ATM Deal Syndication Evaluation

[Duke Giordano]

Hello All,

For many of us we are familier with certain metrics used to evaluate deals in asset classes such as Multi-Family, Self Storage, Mobile Home etc. when vetting a deal and a sponsor.  However, if one were considering an ATM investment I have a few questions if you would so oblige.

1. Since most of these deals are funds, how would one vet the sponsor in this ATM space?

2. When looking at an ATM deal what are some of the key parameters/metrics that one should look at when evaluating these deals? What are expected numbers for these things? Such as Preferred return, IRR, Equity Multiple?

3. What are typical fee structures for these deals that are reasonable?

4. I have learned that these assets depreciation fully over 7 years, what is a typical depreciation schedule and percentage of investment that would be expected?

5. What is an expected or typical hold time and how does this factor into the vetting process for ATM deals specifically?

Thanks in advance, just looking for some details on how to vet these deals.

[Yan Yan]

To begin with, I personally invested in ATM fund, so the following are my thoughts. FYI. If you want to discuss more questions, you are welcome to message me.

1. Since most of these deals are funds, how would one vet the sponsor in this ATM space?

I would recommend that you look at their history and past performance. Also ATM is a highly regulated industry, make sure that they pass those scrutiny.

2. When looking at an ATM deal what are some of the key parameters/metrics that one should look at when evaluating these deals? What are expected numbers for these things? Such as Preferred return, IRR, Equity Multiple?

In my opinion, the most important metric is the transaction volume, which determines how much surcharge you can get from the transaction. Other stuff like preferred return, IRR or Equity multiple are part of the deal structure. It all depends on how much the sponsor wants to share with you. But at the end of the day you need to see their transaction volume is consistent with their expected returns.

3. What are typical fee structures for these deals that are reasonable?

Depends on the sponsor

4. I have learned that these assets depreciation fully over 7 years, what is a typical depreciation schedule and percentage of investment that would be expected?

Yes, ATM is a low value asset, relative to MF, so it's fully depreciated over 7 years. This is good, because at the end of the seven years you don't have to pay recapture, but you do enjoy the 100% bonus depreciation in year 1.

5. What is an expected or typical hold time and how does this factor into the vetting process for ATM deals specifically?

I think it depends on two things: 1. physical life of ATM; 2. how long the location contract is