1 / 20

UConn Presentation October 2, 2004

UConn Presentation October 2, 2004. Agenda. GE Overview - How Real Estate fits into the company Basics of Commercial Real Estate Lending - Definitions - Impact of leverage - Deal process Deal Examples Questions & Answers.

rafi
Télécharger la présentation

UConn Presentation October 2, 2004

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. UConn Presentation October 2, 2004

  2. Agenda • GE Overview- How Real Estate fits into the company • Basics of Commercial Real Estate Lending- Definitions - Impact of leverage - Deal process • Deal Examples • Questions & Answers

  3. GE: A company with a strong track record of performance for all stakeholders • Founded by Thomas Edison in 1878 as the Edison Electric Co. • The only company listed in the Dow Jones Industrial Index today that was also included in the original index in 1896 • Earnings have more than tripled since 1990 Earnings* ($ in Billions) * Before required accounting changes

  4. A company with global reach • Operations in over 100 countries • Manufacturing facilities in 32 countries • Research centers in Germany, India, China and the U.S. • 305,000+ employees worldwide • $134 billion in revenues in 2003 • $61 billion in international revenues in 2003 GE revenues US/ World

  5. We are an 11-business company that can grow in any market cycle. Transportation NBC Infrastructure Healthcare Consumer Finance Energy Commercial Finance Advanced Materials Equipment Services Insurance Consumer & Industrial

  6. GE Commercial Finance Offers businesses of all sizes an array of financial services and products worldwide MARKETS: Aviation & Transportation Services, Corporate Finance, Commercial Equipment Financing, Dealer and Distributor Financing, Energy Financial Services, Fleet Management, Healthcare, Real Estate 2003 Revenues (in millions): $20,813 President and CEO: Michael A. Neal Amelia Island Presentation 6 20040265-1

  7. North America Debt • Volume 55% of GE Real Estate • Income 30% of GE Real Estate • 12 Regional Offices • 230 Associates Debt GE Real Estate GE Real Estate • $30 Billion in Assets • Net income $834 Million • 30 Offices • 6,000 Associates

  8. Definitions Commercial Real Estate: Income-producing properties, primarily leased to 3rd-party tenants. Examples: Office, retail, multi-family, industrial, self-storage, hotel. Net Operating Income (NOI): Revenue generated at the property by the tenants, less operating expenses incurred in running the property (excluding debt service). Capital Improvements: Non-recurring property expenses that improve/maintain asset value (replacement of roofs, windows, elevators, HVAC systems). Cap Rate: Rate of return used to derive the capital value of an income stream. Property value = NOI / Cap Rate. Leverage: Use of borrowed funds to increase purchasing power and profitability. Includes Mortgage Debt and Mezzanine Financing. Mortgage Debt: Real estate financing secured by a recorded mortgage lien. Mortgage Debt is the most senior level of financing on a property. Loan-to-Value (LTV): Ratio of Leverage to the total value of an asset. Cash-on-Cash (CoC): NOI / loan amount on the property. Debt Coverage Ratio (DSCR): NOI / debt service (interest & amortization) on the loan. Borrower Cash Equity: Asset value less the total amount of Leverage. Mezzanine Debt: Financing that is subordinate/junior to Mortgage Debt. Secured by a pledge of the property owner’s partnership interests in the asset.

  9. Impact of Leverage $100MM asset purchase price; $7MM NOI $15MMEquity $35MMEquity $20MM8% MezzDebt $100MMEquity 1.7xDSCR $65MMMortgageDebt @4.00% $65MMMortgageDebt @4.00% 2.7xDSCR Equity Yield: 7.0% 12.6% 18.7% Leverage Increases Buying Power & Returns … And Risk

  10. Deal Process AssetManagement Approval &Closing Marketing Sourcing Underwriting • Advertisements in newspapers, magazines, trade publications. • Meetings with new and existing clients to communicate strategy & product offerings. • Hosting dinners, golf outings, sporting events and group trips to build personal relationships with customers. • Networking at industry conferences, outings. • Receipt of a financing package from customers or brokers. • Analysis of property financials, asset quality, market conditions and execution strategy. • Negotiate loan pricing, proceeds and structure while in competition with other lenders for the business. • Execute a term sheet / loan application with the client. • Detailed analysis of property rent roll and expenses. • Property site inspection and identification of rent and sale comps. • Engineering and environmental due diligence completed by expert 3rd-party consultants. • Complete a credit request to obtain internal approval for the deal. • Presentation of credit request & analysis to committee for approval. • Preparation and negotiation of legal documentation. • Execution of legal documents and wiring of money. • Host a closing dinner with the client. • Monitoring of loan performance, focused on CoC, DSCR, and LTV. • Execute future funding draws, loan extensions, asset releases, and cash flow sweeps. • Seek approval for and close any modifications to the loan terms. • Complete foreclosures of assets where borrower is in default.

  11. Deal Process AssetManagement Approval &Closing Marketing Sourcing Underwriting • Advertisements in newspapers, magazines, trade publications. • Meetings with new and existing clients to communicate strategy & product offerings. • Hosting dinners, golf outings, sporting events and group trips to build personal relationships with customers. • Networking at industry conferences, outings. • Receipt of a financing package from customers or brokers. • Analysis of property financials, asset quality, market conditions and execution strategy. • Negotiate loan pricing, proceeds and structure while in competition with other lenders for the business. • Execute a term sheet / loan application with the client. • Detailed analysis of property rent roll and expenses. • Property site inspection and identification of rent and sale comps. • Engineering and environmental due diligence completed by expert 3rd-party consultants. • Complete a credit request to obtain internal approval for the deal. • Presentation of credit request & analysis to committee for approval. • Preparation and negotiation of legal documentation. • Execution of legal documents and wiring of money. • Host a closing dinner with the client. • Monitoring of loan performance, focused on CoC, DSCR, and LTV. • Execute future funding draws, loan extensions, asset releases, and cash flow sweeps. • Seek approval for and close any modifications to the loan terms. • Complete foreclosures of assets where borrower is in default.

  12. Deal Process AssetManagement Approval &Closing Marketing Sourcing Underwriting • Advertisements in newspapers, magazines, trade publications. • Meetings with new and existing clients to communicate strategy & product offerings. • Hosting dinners, golf outings, sporting events and group trips to build personal relationships with customers. • Networking at industry conferences, outings. • Receipt of a financing package from customers or brokers. • Analysis of property financials, asset quality, market conditions and execution strategy. • Negotiate loan pricing, proceeds and structure while in competition with other lenders for the business. • Execute a term sheet / loan application with the client. • Detailed analysis of property rent roll and expenses. • Property site inspection and identification of rent and sale comps. • Engineering and environmental due diligence completed by expert 3rd-party consultants. • Complete a credit request to obtain internal approval for the deal. • Presentation of credit request & analysis to committee for approval. • Preparation and negotiation of legal documentation. • Execution of legal documents and wiring of money. • Host a closing dinner with the client. • Monitoring of loan performance, focused on CoC, DSCR, and LTV. • Execute future funding draws, loan extensions, asset releases, and cash flow sweeps. • Seek approval for and close any modifications to the loan terms. • Complete foreclosures of assets where borrower is in default.

  13. Deal Process AssetManagement Approval &Closing Marketing Sourcing Underwriting • Advertisements in newspapers, magazines, trade publications. • Meetings with new and existing clients to communicate strategy & product offerings. • Hosting dinners, golf outings, sporting events and group trips to build personal relationships with customers. • Networking at industry conferences, outings. • Receipt of a financing package from customers or brokers. • Analysis of property financials, asset quality, market conditions and execution strategy. • Negotiate loan pricing, proceeds and structure while in competition with other lenders for the business. • Execute a term sheet / loan application with the client. • Detailed analysis of property rent roll and expenses. • Property site inspection and identification of rent and sale comps. • Engineering and environmental due diligence completed by expert 3rd-party consultants. • Complete a credit request to obtain internal approval for the deal. • Presentation of credit request & analysis to committee for approval. • Preparation and negotiation of legal documentation. • Execution of legal documents and wiring of money. • Host a closing dinner with the client. • Monitoring of loan performance, focused on CoC, DSCR, and LTV. • Execute future funding draws, loan extensions, asset releases, and cash flow sweeps. • Seek approval for and close any modifications to the loan terms. • Complete foreclosures of assets where borrower is in default.

  14. Deal Process AssetManagement Approval &Closing Marketing Sourcing Underwriting • Advertisements in newspapers, magazines, trade publications. • Meetings with new and existing clients to communicate strategy & product offerings. • Hosting dinners, golf outings, sporting events and group trips to build personal relationships with customers. • Networking at industry conferences, outings. • Receipt of a financing package from customers or brokers. • Analysis of property financials, asset quality, market conditions and execution strategy. • Negotiate loan pricing, proceeds and structure while in competition with other lenders for the business. • Execute a term sheet / loan application with the client. • Detailed analysis of property rent roll and expenses. • Property site inspection and identification of rent and sale comps. • Engineering and environmental due diligence completed by expert 3rd-party consultants. • Complete a credit request to obtain internal approval for the deal. • Presentation of credit request & analysis to committee for approval. • Preparation and negotiation of legal documentation. • Execution of legal documents and wiring of money. • Host a closing dinner with the client. • Monitoring of loan performance, focused on CoC, DSCR, and LTV. • Execute future funding draws, loan extensions, asset releases, and cash flow sweeps. • Seek approval for and close any modifications to the loan terms. • Complete foreclosures of assets where borrower is in default.

  15. 110 Plaza • $54 MM deal with BCL and Lehman Brothers • 320,200 sq. ft. office building in San Diego • Refinance of existing GE 1st mortgage & Lehman mezz loans Deal Structure • Floating rate first mortgage secured by a single office property • $49.5MM initial funding plus a $4.5MM commitment for future TI and leasing commission costs • 3 year term, 9.5% CoC, interest only Deal Challenges • Loan secured by a single office asset • Strong market, sponsorship and in-place property metrics (3.4x DSCR) • $15.5MM increase to the existing GE 1st mortgage loan • Improved NOI since closing; customer retained cash equity in the transaction

  16. Eaglewood Apartments • $16 MM deal with Whitehall / Archon • 424 apartment units in Orlando • Refinance & increase of existing GE debt Deal Structure • 2-year floating rate loan – 8.5% CoC, 2.1x DSCR, 84% LTV • $10MM existing balance on the final asset remaining from a portfolio loan that is nearing maturity. Extending loan and funding an additional $6MM. Deal Challenges • Increasing loan balance by $6MM, with no remaining borrower cash equity at risk. • Strong metrics at the higher loan amount (8.5% CoC, 2.1x DSCR). • Good quality, well maintained asset located in a low risk market.

  17. Metro Park South • $33 MM deal with Morgan Stanley and Normandy Real Estate Partners • 205,000 sq. ft. office building in Old Bridge, NJ. Constructed in 2001. • Currently 21% occupied Deal Structure • 3-year floating rate loan at 75% LTC at initial funding, plus a $1.5MM letter of credit for interest carry, taxes & insurance. • $9MM future funding commitment for TI/LC/CapEx; $5MM Earnout at stabilization. Deal Challenges • Financing of a 21% leased asset with no in-place cash flow to cover debt service. • Structure includes a letter of credit to cover 1 year of debt service, taxes & insurance. • Class ‘A’ asset that is well located in a recovering market.

  18. AMLI at Spring Creek • $35 MM deal with Morgan Stanley • 1,180 apartment units in Atlanta • Constructed in 4 phases Deal Structure • 3-year floating rate loan secured by all 4 phases. • A portion of the debt was subordinate to low floater, long-term county bonds in place on 3 of the phases. Deal Challenges • Structure: 3 phases of the asset encumbered by attractive senior bond financing. • Loan structured as a senior preferred equity deal on the 3 encumbered phases, crossed with a 1st mortgage lien on the 4th phase. • LTV: High at 90% • Strong coverage due to the bonds; rate protection purchased.

  19. Charter Oak Portfolio • $160 MM deal with Blackstone • 9 Outlet Center Malls • Located in 8 States Across the U.S. Deal Structure • Fixed rate loan, subordinate to $187MM assumed low leverage mortgage debt • Structured as preferred equity due to restrictions on debt in the senior mortgage • 4.75 year term, 13% CoC, interest only for 3 years Deal Challenges • Asset type: Outlet Malls not a traditional asset class • Strong sponsorship with extensive retail/outlet experience • Security position: Subordinate loan not secured by a mortgage lien • Structured as preferred equity with extensive control rights

More Related