Rendering of the luxury Four Seasons-flagged complex under construction in Vail, Colorado

Wien & Malkin Strategic Capital IV, L.P. (SC IV) has closed on a preferred-equity investment of $9.4 million to complete the financing for a new Four Seasons flagged-hotel and condominium resort under construction in Vail Village, Colorado. In addition, Wien & Malkin has two other transactions in documentation with good prospects for closing.

Ned H. Cohen, Executive Vice President of Wien & Malkin Securities Corp., says a fifth Strategic Capital fund may be offered in early summer to continue to support marketplace demand for structured equity and mezzanine financing. SC IV, the largest fund to date in the Strategic Capital program, raised $27 million of capital in two offerings to accommodate the good deal flow and execution of the investment team.

Mr. Cohen explains that approximately $5 million of equity capital is still available for investment from SC IV, together with $7.3 million of funds that have been repaid from an 18-month loan made as a co-investment by SC II and SC III in 2005. But he adds that the total may not be sufficient to fund all transactions now under consideration and that this is an ongoing program that requires fresh capital to go forward.

The Vail investment, which is for a term of three years, with two one-year extension options for the developer, is structured to produce a current annual yield of eight percent, with a "look back" that will increase the overall return to 25 percent when the investment matures. This $9.4 million investment completes a financing package in excess of $225 million for the 121-room luxury hotel and 35 condo apartments, 16 of which are being sold in whole-ownership units and the remainder in fractional units.

Strategic Capital Aids in Complex Fundings

"The funding for this development is very complex, and there was still a gap remaining between the institutional financing package and the sponsor's equity," says George S. Perry, Senior Vice President and Director of Investments for W&M Properties, which sources and structures investments for the Strategic Capital program. "By quickly stepping in to fill that gap in a timely and efficient way, we provided a critical missing piece to the deal, and a solid above average yield to our investors."

Mr. Perry adds: "Four Seasons is one of the premier names in the hospitality industry, and the primary lender on this project is one of the world's largest international banks. Demand for luxury hotel rooms and high-end condos is very strong in the Vail region, and this development is advantageously situated right in Vail Village."

Many of the condo units have been pre-sold, he says. The project, for which ground was recently broken, is scheduled for completion in August 2009.

Of the two deals in the documentation stage, the most advanced is a proposed $5 million preferred-equity investment that would help recapitalize a well-established Long Island shopping center on behalf of the property's new ownership. The three-year deal would be structured to yield an 11% annual return, with a 12% overall return at maturity.

The property is a 132,000-square-foot retail center in Carle Place, Nassau County, only a few blocks from Roosevelt Field, one of the nation's largest shopping malls, located about 22 miles east of Manhattan.

The shopping center is anchored by Staples and Big Lots, and its other national tenants include Dress Barn, Bass Shoes, Vitamin Shoppe and Subway. Developed in the 1950s, the center is situated in a retail corridor that is part of one of Nassau County's busiest shopping districts, in part because it adjoins Roosevelt Field. The new owners will use the funds to make improvements to the property and lease two vacant spaces," says Mr. Perry.

The demographics for retail property in Nassau County Long Island are excellent. More than 400,000 residents, with average annual household income exceeding $100,000, live within a five-mile radius of the property.

The joint-venture owners of the property are a long established wealth management firm for institutions and high-net-worth investors, and an asset property management company, with more than 30 years experience, including some 35 shopping centers and malls. "As always, a very high comfort level with the sponsor is a prerequisite for committing SC funds to any transaction," says Mr. Perry.

The Strategic Capital program offers subordinate capital for real estate entrepreneurs who have special funding needs. The program has consistently provided Wien & Malkin investors with exceptional current yields since it was introduced in 2000.