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Presentation by Harvey Kasin, Hypo Real Estate Bank International AG Bank Funding of Retail property November 2008

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Presentation by Harvey Kasin, Hypo Real Estate Bank International AG Bank Funding of Retail property November 2008. Introduction. What is Property Lending? Retail Property Lending An Example Property Stats. What is property lending?.

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Presentation by Harvey Kasin, Hypo Real Estate Bank International AG

Bank Funding of Retail property

November 2008

introduction
Introduction
  • What is Property Lending?
  • Retail Property Lending
  • An Example
  • Property Stats
what is property lending
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
retail property london
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
retail property london1
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
an example
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.

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

Investment Market Summary
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

Retail Investment – The next Few Months