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Green Pearl Events Multifamily Investment Summit Mike Kelly Presentation

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Green Pearl Events Multifamily Investment Summit Mike Kelly Presentation

Green Pearl Events Multifamily Investment Summit Mike Kelly Presentation


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  • 1. Green Pearl Real Estate Conference December 3, 2009 December 3, 2009 Confidential & Proprietary
  • 2. Questions - 1. Identifying the bottom? • Are we there yet? • What are rent roll trends in different markets, quality of product 2. What kind of deals are getting done these days? • Core – Who is selling, where, urban/suburban • Development deals- Have we seen developers sell their projects or are deals just being extended • REO- How much is hitting the market and clearing? • Do you see a Bar bell type of market in 2010/2011 3. Cap rate compression? • Is this a trend or simply a lack of supply? • Funds needing to deploy capital (commitment period), cheap debt, what else is driving this compression? • When & what drives cap rates to normalize? 4. Debt – What kind of deals are getting done? Confidential & Proprietary Page 2
  • 3. Detailed Multifamily Maturities On average, $41 billion multifamily loans mature annually over the next nine years. Multifamily Loan Maturities $ billions By Investor Type (2009 to 2017) $60 $53 $56 $5.4 $50 $47 $46 $7.7 $2.8 Average $41 Billion $40 $2.4 $8.1 $6.6 $40 $35 $34 $1.6 $4.5 $7.1 $30 $16.7 $24.5 $30 $26 $7.0 $2.1 $4.8 $4.5 $1.4 $22.0 $4.5 $0.6 $5.6 $20.2 $8.5 $1.5 $20 $22.6 $5.5 $11.1 $19.0 $0.4 $6.4 $5.3 $0.8 $25.5 $2.2 $21.6 $10 $4.4 $2.8 $0.6 $0.5 $15.8 $10.5 $13.3 $6.3 $7.1 $7.1 $8.1 $0 2009 2010 2011 2012 2013 2014 2015 2016 2017 CMBS, CDO or other ABS Commercial Banks/Thrifts Fannie, Freddie, FHA and Ginnie Mae Credit Companies, Warehouse, and Other Life Insurance Companies Source: Mortgage Bankers Association (“MBA”) The MBA Survey covered most multifamily loans outstanding from the investor pool except for Commercial Banks/Thrifts. Per the MBA , bank/thrifts participation was approximately 25% of the total multifamily exposure. Confidential & Proprietary Page 3
  • 4. FDIC –Construction & Development Loans Non-Current Construction PER FDIC: Non-Current Construction and Development Loans *NON CURRENT LOAN RATES represent the and Development Loans (% of Total) percentage of loans in each category that are past (Billions $) due 90 days or more or that are in nonaccrual status. 14.99% 73.78 Non- Total C&D Non-Current $72.06 14.00% Current 70.00 13.45% Report Loans C&D Billions C&D Date $Billions $ % 61.83 12.00% 60.00 1997 88.2 1.02% 0.90 10.91% 1998 106.7 0.85% 0.90 51.38 10.00% 1999 135.6 0.67% 0.90 50.00 2000 162.1 0.82% 1.32 45.17 8.71% 8.00% 2001 193.2 1.12% 2.16 40.00 7.32% 2002 244.9 1.07% 2.61 38.21 2003 272.2 0.73% 2.00 6.00% 6.09% 29.96 2004 336.8 0.48% 1.61 30.00 4.74% 2005 448.7 0.38% 1.72 20.72 4.00% 2006 564.9 0.79% 4.46 20.00 3.29% 3/31/2007 582.1 1.00% 5.82 6/30/2007 600.1 1.34% 8.02 11.48 2.00% 10.00 1.02% 1.12% 1.86% 9/30/2007 616.4 1.86% 11.48 4.46 8.02 12/31/2007 628.9 3.29% 20.72 2.61 5.82 0.90 1.32 0.00% 0.67% 0.38% 3/31/2008 631.8 4.74% 29.96 0.00 1.61 6/30/2008 627.2 6.09% 38.21 9/30/2008 617.1 7.32% 45.17 12/31/2008 590.2 8.71% 51.38 3/31/2009 566.9 10.91% 61.83 Non-Current C&D % 6/30/2009 535.8 13.45% 72.06 Non-Current C&D Billions $ 9/30/2009 492.22 14.99% 73.78 Source: FDIC Quarterly Banking Profile (Sept 30, 2009) Confidential & Proprietary Page 4
  • 5. Construction Debt: Where do we go now? There is currently $500 billion construction debt on bank books, of which $125 is for multifamily constructions. Deleveraging these will require an additional equity of: $36 billion for multifamily $145 billion for other asset types. Confidential & Proprietary Page 5
  • 6. Seriously delinquent loans - Greater than 90 days + foreclosure/reo 5.00% 4.85% Trepp-multi FYI : Trepp % 4.50% 4.45% Sept 09 – 5.08% 4.37% Fannie- single family Oct 09 - 5.66% 4.17% Fannie single 4.00% 4.04% Freddie single family Nov 09 - 6.14% 3.94% 3.68% 3.50% Trepp CMBS -multifamily 3.42% 3.37% 3.33% Fannie- multifamily 3.15% 3.13% 3.00% 2.96% 2.95% Freddie -multifamily 2.90% 2.77% 2.78% 2.65% Freddie-Single 2.62% 2.50% 2.42% 2.44% 2.29% 2.20% 2.13% 2.13% 2.00% 1.98% 1.89% 1.88% 1.72% 1.72% 1.57% 1.52% 1.50% 1.43% 1.34% 1.32% 1.27% 1.22% 1.15% 1.10% 1.00% 0.50% 0.51% 0.56% 0.56% 0.50% 0.30% 0.32% 0.34% 0.36% 0.21% 0.25% 0.27% 0.16% 0.16% 0.08% 0.09% 0.10% 0.12% 0.11% 0.11% 0.10% 0.00%0.02% 0.01% 0.01% 0.01% 0.01% 0.03% Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Source: Trepp Confidential & Proprietary Page 6
  • 7. Trepp multifamily monthly trends Loan Balances Number of loans Delinquent 90 days, Month Forclose/ non-perf end Original Current Orig Current 30 days 60 days 90 days Non perf REO Total & REO Aug-08 164,078,841,777 120,188,598,717 22,919 14,943 0.27 0.16 0.42 0.06 0.67 1.61 1.15 Sep-08 164,226,728,256 119,393,307,021 22,935 14,756 0.37 0.08 0.48 0.04 0.75 1.74 1.27 Oct-08 164,226,728,256 118,333,726,435 22,935 14,538 0.5 0.08 0.46 0.05 0.81 1.93 1.32 Nov-08 163,636,161,343 117,118,369,431 22,700 14,150 0.81 0.31 0.48 0.08 0.87 2.58 1.43 Dec-08 163,636,161,343 116,551,297,624 22,700 14,034 0.58 0.33 0.73 0.08 1.07 2.82 1.88 Jan-09 163,636,161,343 115,760,089,050 22,700 13,865 0.64 0.57 0.98 0.06 1.16 3.44 2.20 Feb-09 163,517,225,730 115,031,547,811 22,695 13,757 0.57 0.5 1.08 0.05 1.52 3.74 2.65 Mar-09 162,737,408,442 114,481,626,205 22,579 13,666 0.62 0.31 1.39 0.12 1.39 3.86 2.90 Apr-09 162,741,997,265 113,670,444,797 22,518 13,558 1.58 0.29 1.58 0.14 1.61 5.23 3.33 May-09 162,741,997,265 113,069,919,254 22,518 13,421 0.71 1.06 1.55 0.21 1.61 5.16 3.37 Jun-09 164,835,629,093 114,293,127,465 22,638 13,379 0.87 0.46 2 0.19 1.85 5.39 4.04 Jul-09 164,811,059,210 113,443,679,056 22,631 13,271 0.79 0.42 2.07 0.28 2.02 5.61 4.37 Aug-09 164,735,059,210 112,723,433,180 22,629 13,152 1.33 0.47 2.1 0.35 2.4 6.67 4.85 Sep-09 164,606,059,210 112,011,789,657 22,627 13,021 1.26 0.69 2.25 0.29 2.54 7.06 5.08 Oct-09 166,786,650,737 113,472,522,324 22,720 13,007 1.47 0.5 2.48 0.33 2.85 7.66 5.66 Nov-09 166,986,220,620 112,686,242,136 22,730 12,903 1.58 1.02 2.33 0.59 3.22 8.74 6.14 Source: Trepp Confidential & Proprietary Page 7
  • 8. Current Mortgage Holders – per Fed Reserve Mortgage Amount as of Q2 2009 (in Holders billions) Percentage Share Fannie Mae $223 24.5% Freddie Mac $89 9.8% Comm. Banks $212 23.4% Conduits $112 12.3% Savings Instit. $66 7.3% Life Co $51 5.6% Ginnie Mae $38 4.2% Others $117 12.9% Total $907 100.0% Comments 1. Fannie, Freddie & FHA are virtually the only lender in the market in 2009. Thus, their share of the overall market will increase significantly going forward. 2. Can the agencies continue to deploy dollars to make up for the lack of CMBS and Life Insurance originations/ Confidential & Proprietary Page 8
  • 9. Apartment Development Pipeline- Nov 2009 City Period 1 Period 2 Stub/overlap Period 3 Period 4 Last four years Period 5 Total Tim e fram e reported Oct 06-sept 07 Oct 07-sept 08 Oct 08-sept 09 Oct 09-sept 10 Oct 10 -later 1 Atlanta X 8,426 4,878 0 7,846 6,389 27,539 0 27,539 Oct 06-sept 07 Oct 07-sept 08 Oct 08-sept 09 Oct 09-sept 10 Oct 10 -later 2 Dallas / Ft Worth X 7,231 10,439 14,515 16,557 48,742 1,019 49,761 Oct 06-sept 07 Oct 07-sept 08 Oct 08-sept 09 Oct 09-sept 10 Oct 10 -later 3 Houston X 7,339 11,158 0 17,132 9,407 45,036 0 45,036 Oct 06-sept 07 Oct 07-sept 08 July 2008-june 2009 July 2009-june 2010 T otal July 2010 - later 4 San Antonio X 4,907 5,670 (1,538) 4,479 5,028 18,546 376 18,922 Oct 06-sept 07 Oct 07-sept 08 July 2008-june 2009 July 2009-june 2010 July 2010 - later 5 South Florida X 1,596 1,710 (200) 2,334 3,810 9,250 0 9,250 Oct 06-sept 07 Oct 07-sept 08 July 2008-june 2009 July 2009-june 2010 T otal July 2010 - later 6 Charlotte X 2,017 3,502 (1,843) 3,491 4,460 11,627 276 11,903 Oct 06-sept 07 Oct 07-sept 08 July 2008-june 2009 July 2009-june 2010 T otal July 2010 - later 7 Raleigh X 2,012 3,468 (338) 3,055 3,079 11,276 0 11,276 Oct 06-sept 07 Oct 07-sept 08 July 2008-june 2009 July 2009-june 2010 T otal 8 Wash DC 4,819 6,334 (1,420) 7,308 7,802 24,843 1,371 26,214 Oct 06-sept 07 Oct 07-sept 08 July 2008-june 2009 July 2009-june 2010 T otal July 2010 - later 9 Tampa X 1,874 991 (84) 2,067 3,718 8,566 0 8,566 Oct 06-sept 07 Oct 07-sept 08 July 2008-june 2009 July 2009-june 2010 July 2010 - later 10 Denver X 859 2,537 (982) 4,372 3,950 10,736 1,572 12,308 Oct 06-sept 07 Oct 07-sept 08 July 2008-june 2009 July 2009-june 2010 July 2010 - later 11 Orlando X 2,407 1,623 (224) 5,217 1,742 10,765 0 10,765 Oct 06-sept 07 Oct 07-sept 08 Oct 08-sept 09 Oct 09-sept 10 Oct 10 -later 12 Austin X 4,672 3,441 11,209 4,532 23,854 0 23,854 Total 48,159 55,751 (6,629) 83,025 70,474 250,780 4,614 255,394 Source: MFP Confidential & Proprietary Page 9
  • 10. Multifamily Revenue and Growth Projections Projected Rent and NOI Growth 10.0% 7.30% 7.50% 8.0% 6.0% 5.20% 2.70% 4.70% 4.0% 2.40% 3.20% 2.0% 0.60% 1.70% 1.80% -0.50% 0.0% -1.10% -0.50% -3.30% 0.60% -2.0% -0.90% -3.90% -4.0% -3.60% -2.30% -2.80% -6.0% -7.80% -3.70% -5.90% -8.0% -8.20% -10.0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Rent Growth NOI Growth (The current decline in Rent and NOI is expected to continue until 2012) Source: PPR Confidential & Proprietary Page 10
  • 11. Multifamily Current Information Items that drive value Data Source of data Bullish Case Bearish Case Third quarter is typically the best Increase in vacancy is National rate up to 7.7% (5.9% leasing quarter of the year. PPR Vacancy rates in 3q 2008) Reis slowing. Only .2% from 2q estimates 4q 2009 vacancy to be 9.0% 2009. and 9.6% for 2010 Third quarter is typically the best leasing quarter of the year. Rent rolls continue to decline. Quarterly sequential decrease Concessions are growing in most Rental Rates 3q 2009 rental rates (-3.3%) vs. Reis is slowing. Only -.5% from markets. Once the floor has been 3q 2008 2q 2009 reached its much more difficult to raise rents than drop them. The slowdown in new Less new construction means less Development Starts have fallen dramatically DB, MPF product will help the market construction jobs which typically are pipeline in 2009 recover faster more transient an generally renters. The recovery will be slow and a very Recorded unemployment is The stimulus will create jobs small amount of new jobs will be Jobs 10.2%. Under employed is Fed, Bloomberg which will in turn create created. People will continue to live approximately 16% renters. at home Solid positive arbitrage for Rent rolls need to flatten and start Agency rates are 210 bps +/- the first two years. rising quickly to offset the Dus & Freddie Interest rates over 10 year paper. 1-2 years Mac lenders Hopefully the recovery will amortization impact in year 3. Or i/o take hold by the time the deals at current cap rates will have interest only period ends effective negative amortization Other risk Confidential & Proprietary Page 11
  • 12. Transaction Volume (2001- Q3 2009) The number of transactions increased 230% from 2001-2007, but then dropped over 40% from 2007-2008. During the same period, the dollar value of transactions dropped over 60%. October YTD 2009 vs. 2008 is down 64% in number of transactions while the dollar value of transactions has dropped to 70%. Apartment Transaction Volume through October 2009 Last 6 months of transactions- 2009 $120 B 5,000 2007 total - 3,795 3,814 3,871 Garden Mid rise Total ref Number of Transactions $100 B $99.6 4,000 Total $ Amount $88.8 $91.7 May 31 37 68 298 $80 B 2,462 3,000 June 80 21 101 379 $60 B $51.0 2,055 July 54 15 69 319 1,649 2,000 $40 B 1,251 $37.3 Aug 46 12 58 304 1,169 $30.3 $22.7 798 $20.4 1,000 Sept 61 17 78 412 $20 B $12.4 Oct 62 15 77 562 $0 B 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 Total 334 117 451 2274 (Annualized) Avg 56 20 75 379 Garden Mid/highrise Total Price Transactions Source: Real Capital Analytics November 2009 Confidential & Proprietary Page 12
  • 13. Caldera Asset Management Caldera Asset Management is a turnaround and restructuring consulting working exclusively with multifamily assets. We offer lenders, equity investors, developers and lawyers the convenience and efficiency of one-stop shopping. We provide solutions that fit their individual needs. Caldera brings a wealth of experience that covers virtually all aspects of apartments: – Asset management – Restructuring and recapitalization of portfolios as well as one-off assets – Executive experience • Public REITS • Private REITS • Pension fund advisors • Entrepreneurial firms – Experience in direct ownership of all classes of apartment assets (A,B and C) – Financing – Accounting – Brokerage – Portfolio acquisition / disposition www.CalderaAssetManagement.com Confidential & Proprietary Page 13