6C — September 29 - October 12, 2017 — Fall Preview — M id A tlantic
Real Estate Journal
By Daniel Palmier, UC Funds Multifamily & non-traditional lending: 2018’s best-performing investments
here’s no shortage of debt for income- producing assets in today’s mar- k e t . T h e challenges f o r m o s t s p o n s o r s lies in find- ing equity on income- p r o du c i ng a s s e t s o r debt capital for value-add, transitional assets. Plenty of lenders are ac- tively pursuing office, indus- trial, and retail assets. And T Daniel Palmier
apartments, empty nesters and millennials who view housing as an integral part of their lifestyle are buying in and adding to the absorp- tion level. They want to be in prime locations near transit and work, and they want amenity-rich living spaces with lounges, gyms, and a built-in social atmosphere. In the B and C asset classes, value-add multifamily busi- ness plans continue to offer good upsides, with tenants willing to pay higher rents for better quality housing, or with sponsors who continue
to bankroll these deals. Why non-traditional lending is the new normal Traditional lenders are still very active, but only for their key clients with the biggest bank accounts. They’ve shut out the middle-market devel- opers and investors to mitigate their risk. As a result, these owners have turned to non- traditional lenders to finance these deals, and it’s started a trend: As the market for non- traditional lenders has grown, pricing has dropped to be on par with conventional lend- ers, while at the same time offering the added benefits of non-recourse, flexibility, and quicker closing timeframes. Today, even institutional real estate investors are turning to companies like ours for financ- ing to take advantage of the added benefits and competi- tive capital pricing. Looking ahead to 2018 After a strong summer with no headwinds in sight, Q4 of 2017 feels like it’s going to be a very active market. We all hear how the market is due for a correction at some point, but real estate is still one of the best investments. It continues to provide great returns, strong cash flows, and a hedge against inflation. At UC Funds, our invest- ment focus for the remainder of 2017 and 2018 will continue to be in stable properties, value play/transitional assets, and development deals ranging from $5 to $35 million nation- wide. We introduced UC GO in mid-2017 with more than a billion dollars of available capital. We developed UC GO in conjunction with Barclays to offer a non-recourse com- mercial mortgage bridge loan available at 85 percent LTV and 0.5 DSC. All available without the bank restrictions and contingencies. Barring a black swan event, the multifamily market should continue to prove to be one of the best performing asset classes in 2018, delivering solid returns with a reason- able risk profile. Revenue growth rates may stagnate a little, but overall we expect year-over-year gains in the industry, which will continue to attract sponsors, lenders, and equity to the market. Daniel Palmier is pres- ident and CEO of UC Funds, a provider of debt and capital solutions. n
while hospitality presents a few challenges in the cur- rent lending environment,
Demand for multifamily continues Despite recent heavy de-
After a strong summer with no headwinds in sight, Q4 of 2017 feels like it’s going to be a very active market. We all hear how the market is due for a correction at some point, but real estate is still one of the best investments.
liveries of new multifam- ily product in most regions of the country, supply and demand are still balanced. Years of short supply resulted in pent-up demand, so all the new product is quickly absorbed and not overwhelm- ing the market. For luxury
there is capital available for high-quality hotel assets with seasoned sponsors. But, overwhelmingly, commercial real estate capital is chasing multifamily aggressively in any asset class everywhere and that won’t change for 2018.
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