european distressed real estate conf 13 march09
DESCRIPTION
I am scheduled to speak in London, England at the European Distressed Real Estate Conference on April 6-7, 2009. I have attached a copy of my power point presentation, which will be distributed to each of the institutional investors attending the conference. The panel on which I sit is on Monday at the following time and shall cover the following subjects with session chair and panel participants, as set forth below. 17:30 EVALUATING INVESTMENTS IN THE HOTEL/CONDO HOTEL & LEISURE/CASINO SECTORS • Hotel Macroeconomic Situation & Historic Performance During Down Times • Are there Clusters of Distressed Hotels? • Complexities Involving Mixed-Use Projects with Lodging Elements • What are your Options with Broken Properties? • Chain Bankruptcies & Related Cross-Border Issues • Casino & Gaming Underperformers Session Chair: Chris Evans, Partner HAMILTON HOTEL PARTNERS Panel Participants: Ramsey Mankarious, Chief Executive Officer CEDAR CAPITAL PARTNERS LTD. Scott L. Podvin, Managing Director THE CREST AT WATERFORD LAKES, LLC Charles Human, Managing Director HV HODGES WARD ELLIOTT Jochen D. Schäfer-Surén, Head of Hotels and Leisure-Fund Management INVESCO REAL ESTATE Carola Lueder, Real Estate Broker PROPERTIES USA REMAX PARTNERS Please feel free to visit our IMN"s website for more a detailed agenda: http://secure.imn.org/web_confe/index.cfm?sc=20090407_RE_0028&pg=Agenda I look forward to seeing or hearing from you with your comments to the attached, as I hope that we will be able to work together again soon. Best regards, Scott PodvinTRANSCRIPT
By: Scott L. Podvin, Managing DirectorThe Crest at Waterford Lakes, [email protected]://www.linkedin.com/in/sp0dvinTel: (305) 793-5762; Fax: (305) 665-3971
Scott L. Podvin: The European Distressed Real Estate Conference – 6-7 April 2009
THIS FUND SHALL FOCUS ON PURCHASING THE FOLLOWING TYPES OF ASSETS:
City-CoreDevelopment
Projects
Strategically located developments, located in the centre of a city, being large-scale and multi-phase developments typically consisting of residential, office, retail, entertainment and cultural properties with a blend of historic restoration and modern architecture.
Integrated Residential
Development Projects
Large-scale multi-family residential communities in secondary and tertiary markets located on main and main where we can implement a capital improvement program to push the rents. We will be prepared to purchase the asset on an all cash basis, but once the community has been stabilized, we shall lever it or dispose of the asset, triggering a repayment event.
PODVIN DEVELOPMENT GROUPRAISING $$100mm FUND
TO PURCHASE REAL ESTATE, DISTRESSED/OPPORTUNISTIC ASSETS
Broken Condos & Conversions or
Partially Constructed
Communities
There will be tremendous opportunities in busted condos and conversions while value add plays will also be easy to find. Likewise, there will be many projects with incomplete construction that we will be able to pick up on the cheap, complete construction and reposition the asset to create a vibrant working, walkable (with bike baths and all), sustainable and living community for working class people.
WE ARE NOW RAISING A $100,000,000 FUND TO PURCHASE DISTRESSED SELLER’S ASSETS
Scott L. Podvin: IMN’s European Distressed Real Estate Conference6-7 April, [email protected]://www.linkedin.com/in/sp0dvin
FUND RAISING CENTRAL
Scott L. Podvin: IMN’s European Distressed Real Estate Conference
6-7 April 2009
[email protected]; http://www.linkedin.com/in/sp0dvin
PODVIN DEVELOPMENT GROUPCORE BUSINESS FOCUS
Our core business focus is the:
1. Identification;2. Acquisition; 3. Ownership; and 4. Operation of multi-family
residential and hospitality real estate properties.
Scott L. Podvin: IMN’s European Distressed Real Estate Conference
6-7 April 2009
[email protected]; http://www.linkedin.com/in/sp0dvin
Investors
1. Institutional Investors 2. Pension funds 3. Insurance companies 4. Endowments 5. Investment Banks 6. Commercial Banks 7. Fund of funds 8. High net worth individuals 9. Family offices 10. Sovereign wealth funds
Scott L. Podvin: IMN’s European Distressed Real Estate Conference
6-7 April 2009
[email protected]; http://www.linkedin.com/in/sp0dvin
Our Preferred Shares pay cumulative preferential cash distributions at an annual rate of 9%.
Investment ObjectivesOBJECTIVES:
(1) acquire superior-located, middle-income, mutli-family residential properties that have been neglected or poorly managed; and
(2) increase profitability thru: (a) providing superior on-site property mngmnt, (b) improving physical appearance and living environment of the properties;(c) implementing renovation strategies in those instances where rental rate increases justify the costs; and,(d) implementing business development strategies to cross sell ancillary services
Scott L. PodvinIMN’s European Distressed Real Estate Conference, 6-7 April, [email protected]; http://www.linkedin.com/in/sp0dvin
OPPORTUNITIES IN DISTRESS
European surveys reflect that demand for real estate debt in general – and for distressed debt in particular – is at an all time high
Scott L. PodvinIMN’s European Distressed Real Estate Conference, 6-7 April, [email protected]; http://www.linkedin.com/in/sp0dvin
BLUE HORESHOE LOVES DISTRESS
Consider the dramatic tilt in institutional investors’ (2007) allocations:$44.5 billion targeted to domestic real estate
$36.3 billion to private real estate$24.7 billion to non-core (i.e., value-added and opportunistic),
$11.6 billion to core (i.e., stabilized apartment, industrial, office & retail)
Scott L. Podvin: IMN’s European Distressed Real Estate Conference; April 6-7, 2009
[email protected]; http://www.linkedin.com/in/sp0dvin
VULTURES CIRCLING – EYEING THEIR PREY
In 2008, $87Bn was raised by 87 opportunistic or debt and distressed debt focused funds.
Of the $87Bn, U.S. accounted for $47MM and Europe for $15.8MM
$56.25Bn raised in 2006$73.75Bn raised in 2007
Scott L. PodvinIMN’s European Distressed Real Estate Conference, 6-7 April, [email protected]; http://www.linkedin.com/in/sp0dvin
SPATE OF RECORD FUND RAISINGS FOR DISTRESSED DEBT BY
1. Carlyle2. MGPA3. Blackstone4. Area Property Partners5. Palmer Capital – recently launched an
opportunity fund with GVA Grimley6. Schroders lookling to raise up to £1bn in
new equity
Scott L. Podvin: IMN’s European Distressed Real Estate Conference; April 6-7, 2009
[email protected]; http://www.linkedin.com/in/sp0dvin
OTHERS ARE WAITINGON THE SIDELINES
COMPELLING STORYConsider the explosive growth of RE-oriented private equity: ApolloBlackstoneColony CapitalRamiusBain CapitalSAC CapitalRecent DealsLondon Opportunity FundStamford’s Opportunity Fund
Source: Kingsley Associates and Institutional Real Estate, Inc
Scott L. Podvin: IMN’s European Distressed Real Estate Conference
6-7 April 2009
[email protected]; http://www.linkedin.com/in/sp0dvin
Opportunity Knocks• There will be more ways to earn opportunistic
returns going forward.
Collier capital - get inundated• Harbourvest - with calls w/• Goldman Sachs - cash strapped inv
• Paul Capital - selling private • Pantheon and - equity assets• Lexington partners –• RBS hires UBS to sell its almost £500mm of
investments in private equity funds
• $134Bn of private equity assets just on the balance sheet of 6 big money banks and AIG
• Source: super return conference Berlin, Germany
Scott L. Podvin: IMN’s European Distressed Real Estate Conference
6-7 April 2009
[email protected]; http://www.linkedin.com/in/sp0dvin12
Goldman Sachs is asking investors in its $15bn private equity fund for approval to shift much of its remaining uninvested money into distressed debt in a stark indication of just how dysfunctional the buy-out business has become amid the meltdown in credit markets.
SMART MONEY GOES TO FLORIDA
Terra Firma Capital Partners, increases assets under mngmnt fr €2bn to €11bn, w/ about 80% of its portfolio biz revenues from U.S.
SMART MONEY GOES TO THE U.S.
Scott L. Podvin: IMN’s European Distressed Real Estate Conference
6-7 April 2009
[email protected]; http://www.linkedin.com/in/sp0dvin
CDS CLEANING SERVICE
Scott L. Podvin: European Distressed Real Estate Conference 6-7 April 09 [email protected]; http://www.linkedin.com/in/sp0dvin
HEDGE FUND LIQUIDATIONS--“THE GREAT LIQUIDATION”
- Industry size
The industry Managed approx. $2.5T at its peak in the summer of 2008.[1]
Global credit crunch has caused assets under management (AUM) to fall sharply through a combination of trading losses and the withdrawal of assets from funds by investors.[2]
Scott L. Podvin: IMN’s European Distressed Real Estate Conference 6-7 April [email protected]; http://www.linkedin.com/in/sp0dvin
OFFSHORE HEDGE FUNDS At end-2007, 52% of the number
of hedge funds were registered offshore.
Most popular offshore locations: Cayman Islands (57%); British Virgin Islands (16%)
and;Bermuda (11%).
The other offshore centers are the Isle of Man and Mauritius.
Scott L. Podvin: IMN’s European Distressed Real Estate Conference 6-7 April [email protected]; http://www.linkedin
ONSHORE HEDGE FUNDS The US was the most popular
onshore location (with funds mostly registered in Delaware) accounting for 65% of the number of onshore funds, followed by Europe with 31%.[3]
HUGE OUTFLOWS, NO INFLOW
OPPORTUNITY IS HIDDEN IN THE OUTFLOW!
Scott L. Podvin: IMN’s European Distressed Real Estate Conference 6-7 April [email protected]; http://www.linkedin
HEDGE FUNDLIQUIDATION SALES
Now large numbers of funds are accelerating or preparing plans to hand back cash to investors.
These funds include:
Drake Management, the New York manager, Centaurus Capital in London, London Diversified Fund Management and many
convertible bond specialists, including Howard Fischer’s Basso Capital in Stamford, Connecticut, and Jeremy Herrmann’s Ferox Capital Management in London.
Scott L. Podvin: IMN’s European Distressed Real Estate Conference 6-7 April [email protected]; http://www.linkedin
TARGET PRACTICEHIT THE HEDGE
DE SHAW – LARGEST US HEDGE FUND -- APPOINTS INDEPENDENT ADMINISTRATOR
MILLENIUM MNGMNT,
$11Bn NY HEDGE FUND,
APPTS LONDON’S
GLOBEOP, AS IND.
ADMIN
UNION BANCAIRE PRIVEE, The 2d Biggest Inv. in Hedge Funds (& a major loser from Madoff), warns others to appoint indep. admins
These guys should be selling soon!
Funds without independent administrators:
1) ESL Investments, run by Eddie Lampert 2) Renaissance Technologies,
run by billionaire Jim Simons
3) Chicago Citadel, run by Ken Griffin 4) SAC CAPITAL, run by
billionaire Steven Cohen 5) Cerberus
6) HBK Capital, Dallas, Tx 7) Caxton Associates, run
by billionaire Bruce Kovner
These are the targets!!!Scott L. Podvin: IMN’s European Distressed Real Estate Conference 6-7 April [email protected]; http://www.linkedin.com/in/sp0dvin
TIME FOR A MARKET STABILITY REGULATOR
Scott L. Podvin: IMN’s European Distressed Real Estate Conference 6-7 April [email protected]; http://www.linkedin.com/in/sp0dvin
PRIV. EQUITY FIRMS MAKE THE BEST SELLERS/JV PARTNERS
Scott L. Podvin IMN’s European Distressed Real Estate Conference: 6-7 April [email protected]; http://www.linkedin.com/in/sp0dvin
1 The Carlyle Group Washington DC $ 32.5
2 Kohlberg Kravis Roberts New York $ 31.1
3 Goldman Sachs Princ Invmt Area NY $ 31.0
4 The Blackstone Group New York $ 28.36
5 TPG Capital Fort Worth $ 23.5
6 Permira London $ 21.47
7 Apax Partners London $ 18.85
8 Bain Capital Boston $ 17.3
9 Providence Equity Partners Prov, RI $ 16.36
10 CVC Capital Partners London $ 15.65
11 Cinven London $ 15.07
12 Apollo Management New York $ 13.9
13 3i Group London $ 13.37
14 Warburg Pincus New York $ 13.3
15 Terra Firma Capital Partners London $ 12.9
16 Hellman & Friedman San Fran $ 12.0
17 CCMP Capital NY $ 11.7
18 Gen. Atlantic Greenwich, CT $ 11.4
19 Silver Lake Prtnrs Menlo Park, CA $ 11.0
20 Teachers' Priv Capital Toronto $ 10.78
21 EQT Partners Stockholm $ 10.28
22 1st Reserve Corp Greenwich, CT$ 10.1
23 American Capital Bethesda, MD $ 9.57
24 Charterhouse Cap Prtnrs London $ 9.0
25 Lehman Bros Priv. Eq. NY $ 8.5
26 Candover London $ 8.29
27 Fortress Invstmnt Group NY $ 8.26
28 Sun Cap. Prtnrs Boca Raton, FL $ 8.0
29 BC Partners London $ 7.9
30 Thomas H. Lee Partners Boston $ 7.5
Private Equity Fund Diagram
Scott L. PodvinIMN’s European Distressed Real Estate Conference, 6-7 April, [email protected]; http://www.linkedin.com/in/sp0dvin
MATURING & ROBUST 2DRY MARKETFOR SELLERS OF PRIVATE EQUITY ASSETS
Types of Secondary Transactions
2.1 Sale of LP Ints
2.2 Sale of Direct Ints
Driven by strong demand for private equity exposure, a sig. amount of capital has been committed to dedicated secondary market funds from investors looking to increase and diversify their private equity exposure
Scott L. Podvin: IMN’s European Distressed Real Estate Conference
6-7 April 2009
[email protected]; http://www.linkedin.com/in/sp0dvin
FOUR POCKETS OF DEMANDLondon-based private equity house Benson Elliot Capital Management has closed Benson Elliot Real Estate Partners III, a pan-European distressed real estate fund. The fund had a target size of €500 million at its 2008:Q3 launch, and has managed to raise around €510 million, officials at the firm said.
1.Opportunity Funds that have been established to buy real estate equity
2.Newer Opp. Funds that have been created as dedicated debt investors
3.Private Equity looking at real estate debt
4.Real Estate Companies buy back their own debt or debt of others
Scott L. PodvinIMN’s European Distressed Real Estate Conference, 6-7 April, [email protected]; http://www.linkedin.com/in/sp0dvin
What Should An Investor Do?
• Core funds, particularly newer vintage funds, will begin to see more attractive pricing for acquisitions.
• Existing core assets will begin to see the benefit of slowing development as we move into 2009-10.
• REITs in US, Europe and Asia take a beating during 2007-08. So, we are approaching the time for pension funds, endowments, REITS, and other qualified investors to rebalance/add to real estate positions.
Scott L. Podvin: IMN’s European Distressed Real Estate Conference April 6-7, 2009 [email protected]; http://www.linkedin.com/in/sp0dvin
• US deals dropped from 154 to 99 while UK deals fell from 74 to 50
• Securitization trusts hold $1.5T of subprime and alt-A loans, $400B of which are delinquent
• 5 Canadian Banks –RBC, Toronto-Dominion Bank, Bank of Nova Scotia, Canadian Imperial Bank and Bank of Montreal –put investment banks under same umbrella
• Capital Markets are closed
• European Recession Deepening and UE rising
• Europe's recession risks lasting into 2010
• European Central Bank's decision last week to revise downwards its 2010 growth forecast for eurozone countries from 1 per cent to zero.
• Since the world financial crisis exploded in September, three European governments have fallen - in Belgium, Latvia and Iceland, which is not a EU member but could soon apply to join.
• Europe risks being the last region to pull itself out of recession unless it can present a unified front on the economic crisis.
• Germany sees sharp (20.7% (Jan – Jan)) drop in exports, the driver for the region’s largest economy.
• IMF is expected to borrow $100Bn from Japan and may even issue bonds, an unprecedented step in its 64-yr history
• Russia to supervise a consolidation plan that would see the number of banks cut from 1,100 to 500.
• Global financial tsunami batters Hong Kong, as it falls into recession
Capital Market Conditions Drive Outlook
Scott L. Podvin: IMN’s European Distressed Real Estate Conference 6-7 April [email protected]; http://www.linkedin.com/in/sp0dvin
26
Source: Cartoonbank.com
2009 is Going to be Painful for Many
Scott L. Podvin: IMN’s European Distressed Real Estate Conference,
6-7 April 2009: www.TheCrestLife.com
[email protected]; http://www.linkedin.com/in/sp0dvin
• FDIC had $18.8Bn in depo ins fund at end of 4th qtr to protect about $4.8T of ins deposits
• 14 banks have failed this yr, bringing total to 35 since Jly
• At end of 4th qtr, 252 banks and thrifts on govt’s problem list (534 banks failed in 1989)
• Banks are charging fees of 2.5 to 3.5% on ave for a solid issuer n the current market.
• Unemployment ____________
• Banks are syndicating more risk (laying off 50 to 75%)
• IMF bails out Eastern Europe – Romania, Bulgaria and Croatia -- and Ukraine, Latvia, Hungary & Serbia
• Economic risks spike for Germany, Spain, UK, Ireland & certain “emerging” states
• Spain’s Unemployment reaches 15%
• Spain’s economic miracle is a mirage” : 1mm unsold new homes.
• RBS reports £24.1bn loss for 2008-- largest in British corporate history – after suffering heavy losses from hostile takeover of ABN AMRO, the Dutch lender
Recession is here.
How deep and how long?
• Growth slows and region may fall into recession
• Is it different this time or is Asia in denial?
• Warnings signs from Hong Kong & Vietnam, slower growth showing in Australia and Japan, although China and India forge ahead
Scott L. Podvin: European Distressed Real Estate Conference 6-7 April 09 [email protected]; http://www.linkedin.com/in/sp0dvin
28
BALKANIZATION OF EUROPEAN FINANCE?• European CDS
market is overrun by PIIGS – Portugal, Ireland, Italy, Greece and Spain
Sovereign Defaults: about ¼ if S&Ps rated sovereigns are on negative outlook – the highest proportion ever
• Regulators will continue to require that banks maintain a min. 6% Tier 1 capital ratio, 3% of which should come from common stock.
• Emergency Economic Stabilization Act of 2008
• One in 4 banks not profitable in 2008, highest level in 25 yrs
• Dollar index rises
• Ireland bails out two largest lenders, Allied Irish Banks and Bank of Ireland, after it nationalized Anglo Irish Bank, the 3rd largest bank.
• Belgium’s Fortis gets nationalized and sold to BNP Paribas of France
• Britain in deep recession and could shrink by as much as 4% in 1st ½ yr – pound sank as much as 3% vs. the dollar
• Poland’s Zloty falls 14% vs. euro
• China’s Export’s Plunge 17.5%, but remains resilient, as trade surplus hovers at $39.1Bn
• Japan shows its economy contracted 12.7% on a seasonally adjusted annualized basis in the 4th Qtr
CRISIS STARTS IN U.S. BUT TURNS INTO CATASTROPHE IN & AROUND EUROPE
Scott L. Podvin: IMN’s European Distressed Real Estate Conference 6-7 April [email protected]; http://www.linkedin.com/in/sp0dvin
29
Russian Public and private institutions need to refinance $117.1Bn in bank loans and bonds this year
RECOVERY CHECKLIST: In the works: Among EU initiatives to
combat the crisis are:● A recovery plan costing €200bn ($263m, £188bn), of which €170bn stems from national governments ● Spending by means of “automatic stabilisers” (unemployment benefits and other social security payments) worth about €200bn
Recapitalising banks – €300bn
● Bank guarantees – €2,500bn
● Aid for central and eastern Europe – a €25bn facility, of which €6.5bn is already being disbursed to Hungary and €3.1bn to Latvia
● Support for the car industry – €7bn in loans expected from the European Investment Bank
Scott L. Podvin: IMN’s European Distressed Real Estate Conference 6-7 April [email protected]; http://www.linkedin.com/in/sp0dvin
UNITED KINGDOM1. London is Europe’s leading centre for
hedge fund managers, with three-quarters of European hedge fund investments, about $400bn (£200bn), at the end of 2007.
2. Unemployment has soared to above 2m for the first time since 1997.
3. London won market share from continental exchanges and remained the most successful market in Europe for initial pubic offerings in 2008.
4. Britain is set to have the longest recession of all the major economies.
Scott L. Podvin: IMN’s European Distressed Real Estate Conference 6-7 April [email protected]; http://www.linkedin.com/in/sp0dvin
UNITED KINGDOM5. Britain will invest $73 Bn in its banks;
6. Britain decided that the Royal Bank of Scotland, Northern Rock and Bradford & Bingley are, in effect, public corporations because the gov’t has sig. control over their operations.
7.Ave. UK home is now £195,724, down more than £25,000 in the last year, according to DCLG.
8. House prices down:Ireland down 14.3%England down 11.8%. West Midlands down 14.1% London down 13.9%.
Scott L. Podvin: IMN’s European Distressed Real Estate Conference 6-7 April [email protected]; http://www.linkedin.com/in/sp0dvin
OPPORTUNITY LIES BENEATH THE SURFACE
RBS reports £24.1bn loss for 2008-- largest in British corporate history – after suffering heavy losses from hostile takeover of ABN AMRO, the Dutch lender
Lloyds– including HBOS -- in worse shape than RBS after purchasing Halifax Bank of Scotland – UK govt’s stake NOW reaches 77%
Scott L. Podvin: IMN’s European Distressed Real Estate Conference 6-7 April [email protected]; http://www.linkedin.com/in/sp0dvin
Angela Merkel Backs Germany’s BanksGERMANY OPTS FOR LOAN GUARANTEES, NOT DIRECT STAKE IN BANKS
In Berlin, German leaders unveiled a 480 billion package consisting mostly of loan guarantees, but no stimulus plan
Unlike the British blueprint, however, the plan announced by Ms. Merkel does not call for Berlin to acquire direct stakes in German banks.
Instead, the German approach offers €400Bn in guarantees for inter-bank loans and another €80Bn for direct injections of capital to restore weakened balance sheets and purchase the toxic, illiquid assets.
Reichmuth & Co are shutting Madoff-hit funds of hedge funds.
In 2002 Germany introduced the single European currency, the euro.
Scott L. Podvin: IMN’s European Distressed Real Estate Conference 6-7 April [email protected]; http://www.linkedin.com/in/sp0dvin
GERMANY UPS THE ANTE TOOThe German gov’t has done a lot with a €50Bn
stimulus for consumption, €115Bn for stability to the real economy, and €400Bn in stabilizing financial institutions.
Many funds of hedge funds are already on the block or are being shut down with Deutsche Bank Closing its Topiary unit and Spain’s BBVA closing its Altitude JV.
Scott L. Podvin: IMN’s European Distressed Real Estate Conference 6-7 April [email protected]; http://www.linkedin.com/in/sp0dvin
VIVA LA FRANCEFRANCE AGREES TO €360Bn FOR
BAIL-OUTS
1MM French demonstrators staged W. Europe’s biggest public protest
French gov’t creates fund to guarantee debt for up to 5yrs
To obtain these funds, Banks pledge collateral, including debt currently not accepted as collateral by the ECB.
Scott L. Podvin: IMN’s European Distressed Real Estate Conference 6-7 April [email protected]; http://www.linkedin.com/in/sp0dvin
SARKOZY VOTES AGAINST ADDITIONAL STIMULUS
In addition, a 2d French state-sponsored company will provide up to €40 Bn in direct capital injections to banks that request it, in exchange for handing over equity stakes in the debtor.
No short term stimulus plan. The combined budget deficit
of the eurozone’s four biggest countries – Germany, France, Italy and Spain – will hit 6.4% of GDP in 2010, up from 5.8% in 2009.
Scott L. Podvin: IMN’s European Distressed Real Estate Conference 6-7 April [email protected]; http://www.linkedin.com/in/sp0dvin
EURO-FACTS The bailout packages are roughly similar in economic
impact:
1.3.3 percent of GDP in Germany,
2.2.1 percent in France, and 3.2.9 percent in Britain, according to Capital Economics in London
Scott L. Podvin: IMN’s European Distressed Real Estate Conference 6-7 April [email protected]; http://www.linkedin.com/in/sp0dvin
EURO-FACTS CONT-While Europe’s biggest economies led the way:Austria makes €100Bn available for
recapitalizations and loan guarantees; Spain insures up to €100Bn in bank
debt; & Netherlands threw €220Bn into the
mix.
Scott L. Podvin: IMN’s European Distressed Real Estate Conference 6-7 April [email protected]; http://www.linkedin.com/in/sp0dvin
BIG DEBT By 2012, the ratio of gross public debt to gross
domestic product could be: 117% in Italy; 97% in the US; 80% in France; 79% in Germany; & 75% in the UK. 224% in Japan
Scott L. Podvin: IMN’s European Distressed Real Estate Conference 6-7 April [email protected]; http://www.linkedin.com/in/sp0dvin
ALL IN For Germany, France, the Netherlands and
Austria — countries whose combined economies are just over half the size of the United States’ — state guarantees and capital injections reach 1.3 trillion euros, according to Holger Schmieding, chief European economist for Bank of America in London.
Scott L. Podvin: IMN’s European Distressed Real Estate Conference 6-7 April [email protected]; http://www.linkedin.com/in/sp0dvin
WHO HAS THE MOST DEBT1. Ukraine- $40Bn in loans with $28.8Bn in
reserve2. Hungary-$35Bn in loans with $31Bn in reserve3. Turkey— $100Bn in loans with $70Bn in reserve4. Asia—$775Bn in loans (highest external debt to
roll over)
Scott L. Podvin: IMN’s European Distressed Real Estate Conference 6-7 April [email protected]; http://www.linkedin.com/in/sp0dvin
NOT MUCH BETTER IN THE U.S.
Scott L. Podvin: IMN’s European Distressed Real Estate Conference 6-7 April [email protected]; http://www.linkedin.com/in/sp0dvin
Public Law 110-343/HR 1424SON OF TARP IS BORNE
Effective October 3, 2008, this 169-page law created a $700 billion dollar Troubled Assets Relief Program under the Emergency Economic Stabilization Act of 2008 (division A), and also enacted the Energy Improvement and Extension Act of 2008 (division B), Tax Extenders and Alternative Minimum Tax Relief Act of 2008 (division C)
Scott L. Podvin: IMN’s European Distressed Real Estate Conference 6-7 April [email protected]; http://www.linkedin.com/in/sp0dvin
Expenditures and Commitments
1. As of February 9, 2009, $388 billion had been allotted, and $296 billion spent, according to the Committee for a Responsible Federal Budget. Among the money committed, includes:[26]
2. $250 billion to purchase bank equity shares through the Capital Purchase Program ($195 billion spent);
3. $40 billion to purchase preferred shares of American International Group (AIG, Fortune 500) through the program for Systemically Significant Failing Institutions ($40 billion spent);
4. $20 billion to back any losses that the Federal Reserve Bank of New York might incur under the Term Asset-Backed Securities Loan Facility (none spent);
Scott L. Podvin: IMN’s European Distressed Real Estate Conference 6-7 April [email protected]; http://www.linkedin.com/in/sp0dvin
Expenditures and Commitments Cont.
4. $40Bn in stock purchases of Citigroup and Bank of America ($20Bn each) through the Targeted Investment Program ($40Bn spent)
5. $12.5Bn in loan guarantees for Citigroup ($5Bn) and Bank of America ($7.5Bn) through the Asset Guarantee Program (none spent);
6. $25Bn in loans to autos and their financing arms through the Automotive Industry Financing Program ($21 billion spent)
Scott L. Podvin: IMN’s European Distressed Real Estate Conference 6-7 April [email protected]; http://www.linkedin.com/in/sp0dvin
TARP TIMELINEOn Nov. 12, 2008, Sec. of the Treasury Hank Paulson indicates
reviving the securitization market for consumer credit is a new priority
On Dec. 19, 2008, President Bush, declares TARP funds may be spent on any program he deems necessary; and requests TARP funds to support the auto industry.
On Jan. 15, 2009, Treasury issues interim final rules for reporting and record keeping.
Scott L. Podvin: IMN’s European Distressed Real Estate Conference 6-7 April [email protected]; http://www.linkedin.com/in/sp0dvin
TARP TIMELINE CONT-On 21/Jan/09, Treasury announced new
regulations regarding disclosure and mitigation of conflicts of interest in TARP contracting.
On 5/Feb/09, U.S. Sen. approves changes to TARP, prohibiting firms receiving TARP funds from paying bonuses to their 25 highest-paid employees.
On 10/feb/09, Sec. Treasury Timothy Geithner outlined his plan to use $300Bn of which $50 billion for foreclosure mitigation and the rest to fund private investors to buy toxic assets from banks.
Scott L. Podvin IMN’s European Distressed Real Estate Conference, 6-7 April [email protected]; http://www.linkedin.com/in/sp0dvin
BUY A TOASTER, GET A FREE BANK
Scott L. Podvin IMN’s European Distressed Real Estate Conference, 6-7 April [email protected]; http://www.linkedin.com/in/sp0dvin
NATIONALIZING THE BANKING SYSTEM
Total losses now exceed impact of RTC
Scott L. Podvin: IMN’s European Distressed Real Estate Conference 6-7 April [email protected]; http://www.linkedin.com/in/sp0dvin
Lender’s Brace for Global Cooling
PRE-CREDIT CRISIS TODAY 2008
MAX LOAN TO VALUE/LOAN TO COST 70%-75% 60%
MIN DEBT SERVICE COVERAGE RATIO 1.05x 1.20x
NOI UNDERWRITING Borrowers Pro forma NOI Current in-Place NOI
SPREADS 85-125 bps 250-350 bps
LOAN PROCEEDSSized using
I/O DSCRSized using Amortizing DSCR
AMORTIZATION 10 Years I/O3 Years I/O on 10 Year Loan
LOAN REQUIREMENTS MinimalRequires Structuring (holdbacks,
earn outs, TI escrows)
SYNDICATION RISK (Large Loans) Underwritten, Lead Bank Lender Best Efforts, Borrower
Scott L. PodvinIMN’s European Distressed Real Estate Conference, 6-7 April, [email protected]; http://www.linkedin.com/in/sp0dvin
NOW THAT I’VE FOUND MY PEARL, THE UNIVERSE IS MY OYSTER
So, How Should I Price Non-Core Real Estate:
Identify components of asset-level returns,
Understand impact of financial leverage,
Examine effects of transaction costs; and
Examine effects of JV structures.
Scott L. Podvin: IMN’s European Distressed Real Estate ConferenceApril 6-7, [email protected]; http://www.linkedin.com/in/sp0dvin
REAL ESTATE FUNDS – THE ANATOMY OF THE DEAL
Scott L. Podvin: IMN’s European Distressed Real Estate ConferenceApril 6-7, [email protected]; http://www.linkedin.com/in/sp0dvin
What to Look for in a REAL ESTATE FUND
Scott L. Podvin: IMN’s European Distressed Real Estate ConferenceApril 6-7, [email protected]; http://www.linkedin.com/in/sp0dvin
ExperienceSkillsContactsPractical problem solvingReputationTeam Capacity$$ Balance Sheet $$
Alignment of Interests: FUND & REAL ESTATE COMPANY
Scott L. Podvin: IMN’s European Distressed Real Estate ConferenceApril 6-7, [email protected]; http://www.linkedin.com/in/sp0dvin
Fund ObjectivesFund LifeLeverage and Financing GuaranteesManagement Style and ControlTax ConsiderationsDealing with Unexpected Issues
THE CHEMISTRY COUNTS
BUSINESS PLANWe will acquire, own & operate multi-family residential
properties. We plan to own five (5) multi-family residential
properties. We will acquire additional properties meeting certain
objectives described in our prospectus in the section entitled ‘‘Investment Guidelines.’’
We plan to finance the acquisition of these add’l properties mostly through banks
No commitments from any lenders with respect to a credit facility at this time.
Scott L. Podvin: IMN’s European Distressed Real Estate ConferenceApril 6-7, [email protected]; http://www.linkedin.com/in/sp0dvin
Take Care of Your Family
Scott L. Podvin, Managing Director of The Crest at Waterford Lakes, LLC
[email protected]: (305) 793-5762Fax: (305) 665-3971