Probability of S2 recap returning equity
Scott Everett is many things but a quitter isn’t one.
S2 is attempting to save their REIT and Fund I by pooling 26 viable properties into a new fund created expressly for these purchases at a basis of $1.26B - with senior debts totaling $1.2B, marking for an average LTV of 95%
The target equity raise is $115M, uses consisting of: $38.4M debt repurchase, $25M principal paydown on loan mods, $15.4M to rate caps, $8M capex, and $7.5M closing costs, leaving $20.7M working capital
The plan is also contingent on the following:
1. All mezz noteholders exchanging for equity
2. Positive rent growth in the first year
3. SOFR < 4.1% in the next 5 years
4. Operating expenses, insurance, and taxes trending at or below 2%, 3%, and 3%, respectively.
If this was a prediction market bet, what would the odds be that investors see a return of capital?
seems like kicking can down the road and praying for values to jump
$115M levered macro bet
0%. You can't financially engineer your way out of these shit deals. He's toast.
I'll second that. The play here is to get investors to provide equity to retain control of the assets to harvest fee income.
He’s cooked, also on RCA read servicer comments and you will see that some of the buildings are in bad shape. TBH I’m not sure I’d want to buy a building a syndicator used to own given there’s been no capex done in years.
Yup, the deals are in atrocious shape and will need an absurd amount of capex just to stay operational.
0%
It’s just a way to bail him out because the moron put a bunch of his own money into these deals to try and save them
Fixed rate is for suckers…hang it in the louvre
Solving to 95% LTV floaters on vintage property in a hawkish environment with no rent growth and expanding cap rates. Definitely will be a winner
5% to return all equity. 20% to return some portion of equity is how I would handicap it.
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