducing the stockholder’s tax basis in the REIT stock (or capital gain if the stockholder’s tax basis in the REIT stock is reduced to zero). This reduction in a stockholder’s tax
basis in the REIT stock may increase the amount of gain recognized by the stockholder upon sale of the REIT stock.
Tax deferral occurs where distributions are made in excess of taxable earnings and profits.
Inland Residential Properties Trust, Inc. | 11
Q: What is a REIT/ Nonlisted REIT?
A: REITs pool the capital of many investors to indirectly invest in a professionally managed commercial real
estate portfolio. REITs must pay distributions to stockholders equal to at least 90% of “REIT taxable income,”
subject to certain adjustments. REITs are not typically subject to federal corporate income taxes, thus
eliminating the “double taxation” (taxation at both corporate and stockholder levels) generally applicable to a
corporation. REITs are considered an option for generating income.
A nonlisted REIT has all of the above
characteristics but its shares are not listed
on a public exchange. A nonlisted REIT
is focused on buying and managing new
assets purchased in the private real estate
market. Eventually, as part of its lifecycle,
a nonlisted REIT may list on an exchange
or may merge with or be sold to a listed
REIT. However, nonlisted REITs do not
offer the liquidity of listed REITs and there
is no assurance that a nonlisted REIT will
have a liquidity event. Investors in nonlisted
REITs generally are seeking income from
distributions over a period of years. Listed
and nonlisted REITs are registered with and
regulated by the Securities and Exchange
Commission (SEC).
Investors should bear in mind that investing
in the shares of a nonlisted REIT differs from
investing in listed securities in significant
ways. Shares of a nonlisted REIT have limited
liquidity. In contrast, an investment in a listed
company is a liquid investment, as shares
can be sold on an exchange at any time.
Investing in shares of a nonlisted REIT also
differs from investing directly in real estate
including the expenses related to a nonlisted
REIT offering and other fees and expenses
that the issuer may pay.
REIT Life Cycle
Investors
Buy Shares
REIT
Liquidity
Event
REIT Pays
Distributions
to Investors
REIT Buys
Properties
REIT Collects
Rental Income
Potential Liquidity Event Process
Exit Strategies
Sell Assets
There is no guarantee that a liquidity event will occur.
12 | Inland Residential Properties Trust, Inc.
List on an
Exchange
Merge REIT
Offering Highlights
No Real Estate-Related Transaction Fees
Acquisition, Disposition and Financing Fees Have Been Eliminated (as of August 8, 2016).
Primary Offering1
Annualized Cash
Distribution Rate2
25.00
$
/share
Class A
/share
/share
Class T
/share
Class A
4.219%
Class T
23.75
/share
Class A
(95% of MOP: Maximum Offering
Price of Class A shares)
22.51
$
/share
Distribution Reinvestment
Plan (DRP)4
$
22.50
$
Class A
23.95
$
5.00
%
Estimated Per Share Value
(As of 4/11/2016)3
/share
Class T
22.81
$
/share
Class T
Investor Suitability5
Minimum Initial Investment:
Generally, investors must have a minimum net worth of $250,000, excluding
the value of homes, furnishings and automobiles, or $70,000 gross income
and $70,000 net worth. Investors also should desire a relatively long-term
investment and not require immediate liquidity.
• $3,000 for taxable accounts
• $1,000 for non-taxable accounts
Share Repurchase Program (SRP)
Closed to new investments: February 17, 2017 (unless extended)
6,7
The SRP is designed to provide eligible stockholders with limited, interim liquidity by enabling stockholders to sell shares back to Inland Residential
Trust. Subject to certain restrictions, as discussed in the prospectus, Inland Residential Trust may make repurchases upon the death or “qualifying
disability” of a stockholder (referred to as “exceptional repurchases”) and all other repurchases (referred to as “ordinary repurchases”).
Repurchase Prices
Ordinary Repurchases
21.60
$
/share
Class A
21.61
$
Ordinary Repurchases
96
$
%
Class T
of the applicable
estimated value
per share
until the initial valuation date8
after the initial valuation date8
/share
Exceptional Repurchases
The share classes differ with respect to the sales load (broker commission, dealer/manager fee, issuer
costs). Class A Shares charge a traditional sales load that is taken at the time of initial investment.
Class T Shares charge a reduced sales load that is taken at the time of initial investment, so that
more dollars are available for investment, with a trailing distribution servicing fee of 1% spread over
approximately 5.25 years. Please consult the prospectus for more information about Class A and T
shares.
1
$
22.50
/share
Class A
22.51
Exceptional Repurchases
100
%
Class T
of the applicable
estimated value
per share
until the initial valuation date8
after the initial valuation date8
/share
Alabama, California, Iowa, Kansas, Kentucky, Maine, Massachusetts, Michigan, Missouri, Nebraska,
New Jersey, New Mexico, North Dakota, Ohio, Oregon, Pennsylvania, Tennessee and Washington have
established suitability requirements that are more stringent than the standards described above. In
each case, these special suitability standards exclude from the calculation of net worth the value of the
investor’s home, furnishings and automobiles.
5
Ordinary Repurchases: Inland Residential Trust may make ordinary repurchases under the SRP only
if it has sufficient funds available to complete the repurchase. In any given calendar month, Inland
Residential Trust is authorized to use only the proceeds from its Distribution Reinvestment Plan during
that month to make ordinary repurchases. In addition, Inland Residential Trust will limit the number
of shares repurchased during any calendar year to 5% of the number of shares of common stock
outstanding on December 31 of the previous calendar year. Stockholders must have owned their shares
for at least one year.
6
The 5.0% annualized cash distribution rate for the Class A share is based on a $25.00 share price, and
the 4.219% annualized cash distribution rate for the Class T share is based on a $23.95 share price,
are payable monthly and are not guaranteed and may be modified at any time. As of June 30, 2016,
approximately 71% of the cash distributions paid to stockholders of record since November 2015 were
paid from the net proceeds of Inland Residential Trust’s “best efforts” offering (return of capital), and
approximately 29% were paid from cash flow from operations (may be return of capital). When Inland
Residential Trust makes cash distributions from sources other than cash flow from operations, it will
have less capital to invest in properties and this may lower its overall return potential.
2
Regulatory changes require that the per-share estimated values of publicly issued, nonlisted REIT
securities be shown on investor account statements using an approved methodology. Inland Residential
Trust statements currently report estimated per share values using the Net Investment Methodology
which reflects the maximum offering price (per share) minus commissions, dealer manager fee and
issuer costs. Upon redemption, the price received may be less than the per share estimated value
provided in the account statement.
3
The Distribution Reinvestment Plan provides stockholders with an opportunity to purchase additional
shares of common stock by reinvesting cash distributions. Inland Residential Trust intends to continue
paying distributions monthly.
4
Inland Residential Trust’s board of directors, in its sole discretion, may at any time amend, suspend (in
whole or in part), or terminate the SRP, with 30-day prior notice to stockholders. The board reserves the
right in its sole discretion to change the repurchase prices or reject any requests for repurchases. The
SRP should not be relied upon as a source of liquidity. Consult the prospectus, as supplemented, for a
discussion of the SRP.
7
The initial valuation date will occur in 2018 – approximately two years and 150 days from September
9, 2015, on which date Inland Residential Trust satisfied its minimum escrow requirement.
8
Important Information To Consider
The Inland Real Estate Group of Companies, Inc. is comprised of a group of independent legal entities some
of which may be affiliates, share some common ownership or have been sponsored and managed by Inland
Investments or its subsidiaries and are collectively referred to herein as “Inland.”
Past performance is not a guarantee of future results. When making an investment decision in Inland
Residential Properties Trust, Inc. (Inland Residential Trust), investors should not rely on past performance of the
Real Estate Investment Trusts (REIT) or real estate programs sponsored by Inland Investments to predict future
results. An investment in Inland Residential Trust will not entitle an investor to ownership in any other REIT or
investment program sponsored by Inland Investments.
The Inland name and logo are registered trademarks being used under license. This material has been
distributed by Inland Securities Corporation, member FINRA/SIPC, dealer manager for Inland Residential Trust.
2901 Butterfield Road
Oak Brook, IL 60523
800.826.8228
inland-investments.com
Date first published: 2/23/2015
Current publication date: 9/2/2016
Inventory number: IRESBRO-4
16