European Distressed Real Estate Conf 20 March09

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I am scheduled to speak in London, England at the European Distressed Real Estate Conference on April 6-7, 2009. I have attached a copy of my power point presentation, which will be distributed to each of the institutional investors attending the conference.

The panel on which I sit is on Monday at the following time and shall cover the following subjects with session chair and panel participants, as set forth below.

17:30 EVALUATING INVESTMENTS IN THE HOTEL/CONDO HOTEL & LEISURE/CASINO SECTORS

• Hotel Macroeconomic Situation & Historic Performance During Down Times • Are there Clusters of Distressed Hotels?
• Complexities Involving Mixed-Use Projects with Lodging Elements • What are your Options with Broken Properties?
• Chain Bankruptcies & Related Cross-Border Issues • Casino & Gaming Underperformers

Session Chair:
Chris Evans, Partner HAMILTON HOTEL PARTNERS

Panel Participants:
Ramsey Mankarious, Chief Executive Officer CEDAR CAPITAL PARTNERS LTD.
Scott L. Podvin, Managing Director THE CREST AT WATERFORD LAKES, LLC Charles Human, Managing Director HV HODGES WARD ELLIOTT Jochen D. Schäfer-Surén, Head of Hotels and Leisure-Fund Management INVESCO REAL ESTATE Carola Lueder, Real Estate Broker PROPERTIES USA REMAX PARTNERS

Please feel free to visit our IMN"s website for more a detailed agenda: http://secure.imn.org/web_confe/index.cfm?sc=20090407_RE_0028&pg=Agenda

I look forward to seeing or hearing from you with your comments to the attached, as I hope that we will be able to work together again soon.

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European Distressed Real Estate Conf 20 March09

  1. 1. By: Scott L. Podvin, Managing Director The Crest at Waterford Lakes, LLC spodvin@post.harvard.edu www.TheCrestLife.com http://www.linkedin.com/in/sp0dvin Tel: (305) 793-5762; Fax: (305) 665-3971 Scott L. Podvin: The European Distressed Real Estate Conference – 6-7 April 2009
  2. 2. PODVIN DEVELOPMENT GROUP RAISING $$100mm FUND TO PURCHASE REAL ESTATE, DISTRESSED/OPPORTUNISTIC ASSETS THIS FUND SHALL FOCUS ON PURCHASING THE FOLLOWING TYPES OF ASSETS: Strategically located developments, located in the centre of a city, being large-scale and multi-phase developments typically consisting City-Core Development of residential, office, retail, entertainment and cultural properties with Projects a blend of historic restoration and modern architecture. Large-scale multi-family residential communities in secondary and tertiary markets located on main and main where we can implement Integrated a capital improvement program to push the rents. We will be Residential prepared to purchase the asset on an all cash basis, but once the Development community has been stabilized, we shall lever it or dispose of the Projects asset, triggering a repayment event. There will be tremendous opportunities in busted condos and conversions Broken Condos & while value add plays will also be easy to find. Likewise, there will be many Conversions or Partially projects with incomplete construction that we will be able to pick up on the Constructed cheap, complete construction and reposition the asset to create a vibrant Communities working, walkable (with bike paths and all), sustainable and living community for working class people. WE ARE NOW RAISING A Scott L. Podvin: IMN‘s European Distressed Real Estate Conference $100,000,000 FUND TO 6-7 April, 2009 PURCHASE DISTRESSED spodvin@post.harvard.edu
  3. 3. FUND RAISING CENTRAL Scott L. Podvin: IMN‘s European Distressed Real Estate Conference 6-7 April 2009 spodvin@post.harvard.edu; http://www.linkedin.com/in/sp0dvin
  4. 4. PODVIN DEVELOPMENT GROUP CORE BUSINESS FOCUS Our core business focus is the: 1. Identification; 2. Acquisition; 3. Ownership; and 4. Operation of multi-family residential and hospitality real estate properties. Scott L. Podvin: IMN‘s European Distressed Real Estate Conference 6-7 April 2009 spodvin@post.harvard.edu; http://www.linkedin.com/in/sp0dvin
  5. 5. Investors 1. Institutional Investors 2. Pension funds Our Preferred 3. Insurance companies Shares pay 4. Endowments cumulative preferential cash 5. Investment Banks distributions at an 6. Commercial Banks annual rate of 9%. 7. Fund of funds 8. High net worth individuals 9. Family offices 10. Sovereign wealth funds Scott L. Podvin: IMN‘s European Distressed Real Estate Conference 6-7 April 2009 spodvin@post.harvard.edu; http://www.linkedin.com/in/sp0dvin
  6. 6. Investment Objectives OBJECTIVES: (1) acquire superior-located, middle-income, mutli- family residential properties that have been neglected or poorly managed; and (2) increase profitability thru: (a) providing superior on-site property mngmnt, (b) improving physical appearance and living environment of the properties; (c) implementing renovation strategies in those instances where rental rate increases justify the costs; and, (d) implementing business development strategies to cross sell ancillary services Scott L. Podvin IMN‘s European Distressed Real Estate Conference, 6-7 April, 2009 spodvin@post.harvard.edu; http://www.linkedin.com/in/sp0dvin
  7. 7. OPPORTUNITIES IN DISTRESS European surveys reflect that demand for real estate debt in general – and for distressed debt in particular – is at an all time high Scott L. Podvin IMN‘s European Distressed Real Estate Conference, 6-7 April, 2009 spodvin@post.harvard.edu; http://www.linkedin.com/in/sp0dvin
  8. 8. BLUE HORESHOE LOVES DISTRESS  Consider the dramatic tilt in institutional investors‘ (2007) allocations:  $44.5 billion targeted to domestic real estate  $36.3 billion to private real estate  $24.7 billion to non-core (i.e., value- added and opportunistic),  $11.6 billion to core (i.e., stabilized apartment, industrial, office & retail) Scott L. Podvin: IMN‘s European Distressed Real Estate Conference; April 6-7, 2009 spodvin@post.harvard.edu; http://www.linkedin.com/in/sp0dvin
  9. 9. VULTURES CIRCLING – EYEING THEIR PREY  In 2008, $87Bn was  $56.25Bn raised in 2006 raised by 87  $73.75Bn raised in 2007 opportunistic or debt and distressed debt focused funds.  Of the $87Bn, U.S. accounted for $47MM and Europe for $15.8MM Scott L. Podvin IMN‘s European Distressed Real Estate Conference, 6-7 April, 2009 spodvin@post.harvard.edu; http://www.linkedin.com/in/sp0dvin
  10. 10. SPATE OF RECORD FUND RAISINGS FOR DISTRESSED DEBT BY 1. Carlyle 2. MGPA 3. Blackstone 4. Area Property Partners 5. Palmer Capital – recently launched an opportunity fund with GVA Grimley 6. Schroders lookling to raise up to £1bn in new equity Scott L. Podvin: IMN‘s European Distressed Real Estate Conference; April 6-7, 2009 spodvin@post.harvard.edu; http://www.linkedin.com/in/sp0dvin
  11. 11. OTHERS ARE WAITING ON THE SIDELINES COMPELLING STORY Consider the explosive growth of RE-oriented private equity:  Apollo  Blackstone  Colony Capital  Ramius  Bain Capital  SAC Capital  Recent Deals  London Opportunity Fund  Stamford‘s Opportunity Fund Source: Kingsley Associates and Institutional Real Estate, Inc  Scott L. Podvin: IMN‘s European Distressed Real Estate Conference 6-7 April 2009 spodvin@post.harvard.edu; http://www.linkedin.com/in/sp0dvin
  12. 12. Opportunity Knocks There will be more ways to earn opportunistic Goldman Sachs is • returns going forward. asking investors in its $15bn private Collier capital - get inundated equity fund for approval to shift • Harbourvest - with calls w/ much of its • Goldman Sachs - cash strapped inv remaining • Paul Capital - selling private uninvested money into distressed • Pantheon and - equity assets debt in a stark • Lexington partners – indication of just how dysfunctional RBS hires UBS to sell its almost £500mm of • the buy-out investments in private equity funds business has become amid the $134Bn of private equity assets just on the • meltdown in credit balance sheet of 6 big money banks and AIG markets. Source: super return conference Berlin, Germany • Scott L. Podvin: IMN‘s European Distressed Real Estate Conference 6-7 April 2009 12 spodvin@post.harvard.edu; http://www.linkedin.com/in/sp0dvin
  13. 13. SMART MONEY GOES TO FLORIDA  Terra Firma Capital Partners, increases assets under mngmnt fr €2bn to €11bn, w/ about 80% of its portfolio biz revenues from U.S.  SMART MONEY GOES TO THE U.S. Scott L. Podvin: IMN‘s European Distressed Real Estate Conference 6-7 April 2009
  14. 14. CDS CLEANING SERVICE Scott L. Podvin: European Distressed Real Estate Conference 6-7 April 09 spodvin@post.harvard.edu; http://www.linkedin.com/in/sp0dvin
  15. 15. HEDGE FUND LIQUIDATIONS-- “THE GREAT LIQUIDATION”  - Industry size  The industry Managed approx. $2.5T at its peak in the summer of 2008.[1]  Global credit crunch has caused assets under management (AUM) to fall sharply through a combination of trading losses and the withdrawal of assets from funds by investors.[2] Scott L. Podvin: IMN‘s European Distressed Real Estate Conference 6-7 April 09 spodvin@post.harvard.edu; http://www.linkedin.com/in/sp0dvin
  16. 16. OFFSHORE HEDGE FUNDS  At end-2007, 52% of the number of hedge funds were registered offshore.  Most popular offshore locations:  Cayman Islands (57%);  British Virgin Islands (16%) and;  Bermuda (11%).  The other offshore centers are the Isle of Man and Mauritius. Scott L. Podvin: IMN‘s European Distressed Real Estate Conference 6-7 April 09 spodvin@post.harvard.edu; http://www.linkedin
  17. 17. ONSHORE HEDGE FUNDS  The US was the most popular onshore location (with funds mostly registered in Delaware) accounting for 65% of the number of onshore funds, followed by Europe with 31%.[3]  HUGE OUTFLOWS, NO INFLOW  OPPORTUNITY IS HIDDEN IN THE OUTFLOW! Scott L. Podvin: IMN‘s European Distressed Real Estate Conference 6-7 April 09 spodvin@post.harvard.edu; http://www.linkedin
  18. 18. HEDGE FUND LIQUIDATION SALES  Now large numbers of funds are accelerating or preparing plans to hand back cash to investors. These funds include:   Drake Management, the New York manager,  Centaurus Capital in London,  London Diversified Fund Management and many convertible bond specialists, including Howard Fischer‘s Basso Capital in Stamford, Connecticut, and Jeremy Herrmann‘s Ferox Capital Management in London. Scott L. Podvin: IMN‘s European Distressed Real Estate Conference 6-7 April 09 spodvin@post.harvard.edu; http://www.linkedin
  19. 19. TARGET PRACTICE HIT THE HEDGE DE SHAW – LARGEST US HEDGE FUND -- APPOINTS INDEPENDENT Funds without independent  ADMINISTRATOR administrators: 1) ESL Investments, run by  Eddie Lampert MILLENIUM MNGMNT, 2) Renaissance Technologies,  $11Bn NY HEDGE FUND, run by billionaire Jim Simons APPTS LONDON‘S 3) Chicago Citadel, GLOBEOP, AS IND. run by Ken Griffin ADMIN 4) SAC CAPITAL, run by billionaire Steven Cohen 5) Cerberus 6) HBK Capital, Dallas, Tx 7) Caxton Associates, run by billionaire Bruce UNION BANCAIRE PRIVEE, The 2d Kovner Biggest Inv. in Hedge Funds (& a These are the targets!!! major loser from Madoff), warns others to appoint indep. admins These guys should be selling soon! Scott L. Podvin: IMN‘s European Distressed Real Estate Conference 6-7 April 09 spodvin@post.harvard.edu; http://www.linkedin.com/in/sp0dvin
  20. 20. TIME FOR A MARKET STABILITY REGULATOR Scott L. Podvin: IMN‘s European Distressed Real Estate Conference 6-7 April 09 spodvin@post.harvard.edu; http://www.linkedin.com/in/sp0dvin
  21. 21. PRIV. EQUITY FIRMS MAKE THE BEST SELLERS/JV PARTNERS 1 The Carlyle Group Washington DC $ 32.5 16 Hellman & Friedman San Fran $ 12.0 2 Kohlberg Kravis Roberts New York $ 31.1 17 CCMP Capital NY $ 11.7 3 Goldman Sachs Princ Invmt Area NY $ 31.0 18 Gen. Atlantic Greenwich, CT $ 11.4 4 The Blackstone Group New York $ 28.36 19 Silver Lake Prtnrs Menlo Park, CA $ 11.0 5 TPG Capital Fort Worth $ 23.5 20 Teachers' Priv Capital Toronto $ 10.78 6 Permira London $ 21.47 21 EQT Partners Stockholm $ 10.28 7 Apax Partners London $ 18.85 22 1st Reserve Corp Greenwich, CT$ 10.1 8 Bain Capital Boston $ 17.3 23 American Capital Bethesda, MD $ 9.57 9 Providence Equity Partners Prov, RI $ 16.36 24 Charterhouse Cap Prtnrs London $ 9.0 10 CVC Capital Partners London $ 15.65 25 Lehman Bros Priv. Eq. NY $ 8.5 11 Cinven London $ 15.07 26 Candover London $ 8.29 12 Apollo Management New York $ 13.9 27 Fortress Invstmnt Group NY $ 8.26 13 3i Group London $ 13.37 28 Sun Cap. Prtnrs Boca Raton, FL $ 8.0 14 Warburg Pincus New York $ 13.3 29 BC Partners London $ 7.9 15 Terra Firma Capital Partners London $ 12.9 30 Thomas H. Lee Partners Boston $ 7.5 Scott L. Podvin IMN‘s European Distressed Real Estate Conference: 6-7 April 09 spodvin@post.harvard.edu; http://www.linkedin.com/in/sp0dvin
  22. 22. Private Equity Fund Diagram Scott L. Podvin IMN‘s European Distressed Real Estate Conference, 6-7 April, 2009 spodvin@post.harvard.edu; http://www.linkedin.com/in/sp0dvin
  23. 23. MATURING & ROBUST 2DRY MARKET FOR SELLERS OF PRIVATE EQUITY ASSETS  Driven by strong  Types of Secondary Transactions demand for private equity exposure, a sig. amount of 2.1 capital has been Sale of committed to LP Ints dedicated secondary market funds from investors 2.2 Sale looking to increase of and diversify their Direct private equity Ints exposure Scott L. Podvin: IMN‘s European Distressed Real Estate Conference 6-7 April 2009 spodvin@post.harvard.edu; http://www.linkedin.com/in/sp0dvin
  24. 24. FOUR POCKETS OF DEMAND London-based private 1.Opportunity Funds that have been equity house Benson established to buy real estate Elliot Capital Management has equity closed Benson Elliot 2.Newer Opp. Funds that have been Real Estate Partners III, a pan-European created as dedicated debt distressed real estate investors fund. The fund had a target size of €500 3.Private Equity looking at real million at its 2008:Q3 launch, and has estate debt managed to raise 4.Real Estate Companies buy back around €510 million, officials at the firm their own debt or debt of others said. Scott L. Podvin IMN‘s European Distressed Real Estate Conference, 6-7 April, 2009 spodvin@post.harvard.edu; http://www.linkedin.com/in/sp0dvin
  25. 25. What Should An Investor Do? • Core funds, particularly newer vintage funds, will begin to see more attractive pricing for acquisitions. • Existing core assets will begin to see the benefit of slowing development as we move into 2009-10. • REITs in US, Europe and Asia take a beating during 2007-08. So, we are approaching the time for pension funds, endowments, REITS, and other qualified investors to rebalance/add to real estate positions. Scott L. Podvin: IMN‘s European Distressed Real Estate Conference  April 6-7, 2009  spodvin@post.harvard.edu; http://www.linkedin.com/in/sp0dvin 
  26. 26. Capital Market Conditions Drive Outlook • Capital Markets are closed • European Recession Deepening and UE rising • Europe's recession risks lasting into 2010 • US deals dropped from 154 to • IMF is expected to 99 while UK deals fell from 74 to • European Central Bank's decision last borrow $100Bn from 50 week to revise downwards its 2010 Japan and may even growth forecast for eurozone countries • Securitization trusts hold $1.5T issue bonds, an from 1 per cent to zero. unprecedented step in of subprime and alt-A loans, • Since the world financial crisis exploded its 64-yr history $400B of which are delinquent in September, three European • Russia to supervise a • 5 Canadian Banks –RBC, governments have fallen - in Belgium, consolidation plan Toronto-Dominion Bank, Bank Latvia and Iceland, which is not a EU that would see the member but could soon apply to join. of Nova Scotia, Canadian number of banks cut Imperial Bank and Bank of from 1,100 to 500. • Europe risks being the last region to pull Montreal –put investment banks itself out of recession unless it can • Global financial under same umbrella present a unified front on the economic tsunami batters Hong crisis. Scott L. Podvin: IMN‘s European Kong, as it falls into Distressed Real Estate Conference recession • Germany sees sharp (20.7% (Jan – Jan)) 6-7 April 09 drop in exports, the driver for the region’s spodvin@post.harvard.edu; largest economy. 26 http://www.linkedin.com/in/sp0dvin
  27. 27. 2009 is Going to be Painful for Many Source: Cartoonbank.com Scott L. Podvin: IMN‘s European Distressed Real Estate Conference, 6-7 April 2009: www.TheCrestLife.com spodvin@post.harvard.edu; http://www.linkedin.com/in/sp0dvin
  28. 28. BALKANIZATION OF EUROPEAN FINANCE? • Growth slows and region may Recession is here. fall into recession • European CDS market • Is it different this time or is overrun by PIIGS – How deep and how long? is Asia in denial? Portugal, Ireland, Italy, Greece and Spain • Warnings signs from Hong Kong & Vietnam, slower growth showing in Australia and Japan, although China and India forge ahead • IMF bails out Eastern Europe – Romania, Bulgaria and Croatia -- • FDIC had $18.8Bn in depo ins fund at and Ukraine, Latvia, Hungary & end of 4 th qtr to protect about $4.8T of Serbia ins deposits • Economic risks spike for Germany, • 14 banks have failed this yr, bringing Spain, UK, Ireland & certain total to 35 since Jly ―emerging‖ states • At end of 4th qtr, 252 banks and thrifts • Spain‘s Unemployment reaches on govt‘s problem list (534 banks Sovereign 15% failed in 1989) Defaults: about ¼ • Banks are charging fees of 2.5 to 3.5%• Spain‘s economic miracle is a if S&Ps rated mirage‖ : 1mm unsold new homes. on ave for a solid issuer n the current sovereigns are on market. • RBS reports £24.1bn loss for 2008-- negative outlook – largest in British corporate history – • Unemployment ____________ the highest after suffering heavy losses from hostile takeover of ABN AMRO, the • Banks are syndicating more risk proportion ever Dutch lender (laying off 50 to 75%) Scott L. Podvin: European Distressed Real Estate Conference 6-7 April 09 28 spodvin@post.harvard.edu; http://www.linkedin.com/in/sp0dvin
  29. 29. CRISIS STARTS IN U.S. BUT TURNS INTO CATASTROPHE IN & AROUND EUROPE Russian Public and private institutions need to refinance $117.1Bn in bank loans and bonds this year • Ireland bails out two largest lenders, Allied Irish Banks and Bank of • Regulators will continue to Ireland, after it require that banks maintain nationalized Anglo Irish a min. 6% Tier 1 capital • China‘s Export‘s Bank, the 3rd largest bank. ratio, 3% of which should Plunge 17.5%, come from common stock. • Belgium‘s Fortis gets but remains nationalized and sold to resilient, as • Emergency Economic BNP Paribas of France trade surplus Stabilization Act of 2008 hovers at • Britain in deep recession • One in 4 banks not $39.1Bn and could shrink by as profitable in 2008, highest • Japan shows its much as 4% in 1st ½ yr – level in 25 yrs economy pound sank as much as contracted • Dollar index rises 3% vs. the dollar 12.7% on a • Poland‘s Zloty falls 14% seasonally vs. euro adjusted annualized basis Scott L. Podvin: IMN‘s European Distressed Real Estate Conference in the 4th Qtr 6-7 April 09 29 spodvin@post.harvard.edu; http://www.linkedin.com/in/sp0dvin
  30. 30. RECOVERY CHECKLIST: ● Bank guarantees – In the works: Among EU initiatives  to combat the crisis are: €2,500bn ● A recovery plan costing ● Aid for central and €200bn ($263m, £188bn), of eastern Europe – a which €170bn stems from €25bn facility, of which national governments €6.5bn is already being ● Spending by means of disbursed to Hungary ―automatic stabilisers‖ (unemployment benefits and and €3.1bn to Latvia other social security ● Support for the car payments) worth about industry – €7bn in loans €200bn expected from the  Recapitalising banks – European Investment €300bn Bank Scott L. Podvin: IMN‘s European Distressed Real Estate Conference 6-7 April 09 spodvin@post.harvard.edu; http://www.linkedin.com/in/sp0dvin
  31. 31. UNITED KINGDOM 1. London is Europe‘s leading centre for hedge fund managers, with three- quarters of European hedge fund investments, about $400bn (£200bn), at the end of 2007. 2. Unemployment has soared to above 2m for the first time since 1997. 3. London won market share from continental exchanges and remained the most successful market in Europe for initial pubic offerings in 2008. 4. Britain is set to have the longest recession of all the major economies. Scott L. Podvin: IMN‘s European Distressed Real Estate Conference 6-7 April 09 spodvin@post.harvard.edu; http://www.linkedin.com/in/sp0dvin
  32. 32. UNITED KINGDOM 5. Britain will invest $73 Bn in its banks; 6. Britain decided that the Royal Bank of Scotland, Northern Rock and Bradford & Bingley are, in effect, public corporations because the gov‘t has sig. control over their operations. 7.Ave. UK home is now £195,724, down more than £25,000 in the last year, according to DCLG. 8. House prices down: Ireland down 14.3% England down 11.8%. West Midlands down 14.1% London down 13.9%. Scott L. Podvin: IMN‘s European Distressed Real Estate Conference 6-7 April 09 spodvin@post.harvard.edu; http://www.linkedin.com/in/sp0dvin
  33. 33. OPPORTUNITY LIES BENEATH THE SURFACE RBS reports £24.1bn loss for 2008-- largest in British corporate history – after suffering heavy losses from hostile takeover of ABN AMRO, the Dutch lender Lloyds– including HBOS -- in worse shape than RBS after purchasing Halifax Bank of Scotland – UK govt‘s stake NOW reaches 77% Scott L. Podvin: IMN‘s European Distressed Real Estate Conference 6-7 April 09 spodvin@post.harvard.edu; http://www.linkedin.com/in/sp0dvin
  34. 34. Angela Merkel Backs Germany‘s Banks GERMANY OPTS FOR LOAN GUARANTEES, NOT DIRECT STAKE IN BANKS  In Berlin, German leaders unveiled a 480 billion package consisting mostly of loan guarantees, but no stimulus plan  Unlike the British blueprint, however, the plan announced by Ms. Merkel does not call for Berlin to acquire direct stakes in German banks.  Instead, the German approach offers €400Bn in guarantees for inter-bank loans and another €80Bn for direct injections of capital to restore weakened balance sheets and purchase the toxic, illiquid assets.  Reichmuth & Co are shutting Madoff-hit funds of hedge funds. Scott L. Podvin: IMN‘s European Distressed Real Estate Conference 6-7 April 09 In 2002 Germany introduced the single spodvin@post.harvard.edu; http://www.linkedin.com/in/sp0dvin European currency, the euro.
  35. 35. GERMANY UPS THE ANTE TOO  The German gov‘t has done a lot with a €50Bn stimulus for consumption, €115Bn for stability to the real economy, and €400Bn in stabilizing financial institutions.  Many funds of hedge funds are already on the block or are being shut down with Deutsche Bank Closing its Topiary unit and Spain‘s BBVA closing its Altitude JV. Scott L. Podvin: IMN‘s European Distressed Real Estate Conference 6-7 April 09 spodvin@post.harvard.edu; http://www.linkedin.com/in/sp0dvin
  36. 36. VIVA LATO €360Bn FOR BAIL- FRANCE FRANCE AGREES OUTS  1MM French demonstrators staged W. Europe‘s biggest public protest  French gov‘t creates fund to guarantee debt for up to 5yrs  To obtain these funds, Banks pledge collateral, including debt currently not accepted as collateral by the ECB. Scott L. Podvin: IMN‘s European Distressed Real Estate Conference 6-7 April 09 spodvin@post.harvard.edu; http://www.linkedin.com/in/sp0dvin
  37. 37. SARKOZY VOTES AGAINST ADDITIONAL STIMULUS  In addition, a 2d French state- sponsored company will provide up to €40 Bn in direct capital injections to banks that request it, in exchange for handing over equity stakes in the debtor.  No short term stimulus plan.  The combined budget deficit of the eurozone‘s four biggest countries – Germany, France, Italy and Spain – will hit 6.4% of GDP in 2010, up from 5.8% in 2009. Scott L. Podvin: IMN‘s European Distressed Real Estate Conference 6-7 April 09 spodvin@post.harvard.edu; http://www.linkedin.com/in/sp0dvin
  38. 38. EURO-FACTS  The bailout packages are roughly similar in economic impact: percent of GDP in 1.3.3 Germany, 2.2.1 percent in France, and 3.2.9 percent in Britain, according to Capital Economics in London Scott L. Podvin: IMN‘s European Distressed Real Estate Conference 6-7 April 09 spodvin@post.harvard.edu; http://www.linkedin.com/in/sp0dvin
  39. 39. EURO-FACTS CONT-  While Europe‘s biggest economies led the way:  Austria makes €100Bn available for recapitalizations and loan guarantees;  Spain insures up to €100Bn in bank debt; &  Netherlands threw €220Bn into the mix. Scott L. Podvin: IMN‘s European Distressed Real Estate Conference 6-7 April 09 spodvin@post.harvard.edu; http://www.linkedin.com/in/sp0dvin
  40. 40. BIG DEBT  By 2012, the ratio of gross public debt to gross domestic product could be: 117% in Italy;  97% in the US;  80% in France;  79% in Germany; &  75% in the UK.  224% in Japan  Scott L. Podvin: IMN‘s European Distressed Real Estate Conference 6-7 April 09 spodvin@post.harvard.edu; http://www.linkedin.com/in/sp0dvin
  41. 41. ALL IN  For Germany, France, the Netherlands and Austria — countries whose combined economies are just over half the size of the United States‘ — state guarantees and capital injections reach 1.3 trillion euros, according to Holger Schmieding, chief European economist for Bank of America in London. Scott L. Podvin: IMN‘s European Distressed Real Estate Conference 6-7 April 09 spodvin@post.harvard.edu; http://www.linkedin.com/in/sp0dvin
  42. 42. WHO HAS THE MOST DEBT 1. Ukraine- $40Bn in loans with $28.8Bn in reserve 2. Hungary-$35Bn in loans with $31Bn in reserve 3. Turkey— $100Bn in loans with $70Bn in reserve 4. Asia—$775Bn in loans (highest external debt to roll over) Scott L. Podvin: IMN‘s European Distressed Real Estate Conference 6-7 April 09 spodvin@post.harvard.edu; http://www.linkedin.com/in/sp0dvin
  43. 43. NOT MUCH BETTER IN THE U.S. Scott L. Podvin: IMN‘s European Distressed Real Estate Conference 6-7 April 09 spodvin@post.harvard.edu; http://www.linkedin.com/in/sp0dvin
  44. 44. Public Law 110-343/HR 1424 SON OF TARP IS BORNE  Effective October 3, 2008, this 169-page law created a $700 billion dollar Troubled Assets Relief Program under the Emergency Economic Stabilization Act of 2008 (division A), and also enacted the Energy Improvement and Extension Act of 2008 (division B), Tax Extenders and Alternative Minimum Tax Relief Act of 2008 (division C) Scott L. Podvin: IMN‘s European Distressed Real Estate Conference 6-7 April 09 spodvin@post.harvard.edu; http://www.linkedin.com/in/sp0dvin
  45. 45. Expenditures and Commitments 1. As of February 9, 2009, $388 billion had been allotted, and $296 billion spent, according to the Committee for a Responsible Federal Budget. Among the money committed, includes:[26] 2. $250 billion to purchase bank equity shares through the Capital Purchase Program ($195 billion spent); 3. $40 billion to purchase preferred shares of American International Group (AIG, Fortune 500) through the program for Systemically Significant Failing Institutions ($40 billion spent); 4. $20 billion to back any losses that the Federal Reserve Bank of New York might incur under the Term Asset-Backed Securities Loan Facility (none spent); Scott L. Podvin: IMN‘s European Distressed Real Estate Conference 6-7 April 09 spodvin@post.harvard.edu; http://www.linkedin.com/in/sp0dvin
  46. 46. Expenditures and Commitments Cont. 4. $40Bn in stock purchases of Citigroup and Bank of America ($20Bn each) through the Targeted Investment Program ($40Bn spent) 5. $12.5Bn in loan guarantees for Citigroup ($5Bn) and Bank of America ($7.5Bn) through the Asset Guarantee Program (none spent); 6. $25Bn in loans to autos and their financing arms through the Automotive Industry Financing Program ($21 Scott L. Podvin: IMN‘s European Distressed Real Estate Conference billion spent) 6-7 April 09 spodvin@post.harvard.edu; http://www.linkedin.com/in/sp0dvin
  47. 47. TARP TIMELINE On Nov. 12, 2008, Sec. of the Treasury Hank Paulson indicates reviving the securitization market for consumer credit is a new priority On Dec. 19, 2008, President Bush, declares TARP funds may be spent on any program he deems necessary; and requests TARP funds to support the auto industry. On Jan. 15, 2009, Treasury issues interim final rules for reporting and record keeping. Scott L. Podvin: IMN‘s European Distressed Real Estate Conference 6-7 April 09 spodvin@post.harvard.edu; http://www.linkedin.com/in/sp0dvin
  48. 48. TARP TIMELINE CONT-  On 21/Jan/09, Treasury announced new regulations regarding disclosure and mitigation of conflicts of interest in TARP contracting.  On 5/Feb/09, U.S. Sen. approves changes to TARP, prohibiting firms receiving TARP funds from paying bonuses to their 25 highest-paid employees.  On 10/feb/09, Sec. Treasury Timothy Geithner outlined his plan to use $300Bn of which $50 billion for foreclosure mitigation and the rest to fund private investors to buy toxic assets from banks. Scott L. Podvin IMN‘s European Distressed Real Estate Conference, 6-7 April 2009 spodvin@post.harvard.edu; http://www.linkedin.com/in/sp0dvin
  49. 49. BUY A TOASTER, GET A FREE BANK Scott L. Podvin IMN‘s European Distressed Real Estate Conference, 6-7 April 2009 spodvin@post.harvard.edu; http://www.linkedin.com/in/sp0dvin
  50. 50. NATIONALIZING THE BANKING SYSTEM Total losses now exceed impact of RTC Scott L. Podvin: IMN’s European Distressed Real Estate Conference 6-7 April 09 spodvin@post.harvard.edu; http://www.linkedin.com/in/sp0dvin
  51. 51. Lender’s Brace for Global Cooling PRE-CREDIT CRISIS TODAY 2008 MAX LOAN TO VALUE/ 70%-75% 60% LOAN TO COST MIN DEBT SERVICE COVERAGE 1.05x 1.20x RATIO Borrowers Pro forma NOI Current in-Place NOI NOI UNDERWRITING 85-125 bps 250-350 bps SPREADS Sized using Sized using Amortizing DSCR LOAN PROCEEDS I/O DSCR 3 Years I/O on 10 Years I/O AMORTIZATION 10 Year Loan Requires Structuring (holdbacks, Minimal LOAN REQUIREMENTS earn outs, TI escrows) SYNDICATION RISK (Large Underwritten, Lead Bank Lender Best Efforts, Borrower Loans) Scott L. Podvin IMN‘s European Distressed Real Estate Conference, 6-7 April, 2009 spodvin@post.harvard.edu; http://www.linkedin.com/in/sp0dvin
  52. 52. NOW THAT I‘VE FOUND MY PEARL, THE UNIVERSE IS MY OYSTER
  53. 53. So, How Should I Price Non-Core Real Estate:  Identify components of asset-level returns,  Understand impact of financial leverage,  Examine effects of transaction costs; and  Examine effects of JV structures. Scott L. Podvin: IMN’s European Distressed Real Estate Conference April 6-7, 2009 spodvin@post.harvard.edu; http://www.linkedin.com/in/sp0dvin
  54. 54. REAL ESTATE FUNDS – THE ANATOMY OF THE DEAL Scott L. Podvin: IMN’s European Distressed Real Estate Conference April 6-7, 2009 spodvin@post.harvard.edu; http://www.linkedin.com/in/sp0dv in
  55. 55. What to Look for in a REAL ESTATE FUND  Experience  Skills  Contacts  Practical problem solving  Reputation  Team  Capacity  $$ Balance Sheet $$ Scott L. Podvin: IMN’s European Distressed Real Estate Conference April 6-7, 2009 spodvin@post.harvard.edu; http://www.linkedin.com/in/sp0dvin
  56. 56. THE CHEMISTRY COUNTS Alignment of Interests: FUND & REAL ESTATE COMPANY  Fund Objectives  Fund Life  Leverage and Financing  Guarantees  Management Style and Control  Tax Considerations  Dealing with Unexpected Issues Scott L. Podvin: IMN’s European Distressed Real Estate Conference April 6-7, 2009 spodvin@post.harvard.edu; http://www.linkedin.com/in/sp0dvin
  57. 57. BUSINESS PLAN  We will acquire, own & operate multi-family residential properties. We plan to own five (5) multi-family residential  properties. We will acquire additional properties meeting  certain objectives described in our prospectus in the section entitled ‗‗Investment Guidelines.‘‘ We plan to finance the acquisition of these add‘l  properties mostly through banks No commitments from any lenders with respect to  a credit facility at this time. Scott L. Podvin: IMN‘s European Distressed Real Estate Conference April 6-7, 2009 spodvin@post.harvard.edu; http://www.linkedin.com/in/sp0dvin
  58. 58.  Scott L. Podvin, Managing Director of The Crest at Waterford Lakes, LLC www.TheCrestLife.com  spodvin@post.harvard.edu  Cell: (305) 793-5762  Fax: (305) 665-3971 

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