Quote:
Originally Posted by marothisu
70,000 units - Atlas is huge. I've never heard of them, but then again I'm a real estate development n00b
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I am not a nub, but I hadn't really heard of them either. There are a LOT of massive holding companies out there like this that no one ever hears about. Someone needs to own all those apartment buildings and the scale they operate on is simply very large because of the associated economies of scale.
550 units might sound like a big bet to most people, but that's a drop in the bucket when your portfolio is 70,000 units.
Some quick, back of the envelope, development math:
Let's assume the price per key that Atlas is using is $500,000 (not unreasonable since Parc Huron sold for like $485k/key a while back and this is a way more awesome building). They are likely planning on using an approximately 50% equity, 50% debt mix on a project like this since that is the going expectation by banks for riskier projects like this right now. So we assume the total valuation for it's apartment units that Atlas is operating on is:
550 X $500,000 = $247,500,000
Of that 50% is equity so Atlas would have to contribute about $125,000,000 to be lent against with another $125,000,000. Which is pretty damn close to the number they are throwing down to recapitalize the project. HOWEVER, I think the $500,000/key assumption is probably fairly low and probably closer to $750,000/key which means Atlas will probably have to contribute another $50,000,000+ in equity to the project on top of that. That also assumes Atlas does not have a stake in the condo portion which of course would completely change the game since they would be required to front even more equity. What makes me nervous is that you have to run some pretty high per key prices to even come close to the approximately $1,000,000,000 it will take to finish this thing.
I suppose the good news is that commodity and labor prices have fallen significantly since the boom and this is probably only a billion dollar project after accounting for the work that has already been done instead of a $1.5-1.75 billion project like it was in 2008 during the commodity bubble. Regardless Kellher is going to need more oomph than the announced recapitalization with Atlas to get this done. I estimate he will need another $400-500 million in equity to get it done. Maybe he is working the unions again to try to get them to plow some pension money into the project like they were considering a while ago.