Capital Stack Optimization

• Bay Street evaluates risk and return across the capital stack—senior debt to common equity—using AHA, IRR sensitivity, and structural resilience overlays.

• Each tranche is modeled independently: Senior Debt (DSCR-driven), Mezzanine (IRR delta), Preferred Equity (liquidity adjusted), and Common Equity (residual + promote impact).

• ICs revise deals where leverage penalties outweigh IRR upside. Stack design impacts Bay Score and risk tiers directly.

Broker Compensation as a Risk & Return Lever

• Bay Street scores broker fees as liquidity drag within LSD.

• Compensation is modeled as % of TEV and stress-tested against capped/earnout toggles.

• Higher fees reduce Bay Score by 7–12 points; contract clauses like clawbacks and non-circumvent provisions impact sponsor scoring.

Real-Time Monitoring and Bay Score Drift

• AHA and BAS scores are recalculated quarterly post-close using RevPAR, NOI, margin, and timeline data.

• Bay Score drift triggers IC memos, sponsor alerts, and potential re-underwriting.

• Example: Caribbean hotel score drops from 88 to 68 due to RevPAR shortfall; IC initiates mid-cycle correction.

ESG Integration Within Bay Score & Deal Selection

• ESG factors affect Sponsor (S), Region (R), and Market (M) components of Bay Score.

• Inputs: kWh/sqft, green certification, DEI policy, and sponsor audits.

• Delta of 15–20 points observed in ESG-aligned vs non-compliant deals. ESG compliance feeds IC filters and co-invest approvals.

Alpha Attribution by Region, Type, and Strategy

• Bay Street decomposes AHA by component: FX, brand lift, CapEx delta, and timing alpha.

• IC memos show attribution weighting; example: +1.6% AHA from timing, -0.3% from CapEx underperformance.

• Portfolio allocation adjusts based on attribution dominance.

Country Risk Scoring Framework

• Macro Z-Score composites generate 0–100 country scores, applied as R and M modifiers.

• Inputs: FX volatility, BOP strength, visa access, and governance indicators.

• Scores <40 result in 10–20 point Bay Score penalty and require risk mitigation overlays.

Bay Street vs. Traditional Hospitality Strategies

• Comparison of Bay Score, BAS, and AHA vs REIT ETFs and legacy hospitality funds.

• Bay Street: Mean Bay Score = 87.2, BAS = 0.84 | REIT Avg = 62.5, BAS = 0.36

• Conclusion: Quantamental selection outperforms intuition and yield-only screens.

Inside the Bay Street Portfolio Optimizer

• Utility function: U = α1(Bay Score) + α2(AHA) - α3(Volatility) + α4(Liquidity)

• Inputs: position caps, ESG toggles, regional weight bands, IRR thresholds.

• Portfolio rebalanced quarterly or upon material Bay Score drift.

Bay Street’s Co-Investment Structuring Framework

• Co-invest rights offered based on public dislocation signals and alpha tiers.

• Terms: 8% base preferred → 20% promote split. Mix of common and preferred co-invest.

• Use Case: Singapore hotel flagged via REIT spread widening → LPs offered tiered entry.