New Opportunities In Public Housing 3 Amoroso

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New Opportunities In Public Housing 3 Amoroso

  1. 1. Acquisition Rehab – Bonita Fountains aka Eaglewood Apartments, Orlando Florida
  2. 2. Bonita Fountains Finance Strategy <ul><li>Property initially listed for $67,000,000 or $119,642 unit </li></ul><ul><li>Spent $ 27,500,000 acquisition $49,107 unit </li></ul><ul><li>Construction/Permanent Loan $22,500,000 </li></ul><ul><li>Equity $10,316,595 </li></ul><ul><li>Brownsfield VCTC -$500,000 </li></ul><ul><li>Brownsfield VCTC - $500,000 </li></ul><ul><li>Future bldg materials sales tax -$400-500,000 </li></ul><ul><li>Acquired @ $27,500,000 and developed @ $58,601 unit all including 44 acre tract </li></ul><ul><li>environmental cleanup </li></ul><ul><li>rehabilitation </li></ul><ul><li>infrastructure </li></ul><ul><li>Value </li></ul><ul><li>44 acres of land w/ entitlements for 540 units </li></ul><ul><li>2,000 LF new road and infrastructure for all new units </li></ul><ul><li>560 apartments built in 1987 and 2000 </li></ul><ul><li>Created all new infrastructure for next developments </li></ul><ul><li>Capture sales tax on future building materials </li></ul>
  3. 3. (2) Strategy - Bank owned real estate finding the foreclosed properties <ul><li>Knowing where to look </li></ul><ul><li>Where does the information come from? </li></ul><ul><li>What is public information and what is not </li></ul><ul><li>Who controls the asset? </li></ul><ul><li>Understanding what went wrong </li></ul><ul><li>Determination of value***** </li></ul><ul><li>Financing limitations </li></ul>
  4. 4. Where to look for Bank REOs <ul><li>http://bankofamerica.reo.com/search/propertysearch.aspx </li></ul><ul><li>https://www.citimortgage.com/Mortgage/Oreo/SearchListing.do </li></ul><ul><li>http://mortgage.chase.com/pages/other/co_properties_landing.jsp </li></ul><ul><li>Top real estate brokerage firms bid to be the listing agent to remarket bank owned properties </li></ul><ul><li>Some banks direct sell </li></ul><ul><li>All bank websites have basic information and contact </li></ul><ul><li>Other websites have general info on some bank owned assets such as Loopnet, and broker controlled websites </li></ul>
  5. 5. What are the issues to consider on an REO? <ul><li>Existing asset value is determined by trailing 3 or 12 month NOI (from a lender perspective to acquire debt and finance) less debt available to acquire because performance is below market </li></ul><ul><li>Many buyers are using double digit cap rates for NOI analysis due economy eroding values </li></ul><ul><li>Concessions on rent almost always devalue income stream </li></ul><ul><li>Include reserves above the line when determining value </li></ul>
  6. 6. Trend Analysis – what is it worth? Projected NOI / Total Investment Value to Project Investment Projected NOI / cap rate Year 3 (2011) proj. value on NOI Projected Cash flow / cap rate Year 3 (2011) proj. value on cash flow Cap Rate determined by market Sale Cap Rate used in Model Project NOI Year 3 (2011) NOI - projected Cash flow at stabilization Y 3 Year 3 (2011) Cash Flow -projected   Stabilized Valuation Cash flow on trailing 12 / purchase price Cap Rate on Trailing 12 mos. NOI Trailing 12 / purchase price Cap Rate on Trailing 12 mos. Cash Flow Income- Expense Trailing 12 months NOI Income – expenses and reserves Trailing 12 months Cash Flow XXXXXXXX Going In Purchase Price   Acquisition Cap Rate Cap Rate Analysis  
  7. 7. Trend Analysis – what is it worth? 104.6% Value to Project Investment $34,327,750 Year 3 (2011) proj. value on NOI $32,577,750 Year 3 (2011) proj. value on cash flow 8.00% Sale Cap Rate used in Model $2,746,220 Year 3 (2011) NOI - projected $2,606,220 Year 3 (2011) Cash Flow -projected   Stabilized Valuation 4.09% Cap Rate on Trailing 12 mos. NOI 3.47% Cap Rate on Trailing 12 mos. Cash Flow $919,763 Trailing 12 months NOI $779,763 Trailing 12 months Cash Flow $22,500,000 Going In Purchase Price   Acquisition Cap Rate Cap Rate Analysis  
  8. 8. Conclusions to REO acquisition <ul><li>Must have access to debt </li></ul><ul><li>Debt underwriting more stringent than typical – less debt available </li></ul><ul><li>Must have access to equity*** </li></ul><ul><li>Economy has changed all of the rules! </li></ul><ul><li>If you can buy right on an REO – great opportunity! </li></ul>

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