Public Private Partnerships…What are They Good For?

By Duke Dennis Over its 25-year operating history, Metropolitan Capital Advisors (MCA) has worked on numerous Public Private Partnership (PPP) transaction financings. PPPs have increasingly Read more

The Power of RECA (Real Estate Capital Alliance)

By: Scott Lynn and Andrew Hanzl Metropolitan Capital Advisors (“MCA”) is a member of the Real Estate Capital Alliance ("RECA"), a professional association of 18 Read more

Getting Creative: HUD 221 (D) (4)

By: Andrew Hanzl Take notice! The landscape is shifting: In anticipation of a market slow-down, commercial real estate lenders are dialing back their leverage and Read more

Private Lenders: Filling the Void

by Roger Wyche There will be approximately $96 billion of CMBS loan expirations during 2017. CMBS lenders, therefore, have been counting on refinancing  Borrowers to Read more

A Bridge (Loan) to Everywhere

By Charley Babb Do you remember John McCain’s famous “Bridge to Nowhere” speech from 2005? As the Arizona Senator, and then later as the Republican Read more

Limited Service Hotels are, well…limited!

By Todd McNeill In recent times, the Limited Service Hotel sector’s reputation has steadily declined in the eyes of the finance industry. Once the darling Read more

TrumpCare and the Effect on Healthcare Commercial Real Estate Market

By Kevan McCormack Since Donald Trump has taken office as President of the United States, he has been very busy “making good” on his campaign Read more

What is the TRUMP Effect on Commercial Real Estate? 4 Key Points

— By Sunny Sajnani There is no doubt that Donald J. Trump in the White House is a game changer for the real estate industry. Read more

Whither CRE Construction Lending?

By: Justin Laub The mantra of commercial real estate developers around the country when speaking of the state of construction lending these days might be: Read more

The Good, the Bad, the Texas High-Speed Rail Line

By Duke Dennis Brady Redwine of Texas Central Partners (TCP) recently addressed a group of Texas A&M real estate professionals about the high-speed rail line Read more

UT Ranked #1 in Commercial Real Estate Yardage

-By Scott Lynn Every fall season, the University of Texas at Austin McCombs Real Estate Finance & Investment Center (REFIC) sponsors the National Real Estate Read more

2017: Not a Forecast (Just Some Thoughts to Ponder) for the CRE Market

By Brandon Wilhite Accurately forecasting the commercial real estate market’s performance is a nearly impossible task. There are far too many variables to assess and Read more

What is PACE Financing?

By Andrew Hanzl Global warming is now a widely accepted concern. As real estate professionals, what role can we play to ensure environmental sustainability? One Read more

Banks Reign in Leverage in Effort to Curb Apartment Construction

By Charley Babb My real estate career spans over three decades. Yet for the very first time, I have witnessed lenders exercise prudence and consequently Read more

Risk Retention in CMBS Starting to “Sink” in

By Todd McNeill The early signals of Risk Retention are reverberating through the commercial real estate capital markets.  Several conduit shops, including MC Five Mile Read more

Risk Retention, Risky Business?

By Scott Lynn Basel III, HVCRE…all these new lending regulations that mean lenders are loaning me less and charging me more. Good grief!!! And now, Read more

It’s Senior Living Not Senior Dying

By Kevan McCormack Everything in life and real estate evolves.  Static retail shopping centers evolved into vibrant entertainment venues where a family could spend an Read more

Metropolitan Capital Advisors Arranges $5,512,000 Acquisition Loan For A 9.77- Acre Lot In Frisco

Metropolitan Capital Advisors, Ltd. (“MCA”) has arranged a land acquisition loan for a 9.77-acre tract located in Frisco, Texas at the northeast corner of Read more

Metropolitan Capital Advisors Arranges A $4,700,000 Construction Loan For UC Health Emergency Room (Arvada)

Metropolitan Capital Advisors, Ltd. (“MCA”) has arranged a $4,700,000 construction loan for UC Health Emergency Room, located in Arvada, Colorado. The 0.69-acre site is Read more

Ground Leases-Friend or Foe?

On the surface, a ground lease seems like a simple concept: a landowner grants permission for a tenant to use their land in exchange Read more

What Do Baby Boomers and Millennials Have In Common & Why It's Important in Commercial Real Estate

By Charley Babb What do Baby Boomers and Millennials have in common? They both like to spend money. While they may spend their money on Read more

The Economic Benefits of Walkability

By: Brandon Wilhite Starting with the Federal-Aid Highway Act of 1956, the way cities were developed in the United States began changing. Although it was Read more

Brexit – Immediate Effect on Commercial Real Estate?

— By Sunny Sajnani In late June 2016, a historic referendum was voted on approving the British withdrawal from the European Union (EU).  The immediate Read more

Hotels: What Inning Are We In?

By: Justin Laub I recently returned from the Urban Land Institute’s national conference on hotels and resorts. The last time ULI held this event was Read more

Choppy CMBS Market Hoping For Resurgence

By Charley Babb CMBS issuance for the first quarter of 2016 was roughly half of the production for the same period in 2015. This has Read more

Commercial Real Estate Finance

What Do Baby Boomers and Millennials Have In Common & Why It’s Important in Commercial Real Estate

By Charley Babb

What do Baby Boomers and Millennials have in common? They both like to spend money. While they may spend their money on different items, collectively Boomers and Millennials account for more than $5.5 trillion of annual spending power. This equates to over 30 percent of the annual GDP of the United States. With 150 million people combined, Boomers and Millennials are prompting changes among retailers in order to capture more of these two population segments’ customers and sales. This is true regardless of whether the sales are generated in traditional physical locations or via online retailing.

Not surprising is the fact that Baby Boomers are fueling the healthcare industry. True to our culture of “better living through chemistry,” they are consuming massive quantities of pharmaceuticals. The real estate implications are that drug stores are raking in the sales. These retailers have noted sales growth of greater than 8 percent over the past year. Approximately 57 million Americans will be over the age of 65 by the year 2020. That will account for 16 percent of the total US population. Look for continued long-term growth in the drug store sector of retailers.

A day does not go by without reading an article about the spending habits of the Millennial generation. I know from my own experience (my four kids are all Millennials) that rather than spending as much money on “things” as my generation, Millennials love to allocate a fair share of their disposable income to “experiences.” Much of this is spent in restaurants and bars. As such, these establishments have experienced over 6 percent growth in sales over the past year. Other businesses within the hospitality sector have benefited from this generation’s spending habits as well. Q1 occupancy in US hotels came in at over 60 percent, which is the second highest level on record. A cornucopia of new brands designed to cater to the Millennial traveler have sprung up almost out of nowhere. In addition, Baby Boomers, with plenty of disposable income spent on travel, have the hospitality sector thriving.

While Millennials do enjoy their experiences over things, they are also spending money on furniture and home furnishings. This segment grew at nearly 4 percent over the past 12 months. Millennials are starting new households, albeit typically in apartments, at an expanding rate. Just try to visit your nearest urban center without noticing prolific apartment construction. More than 200,000 new apartment units were delivered nationally during the 12 months ending in March 2016. During the same period, absorption outpaced even this robust addition to the supply, thus reducing the national vacancy rate to 4.2 percent. Affluent Millennials seek live-work-play options in or near central business districts; however, a less reported but significant number of them seek to lease more affordable suburban options. Locations near public transportation, such as light rail stations, have fared particularly well.

light rail commercial real estate

So apparently my children and I enjoy spending our money. They may rent and I may own my home, but we all love to enjoy our experiences together. Smart retailers will continue trying to attract that next dollar from each of us and likewise, real estate entrepreneurs are cooking up new real estate deals/projects to attract these tenants. MCA is currently working on several assignments involving mixed-use/destination-oriented /”experience-focused” projects where the anchor tenants are a conglomeration of fantastic restaurant with lines out the door producing staggering sales. The day has come, the paradigm has shifted … traditional grocery and department stores are no longer the only game in town when the goal is attracting throngs of eager Millennials (and likely Boomers too) looking for just the right experience

The author, Charley Babb, is a Principal and Senior Director in the Denver office at Metropolitan Capital Advisors. Charley can be reached at cbabb@metcapital.com or visit the Metropolitan Capital Advisors website at http://www.metcapital.com

 

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The Economic Benefits of Walkability

By: Brandon Wilhite

Starting with the Federal-Aid Highway Act of 1956, the way cities were developed in the United States began changing. Although it was never the intent of the legislation, new highways funded by federal and state funds incentivized development away from city centers and into the suburbs in quantities never before seen in American history. New highways, originally intended to provide mobility for US military resources, made suburban areas more accessible, and thus more attractive to the masses. Suburban development thrived, and with it, the American car culture, necessitated by the new commuting patterns of workers who worked in the city centers and lived in the suburbs. Suburban development patterns of single-use developments and neighborhoods (i.e. residential subdivisions, retail shopping centers, and suburban office parks) further exasperated America’s dependency on automobiles. Within a generation, walking between destinations as part of a daily routine became a thing of the past for large populations of American citizens.

walkability commercial real estate

Recent trends are indicating that preferences are changing across both demographics and generations. Growth in Vehicle Miles Traveled (VMT) per capita is slowing according to most studies and some studies actually show the number shrinking considerably. The recent rise of on-demand transportation services such as Uber and Lyft are starting to make some rethink the idea of car ownership all together in some parts of the country. This trend will likely increase with the rise of autonomous cars, thereby reducing the cost of those services.

Generations from Millennials to retiring Baby Boomers are increasingly showing a preference for living in walkable communities. Both retailers and employers, both wanting to be close and convenient to their customers and employees, are following suit and showing a preference towards mixed-use walkable neighborhoods. Intuitively, it would make sense that as demand for walkable neighborhoods increased, so to would property values in those neighborhoods. The data backs up that intuition: A recent study conducted by Real Capital Analytics and WalkScore found that between 2005 and 2015:

  • Prices for properties located in Central Business Districts (CBDs) have risen 125%
  • Prices for suburban properties that are also considered highly walkable increased 43%
  • Prices in less walkable, car-dependent suburban locations increased only 21%-22%

The benefits of walkability don’t end there. Workers and residents in walkable areas typically have lower transportation costs. When combining housing costs and transportation costs, residents living in cities typically viewed as having high costs of living such as New York City, San Francisco and Washington DC actually spend a lower percentage of their income than residents in cities typically considered to be more affordable such as Houston, Atlanta and Dallas. Additionally, residents enjoy significant health benefits from living in walkable communities such as lower instances of obesity and diabetes.

Because of these benefits, walkable communities are no longer limited to urban city centers. Public officials of suburban cities also recognize walkable and livable communities are a key to economic competitiveness. As a result, many new suburban developments are developed adjacent to commuter rail and offer mixed-use “live-work-play” environments.

Metropolitan Capital Advisors has assisted our clients in financing projects ranging from mixed-use high-rise redevelopments in CBDs to ground-up mixed-use developments in suburban locations.

The author, Brandon Wilhite, is a Senior Director in the Dallas office of Metropolitan Capital Advisors. Please contact Brandon Wilhite at bwilhite@metcapital.com or visit the Metropolitan Capital Advisors website at http://metcapital.com.

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Brexit – Immediate Effect on Commercial Real Estate?

— By Sunny Sajnani

In late June 2016, a historic referendum was voted on approving the British withdrawal from the European Union (EU).  The immediate reaction was a short-lived dive in world stock markets, which immediately rebounded a week later.  Investors of all assets classes have come to realization that Brexit will result in a long-term transition for the UK, rather than an immediate change.  So what does all this mean for commercial real estate in the United States?  Why does the UK decision to distance themselves from other European nations affect us?

brexit commercial real estate

Markets

Bexit is likely to have a short-term positive effect on commercial real estate in the United States, especially in large gateway cities and in the office market.  “We’re probably going to see more foreign capital push into the safe haven that is the United States.  The greatest effect will probably be in the office markets of U.S. cities that are points of entry for international travelers,” said Suzanne Mulvee, director of research at CoStar, a commercial real estate analytics company.

The longer-term effects of the vote and Britain’s actual withdrawal from the EU are less clear.  “Brexit is one more in a series of shocks to the global economy that will have uneven implications for the U.S.,” said Christian Redfearn, professor of real estate at the University of Southern California. “An exit from the EU could signal the beginning of the end of the EU experiment and a lot of uncertainty about one of the major drivers for the world economy.”

Gerard Mildner, director of the Center for Real Estate at Portland State University, said Brexit will probably have little immediate impact on the U.S. economy or commercial real estate markets, but could be part of a larger shift in the nature of the global economy.  “The risk is that other countries will copy Britain and impose trade barriers.  The most exposed U.S. sectors will be export businesses (e.g., aerospace, agriculture, technology), port-related industrial property and the financial industry.”

Interest Rates

US Treasury rates have tanked since the Brexit vote.  The 10-year US Treasury rate has fallen from 1.74% on June 23, 2016, to 1.37% on July 5, 2016—a reduction of 37 bps in 2 weeks.  Also note, when the energy market was at its low at the beginning of the year, the 10-year treasury rate was 2.24%.  A drop in rates comes as investors flee to the safety of the 10-year treasury note that serves as the benchmark for mortgage interest rates, creating a “Brexit benefit” for lenders and borrowers.  For purposes of new financings, this is a huge benefit for borrowers that are locking in long-term rates especially compared to the price of capital only 6 months ago.

These drastic rate decreases don’t benefit everyone.  Brexit drastically affects Defeasance Costs and Yield Maintenance for borrowers that are trying to unwind and payoff CMBS debt (and other permanent mortgage products).  The cost to defease a CMBS loan has become substantially more expensive due to the decline in treasury yield.  Since most CMBS loans being defeased now are maturing within a couple of years, the cost is more correlated with short-term yields.  As yields rise, the cost to defease is cheaper; however, as they drop, the cost increases.  As an example, the yield on the 2-year note has dropped from 91 basis points at the beginning of June to 58 basis points at the beginning of July.  Thus, many borrowers are being surprised at the jump in the cost over the past couple weeks.

The Principals and Senior Directors at MCA are preparing for surge of financing requests to lock in long term rates given the current environment.  Please reach out to us if you have questions on how your deal will place in today’s credit markets.

The author, Sunny Sajnani, is a Senior Director in the Dallas office of Metropolitan Capital Advisors. Please contact Sunny Sajnani at ssajnani@metcapital.com or visit the Metropolitan Capital Advisors website at http://metcapital.com.

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