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Mar 152012
 
(left to right) Panelists: Adam Spies, Managing Director, Eastdil Secured, LLC; Jason Choulochas, Managing Director, Investments, Wrightwood Capital; William Hughes, Senior Vice President and Managing Director, Marcus Millichap Capital Corp; Andrew Scandalious, HFF; Moderator: Simon Ziff, President, Ackman-Ziff Real Estate Group Moderator: Simon Ziff, President, Ackman-Ziff Real Estate Group

Finding and matching the right source of capital for a deal in today’s market can be like looking for a needle in a haystack. Simon Ziff, President of Ackman-Ziff Real Estate Group moderated a panel on sourcing debt, equity, mezzanine, bridge, gap and rescue financing at the ULI Real Estate Finance and Investment 2011 summit. he was joined by panelists Jason Choulochas, Managing Director, Investments, Wrightwood Capital; William Hughes, Senior Vice President and Managing Director, Marcus Millichap Capital Corporation; Adam Spies, Managing Director, Eastdil Secured LLC and Andrew Scandalious, HFF.

Ziff

What are the trends-what do you see you happening in the market?

Spies

Overall the market is flush with capital-on the CMBS side we have seen spreads widen out a little bit, probably about 40 basis points-on debt side yields are aggressive-the amount of capital we are seeing is immense. In terms of Mezz we are back to old school basics-you have to build the capital stack. In terms of equity-there are a number of equity flush funds-hedge funds have gotten into the game as well as private equity funds-pension funds have become active and we are seeing a fair amount of foreign capital as well.

Hughes

The market has improved across all classes. On smaller transactions- one to 35 million the debt equity is probably not getting down to seven’s-more like low nine’s- we just can’t get down there so is more concern on that quality asset and those transactions to limit debt against value. Debt yields have moved down from 11’s to 10’s to 9’s and the high 8’s but we haven’t seen them go down as far as class A institutional assets.

Choulochas

Just to add to what everybody has said the life companies on select deals are putting large amounts of capital into the NY market(did a 900 hundred million with Metlife) and they are chasing quality as an overall trend-there is plenty of liquidity for every deal that has a good basis and business plan. The general theme is a flight to quality even in secondary markets.

Ziff(to Spies)

About six months ago when replacing the capital stack you had to do the sub-debt yourself-today the lenders are coming to the table with the entire package. Du you now rely on lenders to do that or do you still need to do that yourself to make sure they execute on that sub-debt?

Spies

Part of it is that you want to make sure they are not taking scrape and they getting the most efficient deals. A lot of times lenders do not want to break down their pricing-of how they price their mezz- so you have to dig a little bit and ask those questions. To keep them honest what we’re still doing is talking to the mezz lender. On a lot of deals it’s the mezz lender that is leading the deal so on a lot of deals you are building the capital stack backwards.

Ziff

I know a lot of people on this panel reverse engineer the deal. It gives your client, developer, or owner a lot more leverage to negotiate if the sub-debt piece is done first.

All the panel members agreed the mezz has climbed up the capital stack.

Ziff

How long does it take to get a deal done.

Typically 30 – 90 days.

The deals that take longer are because some of the pieces – like getting the partners in line can take longer.

Stephen Duff, Moss Adams, LLP; David; David Gilbert, Clarion Partners

Dean Schwanke, ULI

Joseph Luik, JWL Properties; Dennis Yeskey, New Londonderry Capital

Scott Matthews, Vulcan Inc.; Michael Melaugh, Mill Creek Residential

Anthony Fink, Suntrust Inc.; Michael Sonnabend, PMZ Realty Capital LLC

Adam Spies, Managing Director, Eastdil Secured, LLC; Jason Choulochas, Managing Director, Investments, Wrightwood Capital; William Hughes, Senior Vice President and Managing Director, Marcus Millichap Capital Corp; Andrew Scandalious, HFF; Moderator: Simon Ziff, President, Ackman-Ziff Real Estate Group

Simon Ziff, President, Ackman-Ziff Real Estate Group

Andrew Scandalious, HFF