News
Multifamily Monday
October 18, 2010
| MCA principal Scott Lynn says you can’t always get what you want—but if you have a good deal, you can get what you need (with a nod to the Rolling Stones). Right now the good deals are focused on multifamily. | |
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| Scott, right, with senior director Todd McNeill, tells us multifamily’s strength is the government-mandated Fannie, Freddie, and HUD funding. It’s the one area that is head and shoulders above the rest of the market, he says, because it’s being supplemented. MCA’s been repping borrowers largely in multifamily mortgages, mezz loans, and equity placements. For mortgages, most sources have been small and regional banks, life, credit unions, and private capital, they tell us. There is no question that regulation has increased and scrutiny of deals has been doubled, Todd says. Because institutions have the FDIC looking over their shoulders, Scott adds, it will be harder and harder to get those transactions done. | |
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| Scott—here with MCA’s Brandon Miller, Todd, and Sunny Sajnani— says the firm’s leaning heavily into the private capital market, which is a very inefficient market. There are still significant issues with real estate debt that is on the books because everyone knows it’s underwater, he says. “They know it and they don’t want to throw good money after bad. They don’t want to lend, so we have to show them how to loan conservatively. And we have to secure the gap and the way to do that is with private sources,” he says. Scott says MCA’s been approaching more than 50 sources, which in a good market would yield a 20% to 30% hit. Today, he’s hoping to get five prospects to find one to two livewires to get a deal done. | |
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| Late in the summer, MCA arranged a JV between WindRiver Cos. and South Bay Partners (both Dallas-based seniors housing specialists) to acquire Town Village, a 183-unit retirement community in Oklahoma City. It was purchased from a lender that foreclosed on the property in early 2009. MCA negotiated the purchase of the property and arranged new acquisition financing for the seller. Brandon, who worked the deal, says MCA "negotiated very favorable financing terms with a cooperative seller that got us across the finish line on acquisition." Todd thinks deals will continue to be slow and may take up to six years to recover. To make the point, he tells us the firm did $500M in 2008, $150M in 2009 and expects to close another $150M this year, earning the No. 19 slot on NREI's Top Lender rankings. | |
