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……..