terra income fund international · 18 portland#airport#hotel#portfolio hotel portland,#or mezzanine...
TRANSCRIPT
Terra Income Fund InternationalIDB Capital Corp.
Member: FINRA/SIPC
October 2016
This is neither an offer to sell nor a solicitation of an offer to buy the units in the Company. The offering may be made by means of the Private PlacementMemorandum. The sales literature must be accompanied or preceded by that Memorandum and read in conjunction therewith to fully understand theimplications and risks of the securities to which it relates. An investment in the Company’s units is illiquid and involves significant risks and therefore issuitable only for those persons who understand those risks and the consequences of their investment and who are able to bear the risk of loss of theirentire investment. See the “Risk Factors” section beginning on page 6 of the Private Placement Memorandum for a discussion on the material risks thatshould be considered before an investment in the units is made.
Table of Contents
1 Offering Summary
2 Sponsor
3 Current Loan Portfolio
4 Real Estate Financing Market
5 Mezzanine Lending
6 Representative Investments
Terra Income Fund International is a newly organized Cayman Islands exemptedcompany formed to acquire interests in real estate related loans in the U.S. originatedor acquired by Terra Property Trust, Inc. and/or affiliated funds controlled by TerraCapital Partners. It is the second in a series of funds sponsored by Terra CapitalPartners available exclusively to offshore investors. The first of such funds was TerraSecured Income Fund 5 International, which closed on June 30, 2015.
Terra Income Fund International
4
Designed to provide consistent income while preserving principal.
Structure: Cayman Islands exempted company
Offering Size: $25,000,000
Share Price: $100,000
Strategy: Mezzanine & bridge lending backed by U.S. property (co-invest alongside Terra Property Trust, Terra’s primary U.S. investment vehicle)
Current Return: 9% per annum (distributed quarterly)
Management Fee: 1% of assets under management
Hold Period: Estimated five years from close of offering
Return of Principal: Through loan repayments
Sponsor: Terra Capital Partners (www.tcp-us.com)
Sponsor History & Management
Terra Capital Partners
• Established real estate mezzanine & bridge lender
• Founded 2002 – Completed transactions backed by over 350 U.S. properties
• Terra sold 100% of its interests at the market peak in mid-2007 & re-entered the lending market in mid-2009
• Since 2009, Terra has sponsored seven income funds for U.S. investors
• Fully Integrated Platform – Terra originates, manages & services its loans
• Terra is an SEC Registered Investment Adviser
• Real estate & credit market conditions in the U.S. are favorable for Terra’s investment strategy
6
Senior ManagementSimon Mildé - Co-Founder & Chairman
• 45 years of experience in real estate finance, investment, development and management
• Founder and Chairman for 20 years of Jones Lang Wootton NA (now Jones Lang LaSalle)
• Co-founded JLW Realty Advisors (now Clarion, one of the largest institutional real estate managers)
Bruce Batkin - Co-Founder & CEO
• 38 years of experience in real estate finance, investment, development and management
• Held senior positions at Merrill Lynch, Donaldson Lufkin & Jenrette (now Credit Suisse) and ABN Amro
• Graduate of Cornell University and Harvard Business School
Greg Pinkus - Chief Financial Officer• Certified Public Accountant with 30 years of experience
• Previous positions at W.P. Carey & Co. and Bank of America
• Graduate of the Leonard N. Stern School of Business at New York University
Dan Cooperman - Chief Originations Officer
• 19 years of experience in real estate finance, investment, leasing and management
• Previous positions at Greenwich Group International and Chase Manhattan Bant
• Graduate of the University of Colorado at Boulder
Steve Hamrick - CEO, Terra Capital Markets
• 35 years of experience in investment management and fundraising
• Held senior positions at W.P. Carey & Co., UBS PaineWebber and EF Hutton
• Graduate of Duke University
7
Terra Property TrustCurrent Loan Portfolio
Terra Property Trust – Current Portfolio as of October 2016
9
Investment Property Type Locat ion Loan St ructure ProfileTPT Current Balance
% of Port . LTV
Interest Rate
Years to Maturity
1 144 S. Harrison Street Mult ifamily East Orange, NJ First Mortgage Construct ion 22,639,955 8.2% 66.4% 12.0% 0.3 years2 2700 NW 2nd Ave Inf ill Land Miami, FL First Mortgage Pre-Development 19,620 ,000 7.1% 60 .0% 12.0% 1.2 years3 1733 Ocean Avenue Off ice Santa Monica, CA Levered Mortgage (net) Value-Add 16,450 ,061 6.0% 77.6% 13.6% 1.4 years4 Marriot t Warner Center Hotel Los Angeles, CA Preferred Equity Stab ilized 16,250 ,000 5.9% 82.2% 13.3% 2.8 years5 Millennium IV Inf ill Land Conshohocken, PA First Mortgage Pre-Development 13,980 ,000 5.1% 50 .5% 12.0% 0.0 years6 Park Central and Park East 1 Off ice Greenv ille, SC Equity Value-Add 13,785,167 5.0% N/ A 12.0% N/ A7 30 Warren Street Mult ifamily Manhat tan, NY Mezzanine Construct ion 13,078,123 4 .8% 69.2% 12.0% 2.8 years8 CSRA Cred it Facility Mult i-Asset Mult i-State Preferred Equity Stab ilized 12,500 ,000 4 .5% N/ A 13.0% 0.8 years9 1100 Biscayne Boulevard Hotel Miami, FL Mezzanine Value-Add 11,918,000 4 .3% 65.6% 15.0% 1.0 years10 Up town Newport Inf ill Land Newport Beach, CA First Mortgage Pre-Development 11,200 ,000 4 .1% 59.2% 12.0% 0.0 years11 42-50 24 th Street Inf ill Land Long Island City , NY Mezzanine Pre-Development 8,750 ,000 3.2% 80 .5% 14 .0% 0.7 years12 Nelson Brothers Cred it Facility Student Housing Mult i-State Preferred Equity Stab ilized 8,000 ,000 2.9% N/ A 15.0% 0.8 years13 Peachtree Pointe Off ice At lanta, GA Mezzanine Stab ilized 7,500 ,000 2.7% 70 .3% 12.0% 0.1 years14 BPG Off ice Port folio Off ice Wilming ton, DE Mezzanine Stab ilized 7,000 ,000 2.5% 85.9% 13.5% 1.7 years15 Urbanea Mult ifamily Miami, FL Mezzanine Construct ion 6,250 ,000 2.3% 74 .1% 13.0% 2.7 years16 UBS Tower Off ice Nashv ille, TN Mezzanine Stab ilized 6,225,000 2.3% 76.3% 15.0% 0.7 years17 San Diego Doub leTree Hotel San Diego, CA Preferred Equity Value-Add 5,200 ,000 1.9% 64 .2% 12.0% 0.3 years18 Port land Airport Hotel Port folio Hotel Port land , OR Mezzanine Stab ilized 5,000 ,000 1.8% 70 .8% 13.0% 2.0 years19 Georg ia Mult ifamily Port folio Mult ifamily Various, GA Mezzanine Stab ilized 5,000 ,000 1.8% 71.6% 14 .0% 2.3 years20 302 East 96th Street Mult ifamily Manhat tan, NY Mezzanine Construct ion 4 ,756,353 1.7% 71.8% 13.0% 2.3 years21 Ramada Plaza Beach Resort Hotel Fort Walton Beach, FL Mezzanine Stab ilized 4 ,500 ,000 1.6% 64 .7% 13.0% 0.8 years22 Z Hotel NYC Hotel Long Island City , NY Mezzanine Stab ilized 4 ,500 ,000 1.6% 59.6% 13.0% 1.2 years23 Myst ic Hotel Hotel San Francisco, CA Preferred Equity Stab ilized 4 ,325,000 1.6% 66.1% 12.0% 0.2 years24 Mayo Port folio Mult ifamily Various, MA Mezzanine Stab ilized 4 ,000 ,000 1.5% 68.7% 12.0% 5.9 years25 Museo Apartments Mult ifamily Aust in, TX Mezzanine Stab ilized 4 ,000 ,000 1.5% 83.5% 12.0% 2.2 years26 AHF Port folio Mult ifamily Various, TX Mezzanine Stab ilized 3,869,381 1.4% 62.8% 14 .0% 5.9 years27 Hilton Garden Inn Hotel Fort Washing ton, PA Preferred Equity Stab ilized 3,742,000 1.4% 79.7% 13.0% 0.0 years28 Doub leTree by Hilton Hotel Greensboro, NC Mezzanine Stab ilized 3,500 ,000 1.3% 73.9% 14 .0% 1.4 years29 Pine Tree Drive Off ice Miami Beach, FL Mezzanine Pre-Development 3,500 ,000 1.3% 85.7% 14 .0% 0.3 years30 Clemson Student Housing Port folio Student Housing Seneca, SC Mezzanine Stab ilized 3,000 ,000 1.1% 75.5% 13.0% 7.3 years31 Kingsport Mult ifamily Port folio Mult ifamily Various, TN Mezzanine Stab ilized 3,000 ,000 1.1% 74 .4% 13.0% 2.2 years32 Marriot t Spartanburg Hotel Spartanburg , SC Mezzanine Stab ilized 3,000 ,000 1.1% 75.1% 13.5% 2.3 years33 Ball State Student Housing Port folio Student Housing Muncie, IN Mezzanine Stab ilized 2,700 ,000 1.0% 84 .8% 13.0% 6.9 years34 Encino Courtyard Retail Encino, CA Mezzanine Stab ilized 2,500 ,000 0 .9% 73.3% 13.5% 6.3 years35 Holiday Inn Mid town Hotel Aust in, TX Mezzanine Stab ilized 2,450 ,000 0 .9% 81.8% 12.5% 4.0 years36 55 Miracle Mile Mixed Use Coral Gab les, FL Mezzanine Stab ilized 2,380 ,000 0 .9% 79.3% 14 .0% 2.9 years37 Arbor Stat ion Mult ifamily Montgomery, AL Preferred Equity Stab ilized 2,100 ,000 0 .8% 83.4% 15.0% 5.8 years38 Strat ford Village Mult ifamily Montgomery, AL Preferred Equity Stab ilized 1,600 ,000 0 .6% 84 .1% 15.0% 5.8 years39 BPG Hotel Port folio Hotel King of Prussia, PA Mezzanine Stab ilized 1,260 ,000 0 .5% 81.3% 13.0% 6.2 years
Total / W eighted Average: 275,0 29 ,0 40 10 0 .0 % 70 .4% 13.0 % 1.6 years
Cash Balance: 12,000 ,000
Total Investments & Cash: 287,0 29 ,0 40
1 Park Central and Park East is an equity investment . LTV and Years to Maturity are not app licab le. Interest Rate rep resents the cash-on-cash d iv idend .
U.S. Commercial Real Estate Financing Market
10
Insufficient Supply of Real Estate Credit to Meet Demand
• Shrinking Bank Market - In January 2016, there were 1,915 fewer commercial banks than January 2008.
• Shrinking Securitization Market - Issuance peaked at 230 billion in 2007; issuance for 2016 projected at $70 billion.
• Strong Demand for Real Estate Credit - $1.4 trillion of mortgage loan maturities between 2016 and 2019.
11
$166
$198
$229
$12$3
$12
$33$48
$86$94 $101
$50
$0
$50
$100
$150
$200
$250
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*
U.S. Commercial Mortgage Backed Securit ies Issuance($ Billions)
$132 $130 $144 $156
$110 $137 $41 $29
$26 $27
$26 $26
$90 $98
$102 $97
$357 $391
$314 $30 8
$0
$100
$200
$300
$400
$500
2016 2017 2018 2019
Total Commercial Real Estate Maturit ies($ Billions)
Banks CMBS Life Companies Other LendersSource: Trepp
*Issuance through Q'3 2016Source: Commercial Mortgage Alert
Mezzanine Lending
Terra’s portfolio consists primarily of mezzanine loans and bridge loans backed by U.S. commercial properties. Mezzanine loans are junior to first mortgage loans and senior to the borrower’s equity. The capital stack below shows where Terra invests. Today, the addition of mezzanine financing adds about 1.70% to our borrower’s financing cost.
Borrower Equity25.0%
Terra Mezzanine Debt15.0%
Senior Debt60.0%
13
Loan-to-ValueRatio: 75.0%
Mezzanine DebtInterest Rate: 13.5%
Senior DebtInterest Rate: 5.0%
Weighted AverageInterest Rate: 6.7%
(6.7% - 5.0% = 1.70%)
Typical Mezzanine Capital Structure
Relative Risk – Mezzanine Debt vs. Equity
Mezzanine investments involve less risk and generate a higher current return than equity investments.
14
Mezzanine Equity
Current Yield: Higher Lower
Predictability: Higher Lower
Ongoing Capital Costs: No Yes
Dependent on Capital Growth: No Yes
Safety of Principal: More Less
Representative Investments
15
The following loans are examples of those in which Terra’s first international fund(Terra Secured Income Fund 5 International) has participated. The full list is set forthin the accompanying Private Placement Memorandum.
Class A Office Building - Santa Monica, CA
16
1733 Ocean Avenue, Santa Monica, CA
Terra closed a First Mortgage in March 2016 to fund the recapitalization of a 96,000 square foot Class-A office building in Santa Monica, CA.
Loan Amount: $54 million
Loan Type: First Mortgage
Interest Rate: LIBOR + 8.5%
Loan Term: 24 months
Minimum Return: 18 months
Appraised Value: $65 million
Loan-to-Value Ratio: 76.9%
Status: Performing
Note: Terra utilized $34 million of financing;interest rate of LIBOR + 5.25%; net investment of$20 million yields 13.6%.
Residential & Retail Project - New York, NY
17
30 Warren Street, New York, NY
Terra closed a Mezzanine Loan in March 2016 to fund the development of a 23-unit residential and retail condominium in New York, NY.
Loan Amount: $19.05 million
Loan Type: Mezzanine Loan
Interest Rate: 12.0%
Loan Term: 40 months
Minimum Return: 22 months
Appraised Value: $121.12 million
Loan-to-Value Ratio: 69.2%
Status: Performing
Note: The unit sizes and economics of theproperty enable it to work as rental apartments.
Edition Hotel Site Acquisition - West Hollywood, CA
18
9040 Sunset Boulevard, West Hollywood, CA
Terra closed a Mezzanine Loan in October 2014 to fund the acquisition of six parcels of land and the pre-development costs for the construction of a 190-room Marriott EDITION hotel in West Hollywood, CA.
Loan Amount: $25 million
Loan Type: Mezzanine Loan
Interest Rate: 12.0%
Loan Term: 12 months
Minimum Return: 12 months
Appraised Value: $57 million
Loan-to-Value Ratio: 87.7%
Status: Repaid
Marriott Hotel - Los Angeles, CA
19
Marriott Warner Center, Los Angeles, CA
Terra closed a Preferred Equity Investment in July 2014 to fund the acquisition and renovation of a 474-room Marriott hotel in Los Angeles, CA.
Loan Amount: $20 million
Loan Type: Preferred Equity
Interest Rate: 13.25%
Loan Term: 60 months
Minimum Return: 30 months
Appraised Value: $115 million
Loan-to-Value Ratio: 82.2%
Status: Performing
Residential Project - Miami, FL
20
Urbanea, Miami, FL
Terra closed a Mezzanine Loan in June 2016 to fund the development of a 100-unit residential building in Miami, FL.
Loan Amount: $6.25 million
Loan Type: Mezzanine Loan
Interest Rate: 13.0%
Loan Term: 36 months
Minimum Return: 24 months
Appraised Value: $38.1 million
Loan-to-Value Ratio: 74.1%
Status: Performing