All-in-One Mezz piece for development loan

  • Anonymous
    # 1 year, 3 months ago

    Hi Spencer & Michael,

    I am working on an office development project using the All-in-One model.

    The way we underwrite the deal is that there will be a Mezz piece in addition to the senior loan for the development financing. I know you have mezz/junior loan in the perm loan tab but I am wondering if there is any Mezz piece for the short-term development loan? Thank you!

    Cooper

    Spencer BurtonSpencer Burton
    Keymaster
    # 1 year, 2 months ago

    Hey Cooper,

    Unfortunately there is not a way to model mezz during development in the current version of the Ai1. Believe it or not adding a third tranche to the capital stack during development is a pretty heavy lift. It’s much simpler during operation.

    I’ll add this to our feature request list though and so what I can’t do at some point.

    Best,

    Spencer

    Anonymous
    # 5 months, 3 weeks ago

    Glad to know the difficulties I’m having are a “heavy lift”

    Modeling a hotel with 65% construction loan, a 30%-ish equity stack and a gap to be filled either with more equity or a mezz portion. The developer has done 2 other deals with Mezz because the construction loan rates are so attractive that way. In the current deal we are looking to build 40 or so condos on top of the hotel stack. Will be financed by Mezz, presold prior to C/O (even before construction start) and closed at C/O with profits and proceeds reducing debt.

    It will be amazing if over time a solution mezz debt during development surfaces. But I understand there are other priorities.

    Spencer BurtonSpencer Burton
    Keymaster
    # 5 months, 2 weeks ago

    Unfortunately, the nuances of the backend make adding mezz during development nearly impossible in the All-in-One model. I’m starting to map out a massive update to the model for 2020/21 that would completely rebuild and simply the backend, but that’s at least 6 months to a year away.

    In the meantime, have you looked at Michael’s hotel development model? While I don’t think it includes the option to model mezz yet, the structure is much simpler and so adding mezz much easier. It’s also a far more complete solution for modeling hotel operating cash flow than the All-in-One. Check out the model here and consider emailing Michael about adding mezz to it:

    https://www.adventuresincre.com/hotel-development-model/

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