2/27/2013 RealCapital 2013 Session C2: Alternative Sources of Capital: How Are Mortgage Funds and Private Equity Meeting the Needs of Investors and Borrowers Mortgage Funds and Private Equity Market Size Presented by Chris Brossard, CEO CMLS FINANCIAL RealCapital 2013 / February 26, 2013 Mortgage Funds & Private Equity 2011 Market Size, Outstandings: $12.8 Billion, 7.7% 2011 Total Commercial Mortgage Market: $166 billion ~$5.2 billion ~$7.6 billion 3.1% 4.6% Mortgage Funds & P/E - Alternative mandates Mortgage Funds & P/E - Conventional mandates FI, Public Sector, Securitization 92.3% CMLS FINANCIAL RealCapital 2013 / February 26, 2013 /1 1
2/27/2013 Mortgage Funds & Private Equity 2011 Market Size, Origination: $4.3 Billion, 14.7% 2011 Total Commercial Mortgage Market: $28 billion ~$2.6 billion 9.3% ~$1.5 billion 5.4% Mortgage Funds & P/E - Alternative mandates Mortgage Funds & P/E - Conventional mandates FI, Public Sector, Securitization 85.4% CMLS FINANCIAL RealCapital 2013 / February 26, 2013 /1 Mortgage Funds & Private Equity 2012 Market Size, Outstandings: $14.6 Billion, 8.6% 2012 Total Commercial Mortgage Market: ~$172 billion ~$6.3 billion ~$8.3 billion 3.7% 4.9% Mortgage Funds & P/E - Alternative mandates Mortgage Funds & P/E - Conventional mandates FI, Public Sector, Securitization 91.5% CMLS FINANCIAL RealCapital 2013 / February 26, 2013 /1 2
2/27/2013 Mortgage Funds & Private Equity 2012 Market Size, Origination: $4.8 Billion, 16.6% 2012 Total Commercial Mortgage Market: ~$29 billion ~$3.1 billion 10.7% ~$1.7 billion 5.9% Mortgage Funds & P/E - Alternative mandates Mortgage Funds & P/E - Conventional mandates FI, Public Sector, Securitization 83.4% CMLS FINANCIAL RealCapital 2013 / February 26, 2013 /1 About CMLS Financial Commercial Mortgage New: Single Family Lending Mortgage Lending • $2.2 billion of new • Single family launches this commercial origination 2012 month Securitization & Fund Mortgage Valuation Management • $250 million CMBS Oct ’12 • $8 billion per annum CMLS FINANCIAL RealCapital 2013 / February 26, 2013 /1 3
2/27/2013 KingSett Capital KINGSETT FUNDS (active management creating premium risk weighted returns): Legal structure: limited partnerships Growth : 5 closed end, finite life funds - institutional investors Income: 1 open ended, indefinite life fund - high net worth retail investors $4.0 billion of equity raised since 2002 $12.5 billion of transactions - acquisitions, dispositions & mortgages $4.0 billion of assets under management today $1.0 billion investment program for 2013 – real estate & mortgages MORTGAGE LENDING: Over $1.0 billion invested so far and growing Over $500 million repaid to-date Over $500 million outstanding today 69% Ontario; 13% Alberta; 10% BC; 5% Quebec; 3% Other 40% residential; 29% retail; 21% office; 11% industrial 59% income producing; 33% construction; 8% land development $75 million is largest and $770,000 is smallest loan to-date 4
2/27/2013 Junior Debt – To Acquire Existing Apartment Building Location: Toronto Property Type: 150 Unit Apartment Building (3.3% Vacancy) Loan Amount: $5,300,000 Second Mortgage Loan Exposure: $16,000,000 ($107,000 per suite) Loan / PP: 83% DSC Ratio: 1.00x NOI / Debt: 7.3% Junior Debt – To Acquire Existing Apartment Building PROBLEM: KingSett DSC ratio = 1.00x Borrower cash was only 9.3% of purchase price Borrower assumed inefficient first mortgage First Mortgage: 55% LTV ratio – 5.15% interest rate – closed loan VTB third mortgage behind KingSett – 5.00% interest (50/50 prepaid/postponed) SOLUTION / COMFORT: KingSett accepted 1.00x DSC Ratio and a VTB third mortgage We committed a 48 month loan – open after 12 months Fifth loan with this client – never any issues Proven ability to reduce energy costs (via capital investment) Positive DSC ratio with right sized & priced first mortgage KS comfortable with $107K loan / door and our 7.3% NOI / Debt EXIT: More senior debt on maturity & more equity (or sale) 5
2/27/2013 Junior Debt – To Reposition Existing Asset Location: Toronto Loan Amount: $20,000,000 Second Mortgage Loan Exposure: $63,000,000 ($242 psf) Property Type: 160,000 sf office (43% leased & occupied) 100,000 sf retail (40% pre-leased but not occupied) LTC Ratio: 90% LTV Ratio: 81% (upon stabilization) Junior Debt – To Reposition Existing Asset PROBLEM: Borrower can contribute 10% of project cost Property 42% pre-leased Only 27% occupied Revenues don’t cover operating costs Retrofit = cost overrun risk SOLUTION / COMFORT: LTC Ratio = 90%. We bridged gap between senior debt and equity Interest payments added to loan for entire term We agreed to discharge surplus development lands Great borrower – very experienced. Great location KingSett comfortable with asset EXIT: Repaid in 14.5 months Conventionally refinanced upon substantial pre-leasing 6
2/27/2013 Timbercreek Asset Management • Timbercreek is a leading real estate asset manager with a hands-on, conservative approach to investing. • Timbercreek manages $3.2 billion in assets through one or a combination of investment strategies; • Private Equity (Direct Real Estate) • Private Debt (Mortgage Investments) • Public Equity/ Debt (Global Real Estate Securities) • Timbercreek is a leading provider of customized real estate financings. In 2012, Timbercreek committed $928 million across 101 transactions. 13 Timbercreek – Transaction #1 Loan Am ount: $65,000,000 Property Type: Multi-Residential Suites: 290 Location: Montreal, QC 14 7
2/27/2013 Timbercreek – Transaction #2 Loan Am ount: $3,380,000 Property Type: Medical Office NRA: 33,895 sq. ft. Location: Stratford, ON 15 Presentation 8
2/27/2013 Apartment Building Description: Acquisition financing for developer to renovate and rent units to tenants. Alternatively, the 4 co- owners may combine units and occupy themselves Property: 4 storey, 17 unit vacant apartment building in Forest Hill Loan: 1st mortgage of $3,000,000 Loan-to-Purchase Price: 75% 17 Apartment Building Challenges: • Property vacant • Owner wants to convert to 4 residential condominium units • Present Toronto zoning issues removing units from rental Solution: • Proven borrower • Hired excellent consultants to liaison with Atrium • 75% of purchase price loan within 10 days 18 9
2/27/2013 Airport Industrial Park Description: Acquisition financing for developer to renovate and Artist Rendering sell industrial condominium units to tenants. Property: Multi-tenanted industrial building, Toronto, ON Loan: 1st mortgage of $7,250,000 Loan-to-Purchase Price: 75% 19 Airport Industrial Park Challenges: • 65% vacant • 30-40 year old multi- Artist Rendering tenanted industrial building • Building Condition Report left a lot to be desired about the buildings Solution: • Structured finance solution – 60% of acquisition cost financing. • Multiple draws to bridge gutting and upgrading model suite and sale of individual units to end users 20 10
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