jeffrey bijur, building capital stacks in today's market
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Jeffrey bijur, Building Capital Stacks in Today's MarketTRANSCRIPT
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Capital Stacks
What Worked, What Didn’t
Covington Realty Partners
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The Good
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The Bad
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The Ugly
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One That Didn’t Work
• Denver, CO high-rise apartment development
• Large deal size - $80M
• 65% construction loan
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• 35% equity
• Option to add mezz financing up to 85% of the capital stack
• Top of the market proforma rents
Didn’t Work (cont.)
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CapitalStack ‐W/O
Mezz
CapitalStack ‐W/Mezz
Equity
Mezz Debt ‐ 14%
Construction Loan ‐ Libor+ 225
Apartment Development
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• 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
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• 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.)
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• Single Tenant Triple Net Retail Portfolio
• Acquired in a DST structure
One That Worked
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• 50% LTC CMBS permanent debt
• 50% bridge equity
• Approximately 2/3 investment grade, 1/3 sub-investment grade
One That Worked (cont.)
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Retail Portfolio
Capital Stack
Bridge EquityCMBS ‐ 5% Fixed
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• Blended acquisition cap rate – 6.72%
• Closing costs – 3%
• Fees/syndication expenses – 10%
Retail Portfolio ‒ DST Structure
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• Bridge equity funded at closing –2.5%
• Interest rate on debt – 5%
• Levered return to investors – 6%
Retail Portfolio ‒ DST Structure (cont.)
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I am obviously NOT Clint Eastwood
But I’m feeling lucky……..