1 presentation by harvey kasin, hypo real estate bank international ag bank funding of retail...
TRANSCRIPT
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Presentation by Harvey Kasin, Hypo Real Estate Bank International AGBank Funding of Retail propertyNovember 2008
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Introduction
׀ What is Property Lending?
׀ Retail Property Lending
׀ An Example
׀ Property Stats
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What is property lending?
Lending a proportion of the cost of construction or value of a property ׀ Senior lending 0 – 75%׀ Mezzanine lending 75 – 85%׀ Stretched mezzanine 85%+
How we earn money׀ Margin׀ Fees׀ Profit share
Key Terms׀ LTV ׀ LTC׀ ISC׀ DSC׀ Exit Yield׀ Amortisation / Bullet
What happens when things go wrong?׀ Why?׀ LTV breach – market changes, income fall ׀ ISC breach – centre / tenant failure, vacancy׀ More serious than other types of Real Estate ׀ Receivership or administration
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Retail Property London
Investment׀ Typical 75% LTV׀ Quality of Asset Manager / track record׀ Anchor tenants׀ Occupancy levels׀ Quality of scheme / mix of tenants׀ Retail hierarchy / competition׀ Rental income / value׀ Asset Management Opportunities
Development׀ Development experience and design team׀ Design / layout location position of key tenants׀ Procurement route׀ Cost management׀ Cost overrun guarantees׀ Period of loan / stabilisation׀ % pre let
Key Factors׀ Property on a ladder׀ Day 1 LTC/LTV׀ Cash flow assumptions made׀ Exit Yield
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Retail Property London
Stand alone shop or parade׀ Quality of covenant׀ Rent & term of lease׀ Pitch & quality of town
In town shopping centre׀ Lot size׀ Competition ׀ Condition, capex׀ Quality of Asset Manager etc׀ Asset Management opportunities
Out of Town ׀ Planning׀ Environment׀ Car Parking
FOC Factory Outlet Centres׀ Demographic Profile׀ Quality of management׀ Partnerships of landlord & tenant
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European Investment Market Prime Yields
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European Investment Market Prime Rental Growth
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November 2008
6.25%
7.81%
£150.80m
94%
£141.38m
0.75%
£8.85m
1.13
Bullet or Amort?
An example
A well experienced client approaches us to fund his purchase of the main shopping centre in well established strong town. The centre is considered by the market as a prime shopping centre.
November 2008
£10m
£12.5m
6.25%
7.81%
£150.8m
75%
£113.10m
3.7%
3.0%
£7.6m
1.31
Bullet or Amort?
June 2009
£10m
£7.5m
7.0%
5.25%
£134.65m
85%
£114.45m
3.0%
1.5%
£5.15m
1.95
Bullet or Amort?
March 2007
Rent £10m
ERV £12.5m
Cap Yield 5%
Reversionary Yield
6.25%
Value £188.5m
LTV 75%
Loan £141.38m
5 yr cost of finance
5.5%
Margin 0.75%
Interest Bill £8.85m
ISC 1.13
Bullet or Amort?
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Development is proceeding faster in maturing/emerging markets
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Retail investment volumes have remained low into 2008
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Shopping Centre City / Town Opening date Total size of scheme sq ft
Total size of scheme sq m
Victoria Square Belfast March 2008 800,000 75,000
Houndshill Blackpool September 2008 398,000 37,000
Market Place Bolton September 2008 276,000 25,000
Cabots Circus Bristol September 2008 1,000,000 92,900
Grand Arcade Cambridge March 2008 450,000 42,000
Eden High Wycombe March 2008 550.000 51,000
High Cross Leicester September 2008 560,000 52,000
Liverpool One Liverpool May 2008 1,700,000 160,000
The Elements Livingstone October 2008 375,000 35,000
Westfield London October 2008 1,600,000 150,000
Trinity Square Nottingham November 2008 190,000 17,500
Eagles Meadow Wrexham October 2008 400,000 37,000
Union Square Aberdeen Autumn 2009 700,000 65,000
Arc (formerly known as the cattle market)
Bury St Edmonds Spring 2009 430,000 40,000
St David’s 2 Cardiff Autumn 2009 970,000 90,000
2008 Shopping Centre openings
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Investment Market Summary
׀ Change in buyer profile – low geared Opportunity Funds or Vulture buyers
׀ Due Diligence and decision making significantly slower
׀ Continued Outward shift in vendors price expectations
׀ Distressed vendors and ‘Off market Discussions’
׀ Return to the market of some familiar names
׀ More attractive returns for property from lower Capital Value Base
׀ Re-pricing of risk-increased discount for Secondary Property
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Retail Investment – The next Few Months
׀ Few buyers with access to significant equity
׀ Valuations generally continuing to fall
׀ Retailers Christmas trade will affect confidence in the sector
׀ Debt buyers unlikely to return in the very short term
׀ Opportunities exist for genuine buyers
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Growth in shopping centre stock
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Major retail investment deals Q1-3 2008