Harvard College Real Estate Club

Newsletter 1st issue


Summary:

Events:

1.        Tuesday night: mixer

2.      Wednesday: HBS Talk A Vision for America's Urban Centers Presented
by Richmond McCoy President and CEO of Urban America, LP

3.      Wednesday night: Harvard Wide Real Estate Club meeting

4.        Friday: MIT Talk Sloan Private Equity Symposium moderated by
Professor
William Poorvu, and will include partners from Barrow Street Capital,
BayNorth Capital, AEW Capital Management, and Cherokee Investment Partners.

Excerpt from real life RE:

1. How to do a Lease Option on a home.

Ilona's practical corner: Real Estate Financing Terms

1.        Ever confused by 1st mortgage, 2nd mortgage, mez debt, construction
- perm financing? Here is a crash course in 2 paragraphs.
2.        6 months mentoring program partner wanted called "RE investing with
no credit and no cash" plz email for details






The HBS Real Estate Club and The African American Student Union Present:



A Vision for America's Urban Centers

Presented by

Richmond McCoy

President and CEO of

Urban America, LP



Wednesday, April 13th

4:30 pm - 6:00 pm

Aldrich 7


Urban America, LP:

UrbanAmerica is a private equity real estate fund seeking income from, and
capital appreciation through, commercial real estate investments in low- and
moderate-income communities in the United States. It acquires and develops
commercial properties in innercity communities and provides opportunities
for corporate, government and retail tenants to locate facilities in these
neighborhoods, increasing each property's value and improving consumer
choices and services for neighborhood residents. The Fund is on track to
provide net returns to limited partners in the low- to mid-teens. To date,
UrbanAmerica has invested $114MM of equity and an additional $200MM in debt
in a portfolio of 28 shopping centers and office buildings in Detroit,
Atlanta, Kansas City, Washington, DC, Philadelphia and several Florida
cities.  UrbanAmerica, L.P.'s notable list of investors includes: LACERA,
Deutsche Bank, Nationwide Insurance, J.P. Morgan Chase & Co., Citibank,
Washington Mutual, Constellation Energy Group Pension Fund, Prudential
Insurance Company, Capital One, Metropolitan Life Insurance Co., General
Mills Pension Funds, MBNA Community Development Corporation, Fleet Bank,
Heron Foundation, PNC Bank, AXA and Wachovia. UrbanAmerica is the first
institutional real estate company to focus on acquiring and developing
commercial real estate in low to moderate income communities in major
metropolitan markets. As a result of concentrating its efforts on inner-city
communities, the company has created more than 1500 jobs for members of low
to moderate income neighborhoods.


Richmond McCoy:

Mr. Richmond S. McCoy is an accomplished, nationally recognized real estate
executive with over 24 years of diverse real estate transaction and
investment experience. He has consummated more than $1.4 billion in
transactions. Mr. McCoy currently serves as President & CEO of UrbanAmerica,
L.P., a $325 million real estate investment company, which he co-founded in
1998. Mr. McCoy was formerly Chairman & CEO of McCoy Realty Group and McCoy
Development Corporation. He was successful in securing management and
disposition assignments from, among others, the nation's two largest pension
funds: Teachers Insurance and Annuity Association (TIAA) and California
Public Employees Retirement System (CalPERS). His companies also represented
Chase Manhattan, Bank of America, AT&T, and entertainment companies such as
The Disney Company, Time Inc. and Motown Records.

Mr. McCoy is the recipient of an Honorary Doctorate of Humane Letters from
Destiny Bible College in Tampa, Florida in recognition of his extensive
contribution to religious organizations in the area of real estate and
finance. Mr. McCoy attended Fordham University in New York City. He holds a
New York Real Estate Broker's License. He is a member of the Real Estate
Board of New York (REBNY); New York State Board of Realtors;
African-American Real Estate Professionals of New York (AAREPNY);
International Council of Shopping Centers (ICSC); the National Congress for
Community Economic Development (NCCED); Urban Land Institute (ULI); Real
Estate Executive Council (REEC) (where is he Vice-Chairman of Membership);
National Black MBA Association, Inc. and ONE HUNDRED BLACK MEN, Inc. (where
he has served as a board member). He is active in the Greater Miami-Dade
Chamber of Commerce.



Harvard Wide Real Estate Clubs Unite

Real Estate Clubs are the first one in Harvard's history to build a
cross-campus student group. The HBS, KSG, HLS and the FAS RE Clubs foster
relationships for you to take advantage of the events going on all around
Cambridge.



Harvard Real Estate Club board members,

Shyam has reserved a room for our next meeting. It is Project Room 275 in
Spangler at the Business School Wednesday from 6:30 to 8:30. Hope to see you
there.

Tim


Club members,

This private equity symposium described below sounds interesting. Although
the day's event is $45, Sloan's Real Estate Club will allow us to attend the
meeting from 10:15 to 11:15 p.m. for free. Cherokee Investment Partners is
on this panel. They are a group that invests in brownfields projects. A
particularly noteworthy project they have is in Denver- the former Gates
Rubber Factory. It is a transit oriented development. E-mail Sean Lucy if
you're interested at slucy@mit.edu and remember to dress up. If you're not
from the GSD and received this e-mail, just tell Sean that you're on our
mailing list and mention the program you're in. I'm sure he can get you in
too.

Best,

Tim

>From: "Sean Lucy" <slucy@mit.edu>
>Reply-To: <slucy@sloan.mit.edu>
>To: <ahorton@mail.gsd.harvard.edu>, <aogarrio@mail.gsd.harvard.edu>,
><tpryor@mail.gsd.harvard.edu>
>Subject: offer on real estate panel at Sloan Private Equity Symposium
>Date: Tue, 5 Apr 2005 10:36:32 -0400
>
>
>The second annual Sloan Private Equity Symposium will be held on Friday,
>April 15th on the Sloan campus.  We have a fantastic group of speakers and
>panelists lined up for the day.  GSD Real Estate Club members may be
>especially interested in the real estate private equity panel, which will
>be
>held from 10:15 - 11:15 am.  This panel will be moderated by Professor
>William Poorvu, and will include partners from Barrow Street Capital,
>BayNorth Capital, AEW Capital Management, and Cherokee Investment Partners.
>
>
>
>
>The admission price for students for the day's events is $45, and includes
>a
>continental breakfast, a full sit-down lunch, a cocktail reception that
>evening, and access to all panels and addresses. Registration information,
>panelist bios, and an overview of the day's events can be obtained at
> http://www.mitvcpe.org/symposium.htm .
>
>
>
>For those students who only want to attend the real estate panel, I have
>secured permission to allow GSD Real Estate Club members to attend just
>this
>panel at no cost.  I need these individuals to email me to confirm their
>intention to attend, and to remember that business attire is appropriate.
>
>
>
>I hope to see you there.

>Sincerely,
>
>
>
>Sean Lucy
>
>slucy@sloan.mit.edu
>
>
>Source: http://www.ehow.com/how_5453_lease-option-home.html


How to Do a Lease-Option on a Home


A lease-option is an agreement between a buyer and a seller that allows the
buyer to lock in the future purchase price, save money for a down payment
and buy the property in the future at current prices. It can be a win-win
situation.



Steps:

1.  

Agree with the seller on a purchase price.



2.  

Agree on the term of the lease. This will be the maximum length of time you
want the opportunity to exercise your option to buy.



3.  

Determine a market value for your monthly rent. (This is the amount a person
would pay to simply rent the property.) Then add $25 to $200 per month to be
applied toward the future down payment of the home. (This is not a
requirement, but it helps you accumulate money for a down payment.)



4.  

Agree upon terms regarding the exercise of the option, such as the escrow
period and financing.



5.  

Determine who will pay for inspections, work and warranties when the time
comes to complete the purchase.



6.  

Go to your local Board of Realtors Association or real estate company and
purchase a lease-option agreement form.



7.  

Handle the transaction as a lease until you are ready to exercise the
option.



8.  

Exercise the option in writing.



9.  

Open escrow or contact a real estate attorney to handle the transaction.





Tips:

Escrow is not required until you exercise your option to buy.





You may want to have a real estate attorney review the contract before you
sign.





You may be asked to put up option money - typically $1,000 to $5,000 paid to
the seller - for the privilege of having the option to buy.






Warnings:



All option and additional rent monies paid to the seller are nonrefundable
if you do not exercise the option to buy.




You must delineate all terms of the purchase at the time you make the
lease-option agreement.




If home prices go down, you will have to choose between buying the property
at the originally agreed-upon higher price and losing the option money.




Ilona's practical corner:

1.        RE financing terms



When you buy (or sell) your first property, this will come handy.

You can finance a property with

1)      Debt

2)      Equity.

(Nothing new, like the old story of the capital markets.)

Everything is a combination of these two. Most people like to put down very
little money so they use a lot of debt.

You can have the following types of debt:

1.        First mortgage: most "senior". That is, the lender gets payed first
from any money that comes in. Usually up to 60-80% of the Value of the
property (Thus Loan To Value LTV ratio of 60-80%
2.        Second mortgage: When you got your first mortgage, you still have to
come up with the remaining 40-20% of the purchase price. No problem! Go get
another loan. This is more risky for the lender, so they will charge you
more. Why is it more risky? Because the lender might not get payed off, as
they have less "senior" claim to the money coming in. Also, the value of
your property might drop down, and they may never see a dime.
3.        Mez or mezzanine debt: (a very hot market right now, lot of job
opportunities) Your second mortgage got you up to 90-95% of the purchase
price (sometimes even higher). But you want even more debt. You can go up to
100% and above. Now this IS really risky, so the interest rates charged on
this type of loans will be high.

Otherwise you can put money down - that is called equity (that can be
divided up into preferred equity and residual claims, but that is not
something you are likely to do in your home purchase :- ). )



What about construction? Well, it is hard to convince the bank to lend on a
piece of dirt, so you can usually only get 50 % or so of the construction
costs. That is not bad. Then, once the structure is ready, and there is
actually some collateral there, the balance of the loan can be changed into
"permanent" loans. That is just another fancy name for you.



2. 6 months mentor program for RE investing with no credit and no cash:



I feel I need a lot of handholding, so I am looking to enroll in this RE
guru's program. If you want to know the costs and the website, please email
me. (budapest at fas)