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

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 located just off the SW corner of McIntyre Parkway and West 64th Avenue.

The Property is adjacent to a grocery-anchored retail center that includes a King Soopers Market-place, Kohl’s, Ace Hardware, KeyBank, Prestige Fitness, FirstBank and Buffalo Wild Wings. UC Health chose the location due its proximity to St. Anthony Hospital, which is located 10-miles south of the site.

Charley Babb, Senior Director and Principal of Metropolitan Capital Advisors’ Denver office, and Senior Associate, Tiffiany Mullins, were responsible for placing the $4.7 million construction loan with a community bank located in Denver. The loan is a five (5) year term with twelve (12) months interest-only at 4.20%, followed by a 25-year amortization.

Since 1992, Metropolitan Capital Advisors has closed in excess of $12 billion of debt and equity transactions. National Real Estate Investor Magazine has consistently ranked MCA as one of the top CRE Financial Intermediaries in the US. MCA completed over $600 million of commercial real estate financings in 2015.

Charley Babb

303.647.9032

www.metcapital.com

cbabb@metcapital.com

For More Information Contact:

Tiffiany Mullins

303.647.1123

tmullins@metcapital.com

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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 for rent. This agreement seems easy to grasp, but if you look beneath the surface you will uncover some hidden details that often go unnoticed.

For starters, a ground lease allows the tenant the right to make improvements (e.g. build a hotel, retail shopping center, apartment complex, or even dig/drill) on land they do not own in exchange for annual rent. A typical lease term of a ground lease is between 50 to 99 years, with the tenant not only paying an escalating annual rent, but in most cases all the other expenses tied to the property. Ground leases have to be long term in nature to justify the tenant making improvements to land they will ultimately concede to the landlord upon the lease expiring.

Although it seems like there is not a lot of upside for the tenant, burdened by rent and other expenses to use land, there are a few benefits. For one, buying land can be expensive, especially when talking about development/acquisition deals in urban/populated environments. The ground lease agreement will enable the tenant to save upfront costs on land, which will free up capital for other expenses such as construction costs. Alternatively, maybe it is not a cost saving tactic, but simply the landlord is unwilling to sell a highly desirable parcel of land. Under this scenario, the tenant might be willing to engage because the project economics are too enticing to pass up.

The tenant will be saving costs upfront; however, over the long term, all these expenses attributed to a ground lease will most likely be higher than purchasing the land outright. Another disadvantage for the tenant is obtaining financing with an unsubordinated ground lease, because the landowner will have hierarchy of claims over the lender. The lender will not be able take control of the land upon default of the tenant, and therefore might lend less or not at all. Moreover, properties constrained with ground leases will continually lose value to reflect the landlord taking ownership of the improvements, as the lease gets closer to expiration. Lastly, the ground lease might be restrictive to how they develop the land or use it in the future, preventing the flexibility granted when the tenant owns the land free and clear.

Flipping the coin to the other party of the agreement, the landlord, also has upside and downside in entering a ground lease agreement. The first and most obvious advantage is the landlord still owns the land, making it a stable long-term investment, especially for family-owned land that needs to be put to economic use. Not only is the landlord collecting rent and most other expenses tied to the property, but the landlord is also benefiting from the appreciation in the land value as improvements are constructed on their land. Depending on how the lease is structured, the landlord might also retain control on how the land is developed in the future, requiring the tenant to seek approval before making dramatic changes to the property. Furthermore, renting out the land does not trigger a capital gains tax like it would during a sale; upon execution of the ground lease, no income tax event occurs until the landlord starts collecting rent.

While it might seem like the landlord is in the driver’s seat collecting rent with little to no downside, this isn’t entirely the case.  One big financial risk facing the landlord is the risk the borrower defaults on the loan. causing the landlord to lose the land, if the landlord is in a subordinate position to the lender.  Another down side for the landlord is that rent collected on a ground lease is taxed as ordinary income, which is taxed at a higher rate compared to the capital gains rate.  Lastly, borrowing against the equity built up in land under a ground lease can either be restricted or prohibited depending on the terms of the ground lease.

A ground lease agreement is more complex than initially meets the eye; therefore, obtaining financing for acquisition/development deals with ground leases can be difficult. Please contact any Senior Director at Metropolitan Capital Advisors to help you navigate the complex capital markets.

The Author, Andrew Hanzl, can be easily reached at Ahanzl@metcapital.com

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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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