News
NOBODY'S PERFECT
July 3, 2012
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| The debt folks at Bisnow’s NY Investment Summit last week say they’re willing to work with investors that have blemishes. As long as they tried, stuck with a property, and didn’t behave badly (that means trying to avoid default and also eating their vegetables), they’ve got a shot with these lenders. Terra Capital Partners’ Adam Kies (right, with RCG Longview’s Chris LaBianca) says his firm sticks to the small deals, most under $8M. It goes for existing cash flow rather than distress. But that doesn’t rule out properties with busted capital stacks that just need a little more leverage. Chris expects volatility (who doesn’t, with these warm fronts blowing through?) but says that’s good for his company, as people run to stability in that climate. |
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| Cantor Fitzgerald’s Mike May (with Prudential Mortgage Capital Northeast and Midwest originations head Melissa Farrell) says his firm doesn’t care whether it takes a mezz or preferred spot. It’s all about the deal, and there are two kinds out there right now: the haves(10-year loans that originated in ’02 or ’03) and the have-nots (five-year ones that originated… well, you know what happened five years ago). The hole Mike sees in the outfield is for big construction loans(while others are standoffish on almost any kind of construction loan). He has term sheets out for two deals between $600M and $700M. |
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| Someone get this woman a microphone! Melissa says Prudential Mortgage wants a preferred spot. If the company goes in on a deal, it’s holding the loan for 10 or 15 years and is comfy with the operator. |
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| Meridian Capital Group CEO Ralph Herzka acknowledges that preferred positions are more secure, but mezz spots often offer better cash flow. He advises investors to diversify among not only lenders but also maturities. |
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| Torchlight’s Steven Schwartz says a few marks on an investor’s record don’t have to be the kiss of death. Just avoid the real bad guys, and otherwise, “we’ll underwrite the crap out of it” and find a way to get comfortable with the deal. With all this talk about who wants what position and how to handle it, he wondered whether he was on a real estate panel, going with the more pragmatic approach: “Take as much money as you can for as long as you can.” |
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| Our moderator, Reznick Group’s Debbie Levinson, says CRE and multifamily mortgage originations hit a record $507.7B in '07, led by conduits. For comparison, 2011 reached only $184.3B (still a 55% increase over the previous year), led by the GSEs. Most of '07 mortgages were office, and of course multifamily was the 2011 star.The 36% jump in originations in Q1 year-over-year, she says, is due to healthcare, retail, and multifamily. A lot has changed, but volume is up and many new and old lenders are very much in business. |
