JPI Multifamily Inc.

JPI Multifamily Inc. came into existence in the year 1989 by Frank Miller and John Carpenter. Both of the individuals have worked together previously on large scale projects in Southland Financials. After the crisis hit the real estate industry, both the owners analyzed that only their apartments have survived the crash. Thus, they built their own company, JPI Multifamily Inc. and focused specifically on the development of luxury apartments.

The company has a track record of building and selling the apartments right away. The company has the strategic goal of achieving the spread of a hundred and fifty basis point between market capitalization and the yield at the start of the project. Now, the company is looking for such opportunities that would offer a market capitalization rate of about ten percent on the overall cost of production.

In its lifetime, the company has developed around two thousand and eight hundred units of apartments and sold about over sixteen thousands of them. Another strategy of the company is that they hold the apartments for around two to three years.

Fleet Bank

Fleet Bank is, at the moment one of the largest banks in New England with assets around over forty five billion dollars and with a ten percent share in the market in its respective industry. The bank has shown a rapid growth in its lifetime, specifically after its merger with the Norstar Bank and also after it has acquired FDIC.

Initially, the bank’s portfolio of real estate consisted of seventy five percent of the loans that were under five hundred thousand dollars. After Freeman became the head of the commercial real estate department, he changed its strategy and focused on targeting the developers itself that it would found worthy to work with. Apart from this, Freeman laid out a few goals for the department as well, which includes originating and closing of 1.5 billion dollars of new loans, decreasing the concentration of loans in New York and New England, and increase in average size of loans in the portfolio.

Analysis

Question No. 1: Recommendation to Fleet for the Loan

It is recommended to Fleet to take the offer of the loan. The recommendation is made based on the following basis and metrics.

	Assets	Net Worth	Liq. Assets	Net Cash Flow(4)&(5)	Contingent Liabilities
JPI Investment Co.	54th(1)	19	4.0	2.0	0
Partners(2)	12	8	1.0	0.2	100(3)
Total	$66	$27	$5.0	$2.2	$100

 

• Industries which have strong barriers to entry have a large debt capacity. The infrastructure industry which involves the development and establishment of apartments is also a part of such industry, thus, there are high barriers to entry.
• Additionally, analyzing the financial performance table of JBI, it can be seen that currently there is no contingent liability on the company itself, which is a good sign for the Fleet Bank.
• The liquid assets of the company also show that the company is highly liquid and has the ability to convert its assets into cash at times of need…………….

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