Evidence room, frozen at the prospectus dated 2007-03-09

Did filed income cover the senior mortgage interest?

Historical education from filed documents only. Not investment or legal advice, and not a refinancing cash-needed calculation. Every filed number carries a source tag; anything the documents do not show is marked UNKNOWN.

Income-to-interest bridge

observed Last filed year, 2006

  • 2006 NOI ST1$112,242,474
  • Whole senior mortgage ST1$3,000,000,000
  • times filed coupon ST16.4340%
  • equals senior annual interest$193,020,000
  • Operating shortfall to interest$80,777,526
  • Coverage, NOI / interest0.58x

forecast Underwriting year 2011

  • Underwritten NOI ST1$336,156,380
  • Same senior annual interest$193,020,000
  • Simple coupon proxy coverage1.74x
  • Filed Underwritten DSCR ST11.71x
  • Growth needed from 2006, total199.49%
  • Growth needed, per year compounded24.53%

The filed 1.71x ratio is a forecast ratio: footnote (2) says underwritten NOI and DSCR rely on cash flows for 2011, a future year when the prospectus was filed, including conversion to 6,397 deregulated units by January 1, 2011 ST1. Dividing underwritten NOI by the whole loan times the coupon gives 1.74x, which is not the same as the filed 1.71x (difference 0.03x). This page keeps them separate; how the filing computed its ratio is UNKNOWN from this extract.

Just to cover senior interest at 1.00x, NOI would need to reach $193,020,000, which is 71.97% above 2006 NOI, or 11.45% per year over 5 years.

NOI by year: observations versus the forecast

Net operating income by year, US dollars Observed NOI for 2004, 2005, 2006 and the 2011 underwritten forecast, compared with whole senior mortgage interest. Zero baseline. $0M $100M $200M $300M $400M US dollars per year (M = millions) 2004 observed NOI $92,102,906 $92.1M 2004 observed ST1 2005 observed NOI $98,862,497 $98.9M 2005 observed ST1 2006 observed NOI $112,242,474 $112.2M 2006 observed ST1 2011 underwritten forecast NOI $336,156,380 $336.2M 2011 UW forecast ST1 Senior interest $193.0M
Solid bars are filed historical NOI; the hatched, dashed bar is the 2011 underwritten forecast, not an observation. Dashed red line: senior annual interest on the whole $3000.0M mortgage at the filed coupon. Zero baseline. Sources ST1 ST2.

Complete numeric rows

Coverage = NOI / senior annual interest. NOI / price uses the $5,400,000,000 transaction price ST2.
YearNOISenior interest CoverageChange vs prior yearNOI / price Sources
2004 observed$92,102,906$193,020,0000.48xfirst filed year1.71%ST1 ST2
2005 observed$98,862,497$193,020,0000.51x$6,759,591 (7.34%)1.83%ST1 ST2
2006 observed$112,242,474$193,020,0000.58x$13,379,977 (13.53%)2.08%ST1 ST2
2011 forecast$336,156,380$193,020,000proxy 1.74x; filed 1.71x199.49% over 5 years from 20066.23%ST1 ST2

Debt layers, never added twice

LayerTrust share of seniorWhole senior mortgage Separate mezzanineSources
Principal $800,000,000 (26.67% of whole; inside the whole loan) $3,000,000,000 at 6.4340%, interest only $1,400,000,000 at 6.277% (rate never applied to the mortgage) ST1
Share of price not added 55.56% senior plus mezzanine 81.48% ST1 ST2
Coverage not a coverage basis 2006: 0.58x mezzanine and all-in: UNKNOWN ST1

Hypothetical growth control

Choose an assumed annual NOI growth rate from 2006 to 2011. This is arithmetic on a reader-chosen assumption, not a forecast and not a probability. The filed scenario and the observed 2006 baseline below do not move.

Hypothetical rate
0.0% per year (hypothetical)
Hypothetical 2011 NOI
$112,242,474
Senior coverage
0.58x
Versus interest
short of interest by $80,777,526
Versus filed NOI
33.4% of the filed underwritten NOI

Filed scenario (fixed)

2011 underwritten NOI ST1
$336,156,380
Implied growth per year
24.53%
Coupon proxy coverage
1.74x
Filed DSCR ST1
1.71x

Observed 2006 baseline (fixed)

2006 NOI ST1
$112,242,474
Coverage
0.58x
Growth to reach 1.00x
11.45% per year

Why occupancy and average rent cannot rebuild collections

11,227 filed units x 98.3% occupancy x $1,707 average monthly rent x 12 gives $226,064,312 ST1. That is 46.93% of filed underwritten revenues of $481,725,392, but neither figure is cash collected. The product ignores arrears, concessions, when vacancies occurred, retail, parking and other income, and the split between regulated and market units. An average rent also cannot say which apartments are legally deregulated: that is a unit-by-unit legal status, so the 2006 count is UNKNOWN here. The buyer announcement counts 11,232 units ST2; the filing counts 11,227 ST1. They are not mixed.

The human stake

These are about 11,227 homes by the filing's count ST1. The underwriting case depends on 6,397 apartments being deregulated by January 1, 2011 ST1, so the same variable that lifts the debt ratio also shapes whether residents keep regulated rents and tenure security. The documents here do not show how residents experienced that period, and this page does not assign blame to any party or treat any later legal outcome as foreseeable from these filings.

Unanswered questions

FieldValueWhy
refinance gap usdUNKNOWNNo lender offer, payoff amount or exact 2010 cash is in the inputs.
lender refinance offerUNKNOWNNot disclosed in the inputs.
payoff amount usdUNKNOWNNot disclosed in the inputs.
exact 2010 cash usdUNKNOWNNot disclosed in the inputs.
complete operating ledgerUNKNOWNOnly annual NOI totals are filed.
actual collections usdUNKNOWNNot disclosed in the inputs.
all in debt service coverage xUNKNOWNMezzanine terms beyond principal and rate, reserves and fees are not disclosed here.
mezzanine coverage xUNKNOWNMezzanine payment terms, tranches and reserves are not in the inputs.
filed dscr reconciliationUNKNOWNThe filing's DSCR method is not fully disclosed in this extract.
legally deregulated units 2006UNKNOWNOnly a projected 2011 count is filed; legal status is unit by unit.

The refinance gap is UNKNOWN: the senior interest shortfall above is an operating comparison, not a refinancing amount.

Dated timeline

  1. 2004 to 2006: filed annual NOI, observed ST1
  2. November 17, 2006: senior mortgage originated, 120 months interest only ST1
  3. 2006-11-20: purchase announced at $5,400,000,000 ST2
  4. 2007-03-09: prospectus filed; this room is frozen here ST1
  5. January 1, 2011: underwriting cash-flow year 2011 begins, forecast only ST1

Input and source ledger

InputValueUnitFiled textSource
units filed11,227unitsSize (Units) 11,227ST1
occupancy pct98.3percentPercentage Physical Occupancy as of November 2006 98.3%ST1
appraisal as is usd5,400,000,000USDAppraisal Value (As-Is) as of November 1, 2006 $5,400,000,000ST1
appraisal as stabilized usd6,900,000,000USDAppraisal Value (As-Stabilized) as of January 1, 2011 $6,900,000,000ST1
average monthly rent usd1,707USD per unit per monthAverage Monthly Rent Per Unit $1,707ST1
uw revenues usd481,725,392USD per yearUnderwritten Revenues $481,725,392ST1
uw expenses usd145,569,012USD per yearUnderwritten Total Expenses $145,569,012ST1
uw noi usd336,156,380USD per yearUnderwritten Net Operating Income (NOI) $336,156,380ST1
noi 2006 usd112,242,474USD per year2006 NOI $112,242,474ST1
noi 2005 usd98,862,497USD per year2005 NOI $98,862,497ST1
noi 2004 usd92,102,906USD per year2004 NOI $92,102,906ST1
origination dateNovember 17, 2006dateOrigination Date November 17, 2006ST1
trust share senior usd800,000,000USDCut-off Date Principal Balance $800,000,000ST1
senior coupon pct6.4340percent per yearMortgage Rate 6.4340%ST1
amortization typeInterest OnlytextAmortization Type Interest OnlyST1
io period months120monthsIO Period (Months) 120ST1
term months120monthsOriginal Term to Maturity (Months) 120ST1
filed uw dscr x1.71timesUnderwritten DSCR on NOI 1.71xST1
whole senior mortgage usd3,000,000,000USDoriginated in the amount of $3,000,000,000 of which $800,000,000 is included in the trustST1
uw cash flow year2,011yearrely on cash flows for 2011ST1
projected deregulated units6,397unitsresulting in 6,397 deregulated units by January 1, 2011ST1
mezzanine principal usd1,400,000,000USDOriginal mezzanine loan amount $1,400,000,000, interest rate 6.277%ST1
mezzanine rate pct6.277percent per yearOriginal mezzanine loan amount $1,400,000,000, interest rate 6.277%ST1
transaction price usd5,400,000,000USDacquisition price was $5.4 billionST2
units announced11,232unitscounts 11,232 apartment unitsST2

Dated assumptions

Sources