The Non-Basic Food Groups in Commercial Real Estate

By Sunny Sajnani As a real estate professional, we always hear about the four basic food groups of commercial real estate: multi-family, office, retail and Read more

Off-Market or Selectively Marketed in CRE Deals

by Hook Harmeling As we emerged from the Great Recession, there were “deals” everywhere. Excellent locations, quality buildings, good tenants and, yes, even good sponsors Read more

Paradigm Shift or Lack of Financing in the Red-Hot Apartment Demand Surge?

By Todd McNeill While perusing recent press on the strength of the market for new apartment developments, the following thought occurred to me:  Is the Read more

Metropolitan Capital Advisors Arranges $5,800,000 Land Loan and Subdivision Development Financing for Prestonwood Polo Club in Oak Point, Texas

Dallas, November 2014 – Dallas-based Metropolitan Capital Advisors (MCA), a financial intermediary specializing in the exclusive representation of investors, developers and property owners in Read more

Could Downtown Apartment Development Max Out in North Texas and Other Major Markets?

As featured in the November Newsletter from Bisnow.com There are 9,000 multifamily units in the pipeline in Downtown and Uptown, but skyrocketing land prices, rising Read more

Metropolitan Capital Advisors Closes A $10,950,000 Permanent Fixed Rate Mortgage For A Retail Shopping Center In Greeley, Colorado

Dallas, Texas-based Metropolitan Capital Advisors (MCA), a financial intermediary specializing in the exclusive representation of investors, developers and property owners in the commercial real Read more

Metropolitan Capital Advisors Exhibiting at International Council of Shopping Centers Texas Conference, Nov. 12 - 14, Booth 771

See the Metropolitan Capital Advisors Team at Booth #771If you are in the commercial real estate industry, you've most likely heard of or attended Read more

The Urban Renter: Who Art Thou?

By: Scott Lynn One trip down the tollway to Uptown/Downtown Dallas leaves me in utter amazement at the amount and quality of high-density multifamily projects Read more

Development Is As Hot As the Texas Heat

By Gabe Gonzalez It seems like construction cranes are part of everyone’s skyline these days.  Even secondary markets such as Waco, Lubbock, and El Paso Read more

The Local Bank vs. CMBS Boxing Match, Special Texas Edition

By Justin Laub             On one side of the ring we have your Local Banker from Texas. He’s wearing a polo shirt from the country club Read more

Metropolitan Capital Advisors Closes $5,560,000 Construction Loan For Speculative Industrial Project In Oklahoma City, OK

Dallas, Texas-based Metropolitan Capital Advisors (MCA), a financial intermediary specializing in the exclusive representation of investors, developers, and property owners in the commercial real Read more

Thank the FDIC, OCC, and FINRA for Residential Increases Bringing CRE With it!

by Todd McNeill The rebound in home prices in the Dallas / Ft. Worth residential market has been record-setting during the last three years.  I Read more

MCA Closes Two Single-Tenant Government Office Loans Totaling $19,900,000 in Oklahoma

Metropolitan Capital Advisors, Ltd. (MCA) has closed long-term debt financing for two separate office buildings leased to government service tenants. Lincoln Plaza, a 154,085 SF Read more

The CMBS Market is on FIRE!

By Sunny Sajnani, Senior Director The CMBS credit market is vital for the commercial real estate industry, providing leverage on assets that typically banks or Read more

Basel III: What Is This, and Why Do I Care?

By Kevan McCormack So maybe you have heard about this thing called Basel III, and maybe you haven’t.  For those of you wondering what Basel Read more

GSA Leases – Lucrative but Risky?

By Sunny Sajnani, Senior Director The General Services Administration (GSA) is probably the largest tenant in the United States, providing space for more than 400 Read more

The Main Drivers of the Single Tenant "Build-to-Suit" (BTS) Fever.....

by Gabe Gonzalez The single tenant Build-to-Suit (BTS) market continues to be one of fastest growing sectors in terms of development, acquisition, and financing activity.  Read more

Development Cycle Already?

by Hook Harmeling It does not seem that we have been out of the Great Recession for all that long. If you blinked, you probably Read more

Preferred Equity – What the Heck Is It?

by Charley Babb We were recently engaged by clients to help monetize some of their trapped equity in an appreciating asset on which they had Read more

Credit Tenant Lease (“CTL”) Financing

By Brandon Wilhite At Metropolitan Capital Advisors (“MCA”), our clients’ financing requirements range from conservative low-leverage to more aggressive high-leverage and everything in between.  Due Read more

Seeing into the Future of Commercial Real Estate Interest Rates

By: Justin Laub                 You’ve come to the right place, folks. I’m going to give you exactly what you’ve been asking for. I’m going to Read more

REIT’s Are Upgrading and Entrepreneurs Are Reaping the Benefits

by Todd McNeill In the last 24 months the REIT’s have been busy adjusting their portfolios.  During the depths of the recession, REIT’s had access Read more

Variety (in Commercial Real Estate) is the Spice of Life

by Scott Lynn Four years ago, at the height of the Great Recession, a commercial real estate financier would have been hard-pressed to find a Read more

Using a Tax Equity Partnership Structure in Real Estate Development

A powerful tool for real estate developers is tax optimization. However, without a proper understanding of tax incentives, these benefits may not be utilized Read more

The Nuances of Underwriting Retail Real Estate

By Brandon Wilhite Every commercial property type has its own unique set of underwriting and investment criteria. While some of those criteria are common to Read more

The Non-Basic Food Groups in Commercial Real Estate

By Sunny Sajnani

As a real estate professional, we always hear about the four basic food groups of commercial real estate: multi-family, office, retail and warehouse properties. These four categories of assets are the most sought-after property types and usually the easiest to finance in the capital markets. But, why is that? For two main reasons: (1) they are less complicated to underwrite, and (2) they have a wider buyer pool. But, with more demand and players, values are driven up and yields decrease.

Many of MCA’s clients seek diversification and higher yields in various non-traditional commercial real estate property types. Some of these property types require a higher level of underwriting and a deeper understanding of the property dynamics in order to sell them correctly to lenders and investors. Below is a list of some of the “other food groups” and some commentary on each:

  • Self-Storage – Fairly simple to underwrite the economics, and cash flows are stable. Consumers hate to move their bulky stuff, and payment is usually processed via credit card. So, once one a self-storage property is stabilized, it’s pretty difficult to lose that cash flow stream. A couple major items to consider when buying or lending are barriers to entry for competitors and proximity to residential rooftops.
  • Hotels – Hotels come down to two “must haves”: Operator and Market. Without a strong operator or a market that drives demand, the hospitality space can be very difficult to finance. Moreover, most capital sources like to have a national “Flag”. It is much easier to obtain a branded franchisee if you have a good operation and strong market. On the flip side, many successful boutique hotels don’t have a “Flag”, but again, the market, location and operator create the “experience” instead of a Flag. The San Jose in Austin, Texas, is a perfect example.
  • Medical – ALF, MOB, IL, ALZ, MC, LTAC, CCRC, SNF, IRF…. You get the picture… the healthcare real estate sector is comprised of hundreds of acronyms. There are many different product types that fall under the medical real estate umbrella. Without a financier that understands this space and who can navigate intelligently through all the acronyms mentioned above, you will be swimming aimlessly in a medical alphabet soup! MCA has closed hundreds of millions in financing for healthcare property types and believes it will continue to be a growing allocation of our production.
  • Residential Lots – Land is usually the “other 4-letter word” in commercial real estate… unless an immediate sale exit is clear. Residential lot development deals are a great example of a land transaction where builders are lined up to “take down” lots for single family homes. At MCA we have been very successful raising both debt and equity in markets with high demand for new single-family homes with a clear exit strategy. Since coming out of the Great Recession, many markets have a slim supply of available or developable residential lots. Now that the economy is back in full swing, home builders are stocking back up on their lot inventories with an expectation to immediately sell homes and build houses. Our shop has recently closed several deals in this space.

Other types of non-traditional real estate types that we have experience in financing include Mobile Home Parks, Marinas, Single Tenant (NNN), Entertainment Complexes and Owner-Occupied Properties. With the capital markets heated up, lenders and investors are chasing yields outside of the traditional assets classes. MCA is constantly monitoring and navigating the capital markets and finding capital sources that will consider these alternative investments. Although these property types don’t fall into the four basic food groups of CRE, it doesn’t mean they aren’t edible!

The author, Sunny Sajnani, is a Senior Director at Metropolitan Capital Advisors and a seven year veteran of the firm. Sunny can be easily reached at ssajnani@metcapital.com

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Off-Market or Selectively Marketed in CRE Deals

by Hook Harmeling

As we emerged from the Great Recession, there were “deals” everywhere. Excellent locations, quality buildings, good tenants and, yes, even good sponsors were literally one phone call away.  The problem during the recession was scarcity of capital rather than the availability of good real estate properties to acquire. As capital began to return to the markets in late 2011 and 2012, equity and sponsors alike made the phrase “Off-Market” the buzz word in commercial real estate, indicating that the deal was available (at the right price) but was never marketed to the buyer pool at large.

Now, as we wind down 2014, there are many that are still using what has become an irrelevant term in commercial real estate vernacular, at least here in Texas. Members of our firm have witnessed countless meetings where a sponsor showed up with a supposedly “Off-Market” deal, but when we dug into it, sure enough, there was a sales broker involved. When we called lenders or investors to obtain financing proposals, they would respond with a resounding, “We’ve seen this deal before!!”

And, what was is wrong with that? Absolutely nothing! A sales broker out “bird-dogging” deals for principals provides a valuable role to Sellers and Buyers alike. But….if a broker shows a viable transaction to a willing buyer, it is not “Off-Market” per se but rather is being “Selectively Marketed.” Moreover, the role of a good sales broker is not to put all of his eggs in one basket…so if he/she is worth his salt, he or she will selectively pick some of the best prospects for the deal, thus turning the Off-Market property into a Selectively Marketed transaction.

The fact is that there is plenty of good real estate being both selectively marketed and fully marketed. The notion of one thinking a deal that is being marketed is somehow damaged goods is likely someone missing out on a lot of opportunities. I am not implying that there are no good Off-Market deals, but if you are not in a desperate situation or don’t want the details of the project to be known to the larger market, why would you not market your property to a wider audience?

The same holds true for our firm when we are marketing debt and/or equity placements.  Clearly, a Client benefits from both the feedback and the results when a transaction is shown to the widest possible audience, and in doing so, it certainly doesn’t compromise the quality of the deal or its ability to attract the best possible capital provider.  Furthermore, the combination of brokerage talent and technology have made the sale (and financing) process of either “Selectively” or “Fully” Marketed more efficient today than in the past.

In 2015 let “Off-Market” go the way of the dinosaurs, and let “Selectively Marketed” fill that gap…for now.

The author, Hook Harmeling, is a Senior Director at Metropolitan Capital Advisors and an eleven-year veteran of the firm.  Hook can be easily reached at hharmeling@metcapital.com

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Paradigm Shift or Lack of Financing in the Red-Hot Apartment Demand Surge?

By Todd McNeill

While perusing recent press on the strength of the market for new apartment developments, the following thought occurred to me:  Is the current red-hot apartment demand artificially inflated due to lack of financing options for first-time home buyers?

We have all been hearing about the new “norm” in apartment demand.  We all think that we know what the Millennials are thinking; flexibility, smaller living areas, large common areas with tons of amenities, along with a general feeling of “pushback” from the illiquidity associated with home ownership.  This new change in attitude regarding home ownership is coming off the heels of the Gen X and Baby Boomer generations whose dream was to own their own homes.  How much of this new attitude is driven by a lack of low down payment options and stricter underwriting for home purchases?

Today’s Millennials are coming out of school with student debt and do not have the ability to aggregate savings to put into a down payment in order to qualify for a conforming FNMA or Freddie Mac home mortgages.  At 20% down, this is just too much cash for most first-time home buyers.  Moreover, many of these would-be homeowners have debt-to-income ratios that are out of whack because of high student or credit card debt that accrued during those college years.  Toss in a car payment and health insurance, and there just isn’t enough cash flow to save for a down payment.

During late October mortgage financing giants Fannie Mae and Freddie Mac, together with their federal regulator, revised the rules to help loosen constricted lending standards to make mortgages more affordable and easier to obtain by those with less-than-stellar credit.  The move comes in response to criticism that banks have clamped down too much on loan criteria in order to avoid legal liability for any mortgages they sell to Fannie or Freddie that may go bad in the future.

Fannie and Freddie were seized by the government in 2008 during the Great Recession as they teetered on financial collapse.  Government regulators pursued many of the originating lenders over mortgages that defaulted as the market melted down. Many loans were poorly underwritten, with some lenders simply accepting  a borrower’s “statement” on income rather than verifying it.  Lenders who originated these bad loans have been forced to pay billions of dollars in recent years to settle assertions that the bad loans violated representations and warranties made when the loans were sold and often times demanding that the original lender repurchase these bad loans!!!

In reaction to this unforeseen liability, a wave of conservatism has swept over  lenders originating new home loans, implying that the threat of loan repurchase “demands” make the risks worth taking only for borrowers with “top” credit profiles.  The new clearer guidelines are intended to convince lenders that they won’t regret lending to higher-risk but still credit-worthy borrowers.

The new rules clearly delineate what constitutes cause for requiring banks to repurchase loans. Moreover, the new rules reduce the minimum down payment from 5% to 3% when determining if a loan can be sold to Fannie and Freddie.  The reduction in the minimum down payment for most Fannie and Freddie loans to 3% brings the requirement in sync with the Federal Housing Administration, which insures loans made to first-time and lower-income borrowers.

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