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

How to fill the void in the coming construction finance boom?

by Todd McNeill, Senior Director

Before you laugh and think to yourself “there is no reason to build any new commercial projects, we’re still in a recession”, it might be helpful to step back and take a look at the market. Yes, the national scene seems grim for future development opportunities save for user driven developments and/or single tenant build-to suits. However, in the Texas and Oklahoma markets, two of the most insulated markets during the Great Recession, there will be a market driven need soon enough for more apartments, single-family, retail and even, perhaps office construction in the not too distant future.

In Feb. 2011, The Dallas Morning News cited that the population of Texas increased 4.3 million as compared to the 2000 Census. A recent study by Texas A&M University’s Real Estate center suggests that the Texas population is expected to grow by another 9 million to possibly 18 million people by 2030.

Texas housing markets are among the healthiest for home building, according to Hanley Wood Market Intelligence. The firm’s Builder Market Health Index gives many Texas MSAs a market health indicator well above 50 out of 100 (50 being the minimum to be considered healthy). According to Hanley Wood, the index weighs housing conditions in the 100 largest home building markets based on the 2011 outlook for six key variables most associated with strong home sales. Those include unemployment rate, change in unemployment numbers, home price appreciation, household growth, job growth and median income growth.

As the population continues to pour into Texas, the market will need to have adequate development to keep pace. Moreover, Texas has lead the nation out of the last three recessions, so surely, viable development opportunities will begin sprouting up in other markets throughout the nation. With this need for development, who is going to fill the void in the healthier markets for construction financing?

The local and regional banks have continued to work through their balance sheet issues and we continually hear from these same banks that their “construction bucket” is full and they cannot take on any more construction loans. Those that do have a “bucket” of money for construction, are saving most of it for existing customers of the bank and thus, are not seeking new opportunities. The big money center banks are only looking at larger $20mm and up projects for “the Best of the Best” Borrowers, those Borrowers with huge cash balances, net worth and little or no contingent liabilities or “legacy” issues. On top of all of this, the OTS and FDIC pounding the regional and local banks to clear their balance sheets of all commercial real estate.

This leaves very little room for the Entrepreneurial Developer, the life blood of development market. Retail, Apartments and Office developments under $20mm rarely hit the radar screen of the Institutional Developer leaving these deals in the hands of the smaller regional developers to execute. We are now seeing viable development deals come across our desk. Soon, however, there will be more demand for interim loans than the current stock of lenders can provide.

In addition, there are viable acquisition properties that need heavy renovation and may have little or no positive cash flow during the renovation that are also searching for a viable Bank or “On Book” Lender. These deals are very difficult to finance in today’s environment with traditional money sources. There are a variety of “Private” lending sources to fund a construction loan at 10% to 15% interest; however, this pricing simply doesn’t work for most development deals and certainly won’t work for an acquisition candidate unless you are stealing the property. Furthermore, most developers “banking relationships” have been completely wiped out during this recession.

In today’s highly fractured market, it is important to know what banks have available construction money and who will lend to “entrepreneurial” development and investment companies. The only way to really know which capital sources are in the market at any given time is to have consistent “deal flow” with a wide variety of providers. The problem is the average entrepreneurs may touch the capital markets once or at best three times a year. On the other hand, a good finance intermediary is constantly touching the market with deal flow on both debt and equity transactions. So at the end of the day, picking a good finance intermediary may very well be a more important decision than picking the actual capital provider.

MCA can help you place your development or property acquisition finance requirements. To learn more, visit us on Facebook, Twitter, or on the Web.

Want to learn more about this?  Feel free to contact Todd McNeill, Senior Director.

Posted on by admin in CREF, Multifamily 1 Comment

National Multifamily Development Not Expected to Boom Anytime Soon— Although North Texas is Defying the National Trends

by Sunny Sajnani, Senior Director

From 1997 to 2006, national multifamily housing construction averaged approximately 342,000 new units per year, but plunged by 66 percent to only 112,000 units in 2010.  Although some real estate professionals predict there will be a multifamily building boom in the near future to accommodate a rising population and housing demands, there are several factors evolving that no such boom will occur in 2011 and 2012 on a national level:

  • Population growth is directly correlated with economic conditions. Americans simply have more babies when the times are good!  According to the recent U.S. Census, the total year-over-year growth of the American population from 2000 to 2001 was approximately 3.0 million, but fell to 2.5 million from 2002 to 2003, a drop of 17 percent directly related to the stock market crash of 2000.  Population growth steadily rose back to 3.0 million from 2006 to 2007—the height of the housing boom.  Annual population growth dropped 57 percent to 1.3 million from 2009 to 2010 in response to the deep recession.
  • Banks and other capital providers have substantially reduced their willingness to make construction loans and development equity investments.  Many capital sources have simply too many bad real estate investments on their books.  Many developers flocked to the construction lending programs offered by HUD but even those programs cut back on allocation by raising equity requirements.
  • The large number of foreclosures likely to occur in 2011 and 2012 has also kept development capital in check.  Approximately 1.2 million foreclosed housing units came onto the sale market in both 2009 and 2010.  These foreclosed units are competing with rental product in most markets.  This unanticipated rise in the rental housing stock will deter developers and lenders from investing in new multifamily developments.
  • Finally, persons ages 25 to 44 (the primary source of renters) will not increase nearly as fast from 2010 to 2015 as will the number of people 65 and older.  Most people over the age of 65 already own homes and will be looking to sell and/or rent to people in the 25 to 44 age bracket—further diminishing the demand for new rental accommodations.

The Dallas / Fort Worth Metroplex, on the other hand, has defied the national trends.  According to multifamily analyst MPF Research, rents are rising and vacancy rates have been declining, causing apartment developers to ramp up construction in North Texas.  More than 3,200 units have been started in the past six months.  A total of 8,000 to 10,000 units are projected to start in D/FW in 2011.  MPF Research had previously forecasted 5,000 to 7,000 units in 2011.

During the first quarter of 2011, apartment owners leased a positive absorption of 1,750 units in the D/FW area, diminishing the overall vacancy to 9 percent.  Vacancy rates are 5 percent or less in newer apartments in suburban markets such as Las Colinas, Plano and Frisco.

Financing sources, including banks, life insurance companies, pension funds and even some apartment REITS, are once again providing debt and equity capital for new apartment developments in North Texas—albeit on a much smaller scale.  Most of the new developments that have started in the past six months have fewer units than in previous years when huge 500+ unit projects were the norm.  As these smaller developments prove to be successful, capital sources will begin approving the larger developments that were being delivered in the height of the market.  North Texas still has some catching up to do from its peak as almost 18,000 units opened in 2009; but the good news is, the development cycle in D/FW for multifamily has begun, defying the broader national trend.

Want to learn more about this?  Feel free to contact Sunny Sajnani, Senior Director.

Posted on by admin in Multifamily 1 Comment

CMBS Loan Transfers: The Beginning of the End or a Temporary Break in the Action?

by Brad Donnell, Senior Director

CMBS loan transfers into special servicing have decreased recently according to Fitch.

In the first quarter of 2010, there were over 630 CMBS loan transfers to special servicing versus only about 200 in the first quarter of 2011.  Annualized, that equates to about half of what was transferred in all of last year and about 37% of what was transferred in 2009.

In January 2010, over 250 CMBS loan transfers to special servicing.  However, since October 2010 the number has not exceeded 78.

The number of specially serviced conduit loans currently stands at 4,656 while the overall CMBS 30+ day delinquency rate increased in February by five basis points to 9.39%

What these statistics seem to point to is that the deals that were destined to fail have failed and we are seeing the beginning of the end of the carnage that began back in 2007.   While this decrease in CMBS loan transfers may bring good news to the market as a whole, there are still perils ahead.

Our observations seem to confirm that smaller balance loans of anywhere from $1million to $3 million that are CMBS loan transfers to special servicing are being resolved more often by discounted payoffs or note sales rather than foreclosures.  Larger balance loans of $20 million or above are instead being modified and or extended and returned to master servicing which is part of the reason why it seems to be difficult for equity investors to source discounted REO assets to purchase.

While modifications have brought temporary stabilization to many assets, the CMBS market remains vulnerable to the performance of these modified loans.  Only time will tell if the modifications will be enough of a band aid to begin the healing process.  There is a fair amount of re-default risk depending on the sustainability of the new cash flows and the ability of the borrower to pay under the new terms.

Modifications often leave Borrowers better off than yesterday, but by no means comfortable.  Like anxious cats in a roomful of rocking chairs, Borrowers today must worry more and more about the ability of their tenants to remain viable businesses capable of servicing these modified loans.  Going back to the servicer for another modification will likely not be a pleasant enterprise.

Posted on by admin in CMBS 2 Comments