Carlton Group Recapitalization Prowess

August 16, 2017

Based on increased property values, property owners are more inclined to recapitalize, rather than sell properties outright to take advantage of increased U.S. property market valuations, particularly in CBD and major market locations.

The prevailing dynamic, which is becoming more common place, is that owners are resisting the temptation to sell assets as few good alternatives exist to reinvest capital.

As a consequence thereof, property owners are interested in aligning with good foreign and domestic capital partners to continue ownership and recapitalize which will allow owners to pull out cash now through a mark to market asset valuation with a second bite at the apple as sponsorship will continue to earn asset management fees and additional upside as they create additional residual value which will allow owners to continue with good foreign and domestic capital partners..

Carlton specializes in accessing unique balance sheet capital for recapitalizations and we also have tremendous experience negotiating and structuring favorable sponsor waterfalls to increase sponsor yields which are highly beneficial to property owners.

The following transactions are just a few of the many recapitalizations that Carlton closed or will be closing shortly:

– 8.5 Million SF Suburban Office Portfolio, Various locations throughout U.S. – Carlton has arranged a joint venture for the recapitalization of this 32 property heavily cash flowing portfolio by sourcing a $1 billion first mortgage from a major institutional lender and $200 million of equity from a NYC-based real estate developer/investor. The sponsor is a nationally recognized private equity investment firm specializing in acquiring and managing value-add real estate and related operating businesses.

– 1,800 Unit Multi-Family Portfolio, Baltimore, MD MSA – Carlton raised $250 million of equity from a premier global real estate company to facilitate the recapitalization of this portfolio on behalf of one of the most successful residential and owner-operators in the U.S.

– General Motors Building, New York City – At two million square feet, the General Motors Building is arguably the highest profile office tower in Manhattan. Carlton arranged the $1.4 billion equity recapitalization on behalf of Harry Macklowe by bringing in a German closed-end fund to invest $300 million of equity which was required to pay off the existing debt and build out the Apple Store and the Madison Avenue retail. Carlton also negotiated an innovative structure which allowed Mr. Macklowe to buyout his German partner at a fixed coupon, which wound up ultimately having a huge economic benefit to Mr. Macklowe.

– 666 Fifth Avenue, New York City – Carlton represented the Kushner Companies in the $525 million investment sale and recapitalization at 666 Fifth Avenue. This transaction was put together during the market downturn and Carlton was able to access an entrepreneurial and institutional investor who paid $525 million which was a 2% cap at the time for a 49% interest in just the retail at this 1.5 million square foot office building on Fifth Avenue. This transaction demonstrated Carlton’s ability to access capital during the financial crisis which essentially saved the owner’s $500 million equity investment.

– One Park Avenue, New York City – Carlton arranged the sale of a controlling interest with a promote to the prior owner while simultaneously arranging $500 million of equity and debt to recap One Park Avenue, an iconic one million square foot office asset in Midtown, Manhattan. Aside from raising the equity and debt (and also negotiating a standstill and discount with some of the existing lenders), Carlton negotiated a structure whereby the client received a significant promote and co-management of the property.

– 1180 Avenue of the Americas, New York City – Carlton arranged this transaction with a joint venture between our client and one of the largest corporations in China, which has a substantial real estate division. This was a highly tense and time sensitive transaction as the mezzanine lender not only accelerated their loan but had initiated a UCC process to gain control of the property. Carlton was able to access this international investor, who stepped up in a matter of days, to put up a hard deposit, and closed shortly thereafter. This transaction also allowed our client to keep control and management of the property, along with a significant promoted interest.

– 450 West 33rd Street, New York City – As exclusive adviser to the Carlton was able to access a huge Canadian fund which paid off the existing lenders and allowed our client to maintain co-management of the property along with a significant promote. This asset had an approximate $600 million multi-tranche capital stack, which was owned by a variety of senior and junior lenders. The junior lender had retained another broker to sell their position, which was sold to two large real estate companies that were determined to gain control of the asset. Carlton worked quickly and quietly, arranging a competitive process, which allowed our client to gain the necessary funds to buy out their original capital partner and stabilized the capital stack. This recapitalization allowed our client to maintain both control and management of the property.

– 760 Market Street, San Francisco – Carlton closed a $75 million recapitalization for one of San Francisco’s most historic assets at 760 Market Street for Thor Operating Fund II. The financing for this 278,000 square foot office and retail asset known as the “Phelan Building” was completed in less than 30 days. Carlton successfully streamlined the underwriting of this complex financing with over 300 tenants and maximized both terms and proceeds for our client.

– Four Seasons, Milan, Italy – Carlton accessed a London based balance sheet investor to provide €250 million to facilitate the refinancing and recapitalization of this five-star iconic asset.

– Heyford Park, suburban London, UK – Carlton raised €45 million of senior financing for a recapitalization and partner buy-out of the 1,250 acre mixed-use residential and commercial project in the Heyford Park community one hour outside of London in Oxfordshire, England.

– Barcelona office building (confidential) – Carlton Spain raised debt financing on behalf of a prominent owner or their CBD office building to convert it into luxury apartments and retail.

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