REFM 2011 Real Deals Annual Report Webinar Slides

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REFM 2011 Real Deals Annual Report Webinar Slides

  1. 1. Real Estate Financial Modeling’sAnnual Report On Real Estate Joint Venture Equity Partnerships Annual Report On Real Estate Joint Venture Equity Partnerships Formed And Proposed In 2011 Be in the know, gain insights and negotiate better JVs.   Presentation by Bruce Kirsch Founder, Real Estate Financial Modeling Copyright © 2012 Real Estate Financial Modeling, LLC.  All Rights Reserved.  www.GetREFM.com
  2. 2. About REFM • Founded in 2009 by Bruce KirschCLICK TO EDIT MASTER TITLE STYLE • Solutions provider for financial analysis,  financial modeling training and data for  commercial real estate transactions.www.GetREFM.com 2
  3. 3. About Bruce Kirsch Bruce Kirsch is the founder and principal of Real Estate Financial Modeling, LLC (REFM), a financial analysis and training solutions provider that specializes in the financial modeling of real estate joint venture partnership structures. REFM also consults to billion‐dollar real estateCLICK TO EDIT MASTER TITLE well as small‐ and medium‐size developers and organizations as STYLE investors. Mr. Kirsch is an Editor of the Third Edition of Wharton Professor Peter Linnemans Real Estate Finance and Investments: Risks and Opportunities, the leading real estate finance textbook. Mr. Kirsch instructs on real estate finance and financial modeling as Adjunct Faculty at Georgetown University. A highly‐acclaimed financial modeling trainer, Mr. Kirsch previously worked in commercial brokerage and real estate investment in New York and Washington, DC. Mr. Kirsch holds an MBA in Real Estate from The Wharton School and a BA in Communication from Stanford University.www.GetREFM.com 3
  4. 4. What REFM OffersCLICK TO EDIT MASTER TITLE STYLEwww.GetREFM.com 4
  5. 5. Our Clients • Small, Medium and Large Developers, Investors,  Lenders, Brokers and other stakeholders L d B k d h k h ldCLICK TO EDIT MASTER TITLE STYLE o Vornado o WRIT o Abu Dhabi Investment Authority o Alvarez & Marsal Al &M l o Clark Enterprises o Skanska USA Commercial Development Skanska USA Commercial Developmentwww.GetREFM.com 5
  6. 6. Our Newest OfferingCLICK TO EDIT MASTER TITLE STYLE My consulting clients wanted to know:  What is “market” for JV structures? What is “market” for JV structures?www.GetREFM.com 6
  7. 7. Our Newest OfferingCLICK TO EDIT MASTER TITLE STYLE First and only of its kind. Over $400MM in Equity Investment represented. Over $400MM in Equity Investment representedwww.GetREFM.com 7
  8. 8. Our Newest OfferingCLICK TO EDIT MASTER TITLE STYLE Be in the know, gain insights and negotiate better JVs.www.GetREFM.com 8
  9. 9. Today’s Agenda • Rationale For Partnering, Risks and Optimal  Structuring TheoryCLICK TO EDIT MASTER TITLE STYLE • Standardized Nomenclature • 2011 Actual Structures and Surprises • How Real Deals Can Benefit Youwww.GetREFM.com 9
  10. 10. Why One Seeks A Joint Venture Partner • As the Sponsor (Owner/Developer), you need: • Capital p • Better access to lendersCLICK TO EDIT MASTER TITLE STYLE • Sellers to believe that you will close • Better third party provider pricing • Strategic and technical expertise • As the Investor, you need an investment vehicle: • Developments • Existing income‐producing properties • Mortgage Noteswww.GetREFM.com 10
  11. 11. Risks: Financial And Other • Front‐end acquisition/development funds  (borne by Sponsor) (borne by Sponsor)CLICK TO EDIT MASTER TITLE STYLE • Construction budget shortfalls (shared pro‐ rata?) • O Operating deficits (shared pro‐rata?) ti d fi it ( h d t ?) • Loan Guaranties (shared pro‐rata?) Loan Guaranties (shared pro rata?) • Reputationalwww.GetREFM.com 11
  12. 12. Joint Venture Partnership Cash Flow Splitting The fundamental question:  Given how much and when cash investmentCLICK TO EDIT MASTER TITLE STYLE goes in to the transaction from each party, and the unique roles that the parties play, when should the original capital invested, and the returns on that capital, come out of the transaction, and how should it be partitioned to each party? 12
  13. 13. Nomenclature For 2 Equity Players OnlyCLICK TO EDIT MASTER TITLE STYLE Principal = Sponsor Pi i l S Third Party Investor Thi d P t I t Owner of the asset Invests in the transaction Developer of the asset kljklj 13
  14. 14. Is Proportional (Pro‐Rata) Financial Reward Desired? Financial Risk a ca s Financial Reward a ca e a d Sponsor Third Party Investor Sponsor Third Party InvestorCLICK TO EDIT MASTER TITLE STYLE 10% 10% 90% 90% 14
  15. 15. Disproportionate Reward To The Sponsor Is Market Financial Risk a ca s Financial Reward a ca e a d Sponsor Third Party Investor Sponsor Third Party InvestorCLICK TO EDIT MASTER TITLE STYLE 10% 30% 90% 70% Total Net Cash Flow is weighted  p p y p disproportionately in favor of the Sponsor… 15
  16. 16. Sponsor Pilots And Lands The Plane With Intense FocusCLICK TO EDIT MASTER TITLE STYLE www.GetREFM.com 16
  17. 17. What If There Are 3 Equity Players? Investment EntityCLICK TO EDIT MASTER TITLE STYLE Overall Sponsor Third Party Investor Minority Sponsor Investor 17
  18. 18. Teaming Up With Third Party CapitalPrincipal/ Principal/ Partner P t Investor/Third Party  I t /Thi d P tCLICK TO EDIT MASTER TITLE STYLE Sponsor Investor Sponsor’s  p Owner equity  Invests in the transaction/developer partner Invests in the fund “Overall Sponsor” JV  Entity E tit First JV Partnership  Formed 18
  19. 19. Teaming Up With Third Party Capital Overall Sponsor O ll S Investor/Third Party  In estor/Third PartCLICK TO EDIT MASTER TITLE STYLE Investor JV Entity Comprised of both Sponsor  Invests in the transaction and Partner Invests in the fund Second JV Partnership  Formed 19
  20. 20. How Equity Might Be Broken Out ‐ $20MM First JV  % Total Equity AmountPartnership  Formed:  Sponsor Equity 1.00% $200,000 “Top‐Level  90/10 Partner Equity 9.00% $1,800,000 Sponsor” S ” CLICK TO EDIT MASTER TITLE STYLE Second JV  Partnership  p Third Party Investor Equity 90.00% $18,000,000 Formed:  90/10 100.00% $20,000,000 20
  21. 21. Cash Flow Partitioning • How can cash flow splits be commensurate with  both risk taken and value added?CLICK TO EDIT MASTER TITLE STYLE • How is it typically structured?www.GetREFM.com 21
  22. 22. No “Formula” • Unfortunately, there is no typical structure  across property types, geographies, transaction CLICK TO EDIT MASTER TITLE STYLE types and the hundreds of thousands of  partnerships investing in real estate • N ti ti Negotiation‐specific ifi • All revolve around the end goal All revolve around the end goalwww.GetREFM.com 22
  23. 23. The Real Deals Database Gives Us InsightsCLICK TO EDIT MASTER TITLE STYLEwww.GetREFM.com 23
  24. 24. The Real Deals Database Gives Us Insights • The structuring details on a variety of actual  transactions that are being put together in the CLICK TO EDIT MASTER TITLE STYLE market today • Terminology is standardized • R Records are redacted to encourage submissions d d d b i i • The Database becomes more valuable with  every new record entered…www.GetREFM.com 24
  25. 25. 2011 Actual Transactions • 19 Records comprising over $150MM in Total 19 Records comprising over $150MM in Total  Invested EquityCLICK TO EDIT MASTER TITLE STYLEwww.GetREFM.com 25
  26. 26. 2011 Actual TransactionsCLICK TO EDIT MASTER TITLE STYLEwww.GetREFM.com 26
  27. 27. 2011 Actual TransactionsCLICK TO EDIT MASTER TITLE STYLEwww.GetREFM.com 27
  28. 28. 2011 Actual TransactionsCLICK TO EDIT MASTER TITLE STYLEwww.GetREFM.com 28
  29. 29. 2011 Actual TransactionsCLICK TO EDIT MASTER TITLE STYLEwww.GetREFM.com 29
  30. 30. 2011 Actual TransactionsCLICK TO EDIT MASTER TITLE STYLEwww.GetREFM.com 30
  31. 31. 2011 Actual TransactionsCLICK TO EDIT MASTER TITLE STYLEwww.GetREFM.com 31
  32. 32. 2011 Actual TransactionsCLICK TO EDIT MASTER TITLE STYLEwww.GetREFM.com 32
  33. 33. 2011 Actual TransactionsCLICK TO EDIT MASTER TITLE STYLEwww.GetREFM.com 33
  34. 34. 2011 Actual TransactionsCLICK TO EDIT MASTER TITLE STYLEwww.GetREFM.com 34
  35. 35. 2011 Actual Transactions – Surprise #1CLICK TO EDIT MASTER TITLE STYLEwww.GetREFM.com 35
  36. 36. 2011 Actual Transactions – Surprise #2CLICK TO EDIT MASTER TITLE STYLEwww.GetREFM.com 36
  37. 37. 2011 Actual Transactions – Surprise #3CLICK TO EDIT MASTER TITLE STYLE Development, Construction Management, Acquisition, Leasing, Property  Management, Asset Management and Disposition. Most prevalent were  Acquisition and Property and Asset Management.www.GetREFM.com 37
  38. 38. 2011 Actual TransactionsCLICK TO EDIT MASTER TITLE STYLEwww.GetREFM.com 38
  39. 39. 2011 Actual Transactions – Surprise #4CLICK TO EDIT MASTER TITLE STYLEwww.GetREFM.com 39
  40. 40. 2011 Actual Transactions – Surprise #5CLICK TO EDIT MASTER TITLE STYLEwww.GetREFM.com 40
  41. 41. 2011 Actual TransactionsCLICK TO EDIT MASTER TITLE STYLEwww.GetREFM.com 41
  42. 42. 2011 Actual TransactionsCLICK TO EDIT MASTER TITLE STYLEwww.GetREFM.com 42
  43. 43. 2011 Actual TransactionsCLICK TO EDIT MASTER TITLE STYLEwww.GetREFM.com 43
  44. 44. 2011 Actual TransactionsCLICK TO EDIT MASTER TITLE STYLEwww.GetREFM.com 44
  45. 45. 2011 Actual TransactionsCLICK TO EDIT MASTER TITLE STYLEwww.GetREFM.com 45
  46. 46. 10% Coupon Code – Good Through Next WednesdayCLICK TO EDIT MASTER TITLE STYLE REALDEALSWEBwww.GetREFM.com 46
  47. 47. Even Bigger Discount Available • Submit a valid JV structure and get 50% Off all Submit a valid JV structure and get 50% Off all  Real Deals productsCLICK TO EDIT MASTER TITLE STYLE • Go to www.GetREFM.com and click on: Real Deals Datawww.GetREFM.com 47
  48. 48. REFM’s Satisfaction Guarantee If you are not satisfied for any reason, simply  If you are not satisfied for any reason simply notify us in writing within 30 days of the date CLICK TO EDIT MASTER TITLE STYLE of your purchase and we ll give you a 100%  of your purchase and we’ll give you a 100% refund.www.GetREFM.com 48
  49. 49. Be in the know, gain insights and negotiate better JVs.   Go to:  www.GetREFM.com www GetREFM com

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