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Rachel Stolrow: Hello, and good morning, or good afternoon, wherever you are tuning in from. Thank you so much for joining our webinar here today. It is titled, The Due Diligence Edge, How Pros Evaluate Multifamily Real Estate Deals.


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Rachel Stolrow: A quick disclaimer, as always, the InTrust group or InTrust does not provide any investment advice, nor do we promote any or endorse any products.


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Rachel Stolrow: All information provided and materials are for educational purposes only. All parties are always encouraged to consult with their attorney, accountants, financial advisor, before entering into any type of investment.


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Rachel Stolrow: On today's agenda, we have Shining Rock Equity. Thank you for joining us. We'll be going over market context, examining opportunity risk.


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Rachel Stolrow: the market selection and best practices, examining underwriting assumptions, and the closing framework and case study, along with our Q&A, so it seems like a very good, informational segment that we have here for you today.


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Rachel Stolrow: A little bit about me. Again, my name is Rachel Stolrow. I've been with the Intrust Group for actually over 10 years now, so quite some time, and I have a huge passion for helping companies and clients really get educated on IRA funds and putting those into alternative investments.


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Rachel Stolrow: about Entrust. So, we are self-directed IRA administrators.


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Rachel Stolrow: We host monthly educational webinars, very much like this one.


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Rachel Stolrow: And we have a very knowledgeable staff with CISP certification.


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Rachel Stolrow: We have over $6 billion in assets under administration.


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Rachel Stolrow: 24,000 active investors, 45 years in service, so honestly, we've been doing this for so long. We've been educating investors, as you can see, for a very long time, and we were the first


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Rachel Stolrow: to market, self-directed custodian, and you have a single point of contact when you work with us. And that's probably my favorite part, getting to know clients and companies, because it really just provides them with a good and seamless experience.


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Rachel Stolrow: All right, so without further ado, I will hand it over to Shining Rock Equity. Clay and Rob, thank you so much for being on here today.


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Rob Stanley: Thank you, Rachel. Good afternoon, everyone. I'm Rob Stanley, managing partner at Shining Rock Equity, based here in Chapel Hill, North Carolina.


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Rob Stanley: Joining me today is my son and business partner, Clay Stanley.


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Rob Stanley: I do want to thank Rachel and Andrew and the team at Entrust for inviting us to be here today. Our goal today is to give you a clear picture of how multifamily deals are being underwritten in today's market.


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Rob Stanley: So even if you never underwrite a deal yourself.


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Rob Stanley: Understanding a few of the key concepts can help you evaluate opportunities more confidently, and hopefully avoid costly mistakes.


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Rob Stanley: A lot has changed in the multifamily space over the past few years. Interest rates are higher. Rent growth has slowed, operating expenses have increased, and new supply has become a much bigger factor than it was just a few years ago.


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Rob Stanley: So we'll walk through what we're seeing in the market now, how we evaluate opportunities before we decide whether we are going to pursue them. Feel free to submit questions throughout the presentation, and we'll save time at the end for some Q. And a.


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Rob Stanley: With that I'll tell you a little bit about shining rock before I turn things over to to Clegg.


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Rob Stanley: I've been involved in real estate for 30 years, much of that time working with institutional investors in acquisitions and portfolio management. A few years ago, Clay and I formed Shining Rock Equity to facilitate making our own investments.


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Rob Stanley: Soon friends and colleagues were investing alongside of us, and that's really how we got our start.


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Rob Stanley: To date, we've invested in 7 multifamily communities representing more than 1,200 apartment units along with one private credit fund.


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Rob Stanley: Nearly 60 investors have invested alongside of us, and one of the things we're super proud of is that many of those have come back for second, third, and a few fourth-time investments. My role?


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Rob Stanley: includes overseeing day-to-day operations, compliance, building relationships with investors. Before I turn things over to Clay, I'll mention two other members on our team. My sister-in-law, Kim Solomon, top residential agent here in Chapel Hill.


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Rob Stanley: She's an incredible connector of people, and as such, she leads our investor relations. And then my wife, Sarah, Kim's twin sister, owns S-Squared Design and oversees our branding and marketing. So, as you can see, we really are a family business. And with that, I'll turn it over to Clay.


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Clay Stanley: Yes, thank you, Dad. I will, provide some brief background on myself. I've been a partner at Shining Rock Equity since inception 4 years ago, and, you know, at a high level, we're focused on


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Clay Stanley: Providing real estate opportunities to our network that meet our criteria from a risk and return perspective and cater to the various investor appetites among our investor network. So this varies from people focused on income and cash flow to people mainly focused on appreciation. We are not operators and we more so get involved in these deals as a capital partner.


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Clay Stanley: We receive… Consistent deal flow from current and prospective operating partners as they need their deals funded.


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Clay Stanley: We then go through our various and extensive due diligence process, not only on the deal, but also on the operating partner. And then if we get to a point where we're comfortable with the opportunity, we will go negotiate better terms for ourselves and our investors.


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Clay Stanley: When we, when we provide any given investment to our network. And so that's generally how we're getting involved in, in deals. And then, in addition to Shining Rock Equity, I handle land acquisition for a firm, where we do infill residential development in and around Charlotte.


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Clay Stanley: I've been doing that for 6 years as well.


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Clay Stanley: With that, we can get into the presentation today, and I think to start off here, it would be helpful to…


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Clay Stanley: before we look at the data, to just have a high-level narrative about what's taken place the last five or so years, and why that might lead us to an opportunity today. And to start off here, we'll go back even a little bit further.


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Clay Stanley: And we can sort of look at the 2015 to 2019 multifamily market as one that was relatively normal.


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Clay Stanley: Rent growth was, was increasing year over year, but not at record rates. It was generally pretty reasonable. Demand and supply were within reason of one another, and everything felt a little bit more normal than maybe it has for the last 5 years.


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Clay Stanley: And then we have COVID. So 2020 hits, we have COVID, and a very quick recession, and interest rates are dropped to zero.


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Clay Stanley: So this does a couple of things. Debt gets extremely cheap, so prices start to rise just based on that alone. And then you have, rent growth that is essentially off the charts for many markets, especially in the Sunbelt.


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Clay Stanley: So many multifamily investors saw this and were investing and piling in, so to speak, and so that was causing prices to continue to rise. But also multifamily developers saw this. They saw the same thing that everybody else saw, and they started to build a ton of new supply, especially throughout the Sun Belt.


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Clay Stanley: Now, these projects take a couple of years to, you know, go through.


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Clay Stanley: Put shovels in the ground and then and then actually build and so all of those projects that got that got started in 21, 22, 23.


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Clay Stanley: were delivered in '24, '25, and leading into '26. And it was really the most supply that the nation has seen since the 1970s. So a huge amount of supply coming online in that '23 to today.


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Clay Stanley: That, that period there,


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Clay Stanley: In addition to that, there was something else happening. So, interest rates increased in late 22 and continue to increase into 23. We're still feeling those effects today. They have not come down.


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Clay Stanley: That caused pricing to largely reset in the multifamily market. In addition to that, you had construction costs that had been increasing, and so developers not able to get projects off the ground


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Clay Stanley: sort of stopped putting new shovels in the ground, stopped starting new apartments. In the late 23, 24, 25,


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Clay Stanley: Period. And that continues into today as well. So we are still feeling the supply overhang of all the new apartments that came online. But looking into the future and the setup for today's conversation is we're potentially going to be able to benefit as apartment investors. We might be able to benefit from


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Clay Stanley: an environment of lower supply. If demand can hold steady, we might see net operating incomes, we might see rental rates start to increase again here in the near future.


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Clay Stanley: Next slide, please.


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Clay Stanley: So, at this point, we can get into some data, and visually look at what has happened over the last few years, and why we think that the next couple of years could be the starting point of another growth cycle for net operating incomes in


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Clay Stanley: multifamily and specifically the Sunbelt.


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Clay Stanley: And then…


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Clay Stanley: And so looking here, you can see that that 2015 to 2019 period, relatively normal supply and demand, the green lines there.


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Clay Stanley: are… are, are starts. And so you can see, as 22 comes along, 23 comes along, huge amount of starts coming online, and those were all delivered a couple years later.


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Clay Stanley: Demand faltered in 23, but as you can see in 24 and 25 with the black lines there, demand has been really strong throughout 2025. Obviously, this chart is just slightly outdated, but demand has remained strong. We'll look at another chart later in the presentation.


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Clay Stanley: Where we see through the first half of 2026, demand is still cranking right along. And, some of this could be considered incentivized demand, because there's so much new supply, and there's so many concessions being offered, that there's lots of


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Clay Stanley: New households being formed, but still, by all measures, strong demand numbers, here.


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Clay Stanley: We can move along to the next slide. This is just a graph that sort of shows, again, that incredible rent growth that we saw in 21 and 22.


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Clay Stanley: and that caused some of these new deliveries to start being built has now faltered and even declined nationally. And we'll see the difference between various markets and where it's declined, where it's continued to rise.


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Clay Stanley: And we can, we can really see that here and see the dichotomy between.


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Clay Stanley: Low supply markets and high supply markets. There's a common theme on between all of these markets that are the rent growth leaders through second quarter of 2026. And the common theme is these are all cities or cities and states that are hard to build in.


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Clay Stanley: It's really hard for apartment developers to build in these cities. You can see that the annual inventory growth as a percentage


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Clay Stanley: of existing stock is all 1% or less. These markets are still chugging right along from a rent growth perspective, and you even have San Francisco coming back with a vengeance after it's all really tough COVID period, and even a few years thereafter.


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Clay Stanley: The common theme is that these are all very low supply markets.


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Clay Stanley: And then we get into the concession environment, and this plays right into where we think there might be an opportunity today. So concessions, just for those of you who might not know, are when an apartment owner says, hey, the rental amount is $1,500 for this unit.


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Clay Stanley: But listen, we understand the market will give you one month free, or two months free, or something of that nature to incentivize people to move in to their apartment complex. As you can see.


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Clay Stanley: From 23 on, concessions have been steadily increasing and seem to have crested just recently.


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Clay Stanley: But, a huge amount of concessions going on, and the average concession amount has been increasing.


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Clay Stanley: But what that potentially provides is an opportunity for us to purchase today and burn off those concessions. And we'll get into more detail there later in the presentation.


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Clay Stanley: Or we'll get into it now. So, the concessions here…


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Clay Stanley: Are are affecting the rental amounts by let's say 10 to 20%.


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Clay Stanley: And so because pricing has reset in multifamily, you can buy at a higher cap rate than you could certainly a few years ago and potentially buy a compressed net operating income stream.


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Clay Stanley: So if you can buy today, and your plan is to burn off those concessions as the market recovers over the next couple of years, then you could see 10-20% rental growth or revenue growth


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Clay Stanley: within your property by just burning off those concessions. It doesn't necessarily take the market rent growth increasing 2, 3, 4, 5%. Market rent growth can stay flat.


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Clay Stanley: But if you can go in and burn off those concessions, you can see the revenue rates increase and hopefully increase your net operating income, therefore increasing the value of the property.


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Clay Stanley: Of course, the risk with all of this is that you buy a property planning to do that, and concessions don't burn off, or…


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Clay Stanley: rent declines continue. And so, as my dad will discuss later in the presentation.


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Clay Stanley: location becomes extremely important. Location and product


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Clay Stanley: All become extremely important. This is not 10 years ago when you could buy a complex, run it for a couple of years, and sell it for a, a nice profit. The operations here need to be extremely tight. You have to understand the supply not only within a given city.


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Clay Stanley: But you have to understand the supply within the given sub markets of that city.


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Clay Stanley: To really take advantage of this opportunity and, and see that revenue increase.


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Clay Stanley: This is just an indicator, there's an order of operations that happen with


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Clay Stanley: apartment buildings when you're… when you're trying to determine if you're going to see market rent growth over any given hold period. And the first thing that needs to happen before you see market rent growth is you need vacancy to start declining.


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Clay Stanley: ever since, really, 22, we've seen vacancy rates continue to rise year over year in the multifamily space. Now, just recently, you can see that the last 4 months have posted vacancy declines.


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Clay Stanley: Now, this could be the impetus for, you know, say an apartment owner gets to 95%.


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Clay Stanley: vacancy. They start to feel like they have a little bit more pricing power in the market. They might not want to raise rents, but maybe they can start burning off those concessions. And after they burn off those concessions, and they're still at 95% vacancy, they say, okay.


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Clay Stanley: Now we can raise rents by 1% or 2%.


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Clay Stanley: And so on and so forth. But the first thing that needs to happen is vacancy to decrease. And that's what we've been seeing over the last four months. Four months starts to be a trend. We'll see if that continues throughout the year. And this is just a graph sort of displaying the supply picture.


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Clay Stanley: National… excuse me. Nationally, the… you can see that the supply spiked in 24, was extremely high in 25, and finally in 26, it gets back to a more reasonable level.


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Clay Stanley: But there's still a ton of new supply that's yet to be absorbed from 24 and 25, and so you're still seeing a soft rental market.


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Clay Stanley: But as the supply continues to drop off, that's when you could potentially see vacancy continue to decline, and then eventually concessions burn off, and then hopefully some market rent growth.


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Clay Stanley: Again, just another clean example of seeing that Q1 2026 supply continue to drop off pretty massively from the peak and to be more in line with what you might consider normal.


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Clay Stanley: And then supply is one piece of the equation, but demand is a separate piece and demand is unfortunately much harder to predict. You can look at supply by looking at new construction starts and permits pulled.


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Clay Stanley: And come up with a reasonable expectation of where that supply might end up in a few years. What is.


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Clay Stanley: more difficult is the demand picture. Fortunately, we have seen demand be pretty incredible in 2025. Again, some of that could be incentivized demand by all the concessions being offered, but by all accounts, still very strong


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Clay Stanley: Demand that's continued through the first half of 2026 and has actually surpassed many people's expectations for, year to date.


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Clay Stanley: So, that's pleasing to see. Obviously, if a recession hits, then we could see these numbers dwindle, and again, it's a little bit harder to predict, but as of right now, the demand picture is still holding strong.


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Rob Stanley: All right. Thank you, Clay.


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Rob Stanley: So, as Clay mentioned, how important market selection is, that process has really changed quite a bit over the last few years. That's especially true in the Sunbelt. Some areas are still working through a significant amount of new supply.


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Rob Stanley: So one of the metrics we will watch closely when we're evaluating the market is new supply as a percentage of the existing inventory. Generally, we like to see that around 2 to 3% or less. When we look at a particular property, we look at the one mile radius which tells us who that property competes with directly.


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Rob Stanley: And then we look at the 3-mile radius, and that gives us a broader picture of market and absorption. So if you're considering investing in a multifamily deal, be sure to ask that operator what the new supply pipeline looks like within those 1- and 3-mile radiuses.


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Rob Stanley: Because the answer to that question can tell you a lot about the risk and the opportunities of that deal.


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Rob Stanley: So once we're comfortable with a submarket, the next step is making sure the underwriting assumptions are realistic.


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Rob Stanley: And this is where Clay spends a lot of his time looking at the operator's underwriting model for deals that we're considering. There are a few things that we focus on. First, st we're really cautious when we see aggressive market rent growth assumptions layered on top of renovation premiums.


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Rob Stanley: In today's environment, that's asking a lot.


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Rob Stanley: Second, we take a hard look at the rent growth assumptions themselves. If a market has flattened or slowed.


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Rob Stanley: We don't want to see projections that assume suddenly it's going to take off again.


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Rob Stanley: We're also paying close attention to those concessions that Clay mentioned. Some underwriting assumes that they burn off pretty quickly, but that's not always how it ends up playing out.


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Rob Stanley: Then there's renewal risk. If new tenants are getting attractive concessions, some existing tenants may decide to move instead of renew their lease. That creates extra turnover costs that needs to be accounted for in the underwriting.


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Rob Stanley: So, at the end of the day, the question is pretty simple. Is the underwritten rent growth coming from the market, or are we counting on management to create it?


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Rob Stanley: And that leads us to one of the biggest concepts we evaluate, and that's lost to lease versus gain to lease.


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Rob Stanley: Lost to release represents real upside.


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Rob Stanley: is the difference between what residents are currently paying and what comparable units are renting for today. Gain to lease is the opposite.


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Rob Stanley: It means residents are already paying above today's market rents. The important question isn't how much loss to lease exists, it's whether it's actually there or not. If you can clearly see the upside exists by examining a property's rent roll, it's much more predictable.


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Rob Stanley: If it's only based on projections or assumptions, there's considerably more execution risk associated with that.


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Rob Stanley: Again, the question we ask, how much rent growth potential already exists, and how much has to be created? And once we've worked through those items, we ask ourselves a few key questions.


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Rob Stanley: You know.


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Rob Stanley: Have we selected the right sub-market?


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Rob Stanley: Are rent growth assumptions realistic? Are concessions being modeled correctly?


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Rob Stanley: Are expense assumptions conservative?


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Rob Stanley: And then one final question, you know what has to go right for this investment to work.


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Rob Stanley: If the answer is quite a bit, we usually move on from that deal.


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Rob Stanley: There's still a lot of excellent investment opportunities in the market today, but discipline really matters, and we're being extremely selective as we evaluate deals today. When we can put that into context with a real example.


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Rob Stanley: This is preserved at Copperleaf in Houston. We closed on this investment in 2024, and since then we've already completed a cash out refi that returned about 40% of investor capital.


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Rob Stanley: original capital while maintaining the same ownership percentage.


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Rob Stanley: I don't know.


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Rob Stanley: We've also increased distributions to well over what the underwriting projections were at the time of the purchase. So it's a good example of what disciplined underwriting can produce when the business plan is realistic.


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Rob Stanley: So what exactly attracted us to this deal?


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Rob Stanley: First, we love the location. After analyzing the sub-market. We saw limited new supply coming online. Second, the execution risk was relatively low. We weren't relying on heavy renovations or hoping to push rents by several hundred dollars per unit.


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Rob Stanley: We also had an operating partner that we knew well and trusted. We had confidence in both their experience and their conservative approach.


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Rob Stanley: The projected returns made sense without stretching the assumptions, and also the anticipated hold time was pretty reasonable.


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Rob Stanley: Another attractive feature of their plan was for… was enrolling the property in Houston's tax abatement, program. And back in 24, the strategy was considered very achievable.


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Rob Stanley: I want to point out that the tax abatement environment has changed quite a bit in many markets. So, if you see a business plan that relies heavily on receiving a tax abatement, I'd encourage you to make sure there's a solid Plan B, in case that property is not approved for tax abatement.


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Rob Stanley: Ultimately, we're looking for investments where the path to success is clear, and doesn't require everything to go exactly as planned. Fortunately, Copperleaf has exceeded projections, and we feel really good about the likelihood of a very profitable exit here in a few years.


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Rob Stanley: With that, I'll wrap up with a final thought.


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Rob Stanley: Again, as I said, there's still excellent opportunities in today's market, but that discipline, that underwriting discipline, really matters more than anything else. At ShinyRock, we're focused on downside protection.


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Rob Stanley: partnering with experienced operators and investing in opportunities where the assumptions are realistic. Again, thank you for joining us today. If you'd like to sign up for our deal announcements and twice monthly newsletter, you can do so by going to our website at shiningrockequity.com.


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Rob Stanley: Where you'll see a sign-up button. We also have a due diligence checklist, which you can, download, by scanning the QR code here.


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Rob Stanley: And with that I'll turn it back over to Rachel.


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Andrew Crawford: Also, real quick, we've launched a poll. If you would additionally or alternatively like to let us know if you want more information from Rob and Clay, just please let us know in the poll here. We'll leave it up while Rachel pushes on for the outro. Thank you, everyone.


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Rachel Stolrow: Awesome, thank you so much, Rob, Clay, and Andrew. Alrighty, so wrapping up here.


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Rachel Stolrow: It's a very quick and easy… if some of you all aren't familiar with investing with an IRA, it's an easy 3 steps. I may be biased because I help people do this every single day, but it's really as easy as establishing an IRA.


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Rachel Stolrow: funding your account, and then directing us on where to put those funds. So again, it's a 3-step process, and we're really here to help you along the way.


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Rachel Stolrow: What's next? As I mentioned in the beginning, we are huge on education. We love educating clients. One way that you can be in on our next webinar is,


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Rachel Stolrow: number one, look at the video replay, and then also, I think you will be sent a link, Andrew, correct me if I'm wrong, so that you can register for August webinar. And that will be how to build an investing strategy that fits your priorities.


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Rachel Stolrow: If you want any more information on self-directed retirement plans, our website, has an amazing learning center, thanks to our marketing team that has webinars, free documents.


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Rachel Stolrow: Pdfs that you may want to download to really help educate yourself, and then you can always set an appointment with our sales team as well, so we can get to know you a little bit more, answer any questions that you may have in particular.


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Rachel Stolrow: Alrighty, so moving on to our Q&A, please drop your questions in the chat. We can answer any and any and every question that you have for Shining Rock or the interest group.


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Rachel Stolrow: And the first one, Rob, Clay, it looks like this is for you. Are you seeing apartment complexes or multifamily facilities going into default or bankruptcy?


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Clay Stanley: Yes, the answer to that is yes. There have been some high profile defaults even just in the last couple of weeks. We're starting to see more true distress situations. Now, I would say it's limited. There's still a fair amount of


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Clay Stanley: what's called Extend and Pretend going on, where lenders are continuing to extend loans out, but


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Clay Stanley: slowly but surely that water is starting to break through the dam, and we hope to be able to take advantage of some of those distressed situations. Of course, you know, hate that people are losing money, but now that we're here, we hope to be able to take advantage of that.


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Rachel Stolrow: Awesome. Thank you. Next question. What are your fees, et cetera, on this project? And if it needs to go in depth, please know again, we did have Rob and Clay's contact information. We can throw that up again if you'd like, so that you can reach out a little bit and to get a little bit more.


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Clay Stanley: Sure.


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Rachel Stolrow: Oh, no.


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Clay Stanley: So, I'll keep it… I don't remember the exact structure we had on that deal, so I'll just say what we… a general structure of, what we usually…


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Clay Stanley: Use and to start off with fees, we have a 1 to 2% acquisition fee.


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Clay Stanley: And depending on, sort of, the deal profile and what we think is reasonable. And then from there, generally speaking, we have a 7% to 8% preferred return.


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Clay Stanley: This preferred return is upon sale is paid. Any shortfall is paid first, and then a full return of capital is due to the limited partner investors before we engage in a profit split of 80/20, 70/30, something of that nature.


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Rachel Stolrow: Awesome. Thank you so much for that. Thank you.


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Rachel Stolrow: Alrighty, any other questions from people in the chat? I did see that somebody was having a hard time with the QR code, so I would just make sure… I don't know if that's working, or if maybe we can provide that to them, you know, along with the replay, either way.


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Rob Stanley: Yes, I did test it out before the presentation, so hopefully it will work. But if you'll let me know who that individual is, I'll be glad to send a copy of it or send it to you and you can send it to them.


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Andrew Crawford: So, Rob.


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Rachel Stolrow: Absolutely.


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Andrew Crawford: Can we flip back to that slide real quick? I think they just said it, we flipped a…


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Andrew Crawford: Right as they were trying to scan it.


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Rob Stanley: Okay, gotcha. Oh, perfect.


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Andrew Crawford: We'll just leave it up as you guys wrap up.


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Rachel Stolrow: Alright, that's awesome. Thanks, Andrew, for that suggestion.


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Clay Stanley: But yeah, if anyone has any more questions, happy to chat here on the call. If you'd like to set up a call and speak individually with us, then we'd of course be happy to do that as well.


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Rob Stanley: Absolutely.


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Rachel Stolrow: Awesome. Thank


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Rachel Stolrow: Alrighty. Well, I don't see any more questions here, in the chat. Thank you for putting up the QR code again. And, again, there is Robert and Clay's contact information. So any of those in-depth questions that you want answered, you're welcome to reach out to them. Thank you, Rob, Clay, for an amazing webinar and joining us here today. And thank you all for joining.


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Rob Stanley: Thank you.


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Clay Stanley: Thank you all. Alright.


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Rachel Stolrow: All right, of course. Take care. By.


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Clay Stanley: Have a good.


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Rachel Stolrow: I agree.