Record Financing
The financing market for commercial properties is as good as it's ever been, say Sonnenblick-Eichner co-founders David Sonnenblick and Elliot Eichner. To underscore, the dynamic duo are in application with a lender for one of the firm's biggest financings: $340M for a JW Marriott Hotel in Chicago.
Yesterday, we sat down with David and Elliot, flanked by principal Patrick Brown and managing director Tina Derderian (for a modified episode of Between Two Ferns). They tell us the Chicago deal is a mixed-use project with a hotel, office, and retail. Part of the financing will be securitized and part will be held on book by the lender. The Beverly Hills-based firm's other deals include a $150M loan with a lifeco for a 1M-plus SF industrial/office property in Hawaii, a mid-sized deal on a shopping center in the Bay Area, and a hospitality financing for a REIT in Georgia. According to David, today is a better interest rate environment and overall pricing environment than prior to the recession.
A display of Lucite "tombstones" mark some of Sonnenblick-Eichner's $15B in deals since inception. They run the gamut of hospitality, office, retail, multifamily, and industrial. The firm recently closed its fifth deal for Pier 39 in San Francisco, a $148M loan on a short-term ground lease, and $111M in 10-year, fixed-rate financing for The Shops at Canal Place in New Orleans. In the past year, the firm has closed a number of hospitality properties, including $112M of first mortgage and mezz financing for a 12-property portfolio in three states for Cooper Hotels.
Elliot notes that while lenders aren't underwriting as much on projections, nearly all deals that have cash flow—and some that don't—are getting financed. Take the hotel they're refinancing in Manhattan. It doesn't open until June, and they've got 10 offers from lenders. (It's like Heidi Klum's first five minutes trying online dating.) Spec condo and spec office deals are still difficult. Most of the firm's activities are debt-oriented, but it's not uncommon for clients to hire them to sell property, like a site at Sunset and Doheny that they sold to Marriott International for an Edition hotel on the West Coast.
We also snapped associates Jonathan Meza and Brandon Tipping (checking out Bisnow’s website). David and Elliot note it's hard for people to believe that interest rates are actually lower today than they were in '05, '06, and '07. The firm's doing deals at less than 3% on floating-rate transactions, and fixed-rate transactions in the low-4s. At its most competitive time before the recession, long-term fixed-rate debt was in the low-5s. They expect rates to go up because that’s the only direction they can go. (We call this the reverse roller coaster effect.) In that event, deals will simply size differently and other funds such as mezz or preferred equity will help fill any shortfall in proceeds.
Before launching Sonnenblick-Eichner in 2000, David and Elliot worked together in the LA office of the old Sonnenblick Goldman. They moved out here separately from New York in 1986, by chance got thrown into the same office, and became fast friends and partners. David, who's into golf, tennis and sailing, has three kids—the youngest is 16. Fun fact: Years ago, he worked as a restaurant cook when he lived in Jackson Hole, Wyo.
Elliot's a cook, too—he loves to smoke foods in his Big Green Egg and the neighbors get much of the bounty. The loves in his life are wife Joy and their 16-month German Shepard pup, Sebastian, who joins Shepard-Lab mix Tammy. He has two children, 21 and 22—the older just graduated from George Washington University.
