New loan tool challenges old prices

By Adam Pincus | February 13, 2009 11:37AM

A loan calculator created by a Soho-based lender provides a cautionary lesson for high-priced apartment portfolios purchased in recent years.

Avant Capital Partners developed a formula to quickly estimate loan sizes for multi-family rental properties valued between $1 million and $35 million for non-institutional purchasers. The tool gives the layperson a way to estimate the value of properties, which is generally a mysterious process.

Although the system was not developed to price massive portfolios such as Stuyvesant Town and Riverton Houses, entering basic financial data from those portfolios yields loan values two to five times lower than what was lent during the easy-credit days in 2006 and 2007. Estimated values were determined using the most recent, publicly available data for revenue, expense, vacancy rates and net income.

Adam Luysterborghs, managing principal at Avant Capital Partners, said although the function was developed to help price much smaller buildings, the differences between the suggested loan amount and the actual loans are enormous.
“This exercise puts into stark relief how [underwriting] guidelines have changed for multi-family [properties] and also how aggressively landmark, large-balance transactions were underwritten in the recent past,” Luysterborghs said.

Stuyvesant Town was purchased by Tishman Speyer Properties and BlackRock Realty in 2006 for $5.4 billion with $4.4 billion in total debt, but the loan calculator valued the property at $2.3 billion with a maximum loan of $1.6 billion.

Riverton Houses, owned by Stellar Management, has a $225 million first mortgage, yet the calculator reported it should be valued at just $68 million, with only $45 million in loans recommended.

An official with Stellar Management, who asked not to be identified, said the $68 million price was absurdly low. Recent published reports put the value at about $180 million.

The Savoy in Harlem, owned by Apollo Real Estate Advisors and Vantage Properties, reportedly has $367 million in total debt, while the calculator said it should be priced at $126 million with only $84 million in loans.

A spokesperson for Tishman Speyer declined to comment and Vantage Properties did not respond to a request for comment.