Marc goldstein, Building Capital Stacks in Today's Market

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Marc goldstein, Building Capital Stacks in Today's Market

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Marc goldstein, Building Capital Stacks in Today's Market

  1. 1. Capital StacksWhat Worked, What Didn’t Covington Realty Partners
  2. 2. The Good
  3. 3. The Bad
  4. 4. The Ugly
  5. 5. One That Didn t Work• Denver, CO high-rise apartment development• Large deal size - $80M• 65% construction loan• 35% equity• Option to add mezz financing up to 85% of the capital stack• Top of the market proforma rents
  6. 6. Apartment Development12010080 Equity60 Mezz Debt ‐ 14%40 Construction Loan ‐ Libor20 + 225 0 Capital Capital Stack ‐W/O Stack ‐W/ Mezz Mezz
  7. 7. Denver, CO High Rise Apartment Development• Total capitalization - $80M• 65% LTV construction loan due to size ($52M)• Equity amount – $28M• 3.25% debt interest rate w/o mezz (65% LTV)• 5.77% blended interest rate w/mezz (85% LTV)• Equity Multiple – 1.71 w/o mezz, 2.04 w/mezz• Levered IRR – 17% w/o mezz, 22% w/mezz• Yield on cost – 7.25% in either scenario• Investor required return – 2.0 equity multiple, 20% IRR
  8. 8. One That Worked• Single Tenant Triple Net Retail Portfolio• Acquired in a DST structure• 50% LTC CMBS permanent debt• 50% bridge equity• Approximately 2/3 investment grade, 1/3 sub- investment grade
  9. 9. Retail Portfolio Bridge Equity CMBS ‐ 5% FixedCapital Stack
  10. 10. Retail Portfolio ‒ DST Structure• Blended acquisition cap rate – 6.72%• Closing costs – 3%• Fees/syndication expenses – 10%• Bridge equity funded at closing – 2.5%• Interest rate on debt – 5%• Levered return to investors – 6%

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