Core Value Add Opportunistic

Transcription

1 Equity Investment Styles Core Value Add Opportunistic Leverage up to 50% up to 65% 65% up to? Target Returns 8% - 12% 12% - 18% >18% Target above 20% Return Source Mostly income Some appreciation Mostly appreciation Asset Type Office, Retail, Industrial, MF Core, plus Hosp, Senior, Storage, etc Anything goes Asset Quality Class A (mostly) Class A, B maybe C Any quality Target Markets Primary (mostly) Other Qualities Low volatility, marquis assets Some secondary markets Reposition, better mgmt, vac space Primary and Secondary Develop, leverage, event driven ULI Fall 2012 Panel

2 Stalled Development Note Purchase Description: Development of two 7-story apartment buildings totaling 46-units Brooklyn, NY Background: Started in 2007 as condominiums Development ceased in 2009 Construction lender failed Funding stopped Borrower lender liability suit Stop work order by City Foreclosure action started Alex. Brown Realty JV: August 2011 Note and Fee Acquisition Settle lender/borrower lawsuits Metrics: $6.7M ABR equity $420,000 per unit all-in 8.5% pro forma ROC Clear City stop work order Restart construction as apts ULI Fall 2012 Panel 2

3 Discounted Loan Payoff Description: Six flex/office buildings 134,389 sq ft Orlando Airport submarket Background Acquired in 2005 for $13.2M CMBS refi in 2006 for $13.6M Decline in occupancy and rates starting in 2008 By 2011, NOI is $750,000 Occupancy at 75% Owner unable to service debt Foreclosure action started Alex. Brown Realty JV Pursue DPO with Borrower Special Servicer rejects $7.6M Metrics: $3.6M ABR equity 65% of previous basis November 2011 win auction.com bid at $7.1M 10% cap on in-place NOI All-cash purchase January 2012 take title via foreclosure March 2012 perm loan ULI Fall 2012 Panel 3

4 CAPITALIZATION OF A TO-BE-BUILT APARTMENT PROJECT IN TULSA, OK Investment Highlights 2008 land assemblage and rezone to higher density, in prime location in Midtown Tulsa. Sat on land through downturn. Tulsa s apartment market 95+% occupied, in strong economy, with comparable rents in some downtown, smaller projects, and no new competitive supply. Market says time to develop. Capital markets resisted projects in secondary / tertiary markets. With development cost at $136k / unit, difficult to comp an exit price per unit. Investment Strategy: Investment Strategy Secure preferred equity tranche to limit further borrower equity contributions, provide adequate return to investor at a lower cost exposure. Be the first Class A project built in the market, sell upon completion and stabilization. Dual exit strategies of sale or refinance. Capitalization Borrower contributes 50% of the total equity required as land and predevelopment costs. Preferred equity provider contributes other 50% of equity. Total equity = 30% of total project cost. Construction lender funds 70% loan to cost. 4

5 CAPITALIZATION OF A TO-BE-BUILT APARTMENT PROJECT IN TULSA, OK Investment Details Enclave at Brookside East 39 th and South Rockford Avenue Brookside, Tulsa OK No. of Units: 240 Cost per Unit: $136,700 Average Unit Size: 984 s.f. Average Rent / Unit: $1,325 Average Rent PSF: $1.35 Going In Return on Cost: 7.9% Stabilized Return on Cost: 8.6% Constr. debt + pref.equity / total cost: 85% Underwritten Exit Cap Rate: 7% Cost of Capital-preferred equity: 14% Going in debt yield on total construction + pref. equity : 9.37% Underwritten permanent Loan Amount: pays off all debt + pref. equity + accrued return 5

6 OFFICE DISTRESSED ACQUISITION FROM SPECIAL SERVICER Property Type: Office Investment Details Location: Greenwich, CT Investment Type: Equity Artemis Ownership: 90% Size: 101,394 sf Investment Highlights Acquired 1979 vintage (renovated 2007), 101,394 sf Class B office property in western Greenwich, CT with an operating partner Property was foreclosed and held as REO by special servicer From default to foreclosure to our acquisition Property saw a decline from 85% to 19% occupancy Purchase price of $19.3M ($190 psf) represents 74% of the par value of the loan and 50% of prior owner s basis Debt at Closing: Acquired unlevered Purchase Price: $19.3M ($190 psf) T-12 NOI Yield (on PP): 0% Status The Joint Venture obtained first mortgage with a national life insurance company (terms: $16.0M; 5% fixed; 65% LTV) The initial capital projects are underway and major marketing events are planned for this month goal to position Property as the low cost provider of Class B+ space within the submarket 6

7 OFFICE - DISTRESSED DEBT ACQUISITION, LOAN TO OWN Investment Highlights Acquired a defaulted non-performing CMBS loan collateralized by four fully-leased flex office buildings in Los Angeles Portfolio totals 187,534 square feet The note purchase price represents a 15% discount to the outstanding loan balance of $27.9 million ($149 psf) JV to foreclose on properties and secure title Re-lease or renew the limited near-term rollover Investment Details Property Type: Flex / Office Location: Los Angeles, CA (Tri-Cities submarket) Investment Type: Equity Artemis Ownership: 90% Size: 187,534 sf Purchase Price: $23.6M ($126 psf) Debt at Closing: Acquired unlevered NOI Yield on PP: 9.7% (Annualized August and September actuals) Status In July 2012, the JV successfully completed the foreclosure process ahead of schedule, below budgeted cost; the joint venture now has clear title to the four properties Closed all equity; currently evaluating third party financing (proposed terms: $17.65M; L+300; 70% LTV) 7

8 Class A Office Building Non-CBD Preferred Equity for Acquisition Property Information 1+ million square-foot Class A office Location Located in a major market outside of the CBD Tenancy Fully net-leased to credit tenant for 6+ years Strategy The buyer assumed 60% LTC senior CMBS financing with the acquisition that was coterminous with the lease, but it had an anticipated repayment date in four years after which hyper amortization commenced. The buyer s strategy was to negotiate an early renewal with the tenant to refinance both the mortgage and the preferred equity. Investor s Terms Preferred Equity; originally tried to structure as mezzanine for 1% less total return, but the rating agencies would not approve it without a substantial letter of credit 9% current return with an overall 14% return 4 year term 8% debt yield on last dollar of exposure 85% LTC The preferred equity providers last dollar was approximately one-third of replacement cost not including the land

9 Class A Office Building CBD Common and Preferred Equity for Partial Interest Acquisition Property Information 1.5+ million square-foot Class A office building Location Located in the CBD of a major market Tenancy Multitenant office building. Strategy Sponsor already owned a 51% controlling interest in another fund and was acquiring the 49% interest from their partners. The property is a core plus asset and the sponsor wanted to increase leverage through preferred equity to reduce the common equity requirements and overall cost of capital. The mortgage that was assumed and the preferred equity can be refinanced at the same time in five years. A 50% equity partner was also arranged for the 49% interest. Investor s Terms 5 year term 5% current pay years 1 3 and 7% year 4 5 with an overall return of 8.5% 1% origination fee 6% debt yield on last dollar of exposure 78% LTV