Post on 13-Jan-2015
description
Capital Stacks
What Worked, What Didn’t
Covington Realty Partners
The Good
The Bad
The Ugly
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
Didn’t Work (cont.)
0
20
40
60
80
100
120
CapitalStack ‐W/O
Mezz
CapitalStack ‐W/Mezz
Equity
Mezz Debt ‐ 14%
Construction Loan ‐ Libor+ 225
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)
Denver, CO High Rise Apartment Development
• 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
Denver, CO High Rise Apartment Development (cont.)
• Single Tenant Triple Net Retail Portfolio
• Acquired in a DST structure
One That Worked
• 50% LTC CMBS permanent debt
• 50% bridge equity
• Approximately 2/3 investment grade, 1/3 sub-investment grade
One That Worked (cont.)
Retail Portfolio
Capital Stack
Bridge EquityCMBS ‐ 5% Fixed
• Blended acquisition cap rate – 6.72%
• Closing costs – 3%
• Fees/syndication expenses – 10%
Retail Portfolio ‒ DST Structure
• Bridge equity funded at closing –2.5%
• Interest rate on debt – 5%
• Levered return to investors – 6%
Retail Portfolio ‒ DST Structure (cont.)
I am obviously NOT Clint Eastwood
But I’m feeling lucky……..