2A — October 30 - November 12, 2015 — M id A tlantic
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M id A tlantic Real Estate Journal
M id A tlantic R eal E state J ournal Publisher .................................................................Linda Christman Publisher ....................................................................Joe Christman Section Publisher .........................................................Steve Kelley Senior Editor/Graphic Artist ..................................... Karen Vachon Production Assistant ........................................................ Julie King Associate Publisher ................................................. Alissa Aronson Associate Publisher .............................................. Barbara Holyoke Office Manager .........................................................Joanne Gavaza Contributing Columnist . .........................................Sanford Herrick Mid Atlantic R eal E state J ournal ~ Published Semi-Monthly Periodicals postage paid at Rockland, Massachusetts and additional mailing offices Postmaster send address change to: Mid Atlantic Real Estate Journal, 312 Market St. Rockand, MA 02370 USPS #22-358 | Vol. 27 Issue 20 Subscription rates: $99 - one year, $198 - two years, $4 - single copy REPORT AN ERROR IMMEDIATELY MARE Journal will not be responsible for more than one incorrect insertion Toll-Free: (800) 584-1062 | MA: (781) 871-5298 | Fax: (781) 871-5299 www.marejournal.com The views expressed by contributing columnists are not necessarily representative of the Mid Atlantic Real Estate Journal
C ommercial real estate continues to be on an upswing, in general, but the market is not without problems. Banks and other traditional lenders are back— but are they much of a factor? What’s the key to success in a cyclical market, and howmuch of a role does experience play? What parts of the country are doing better than others? Case Real Estate Capital, LLC is a commercial real es- tate investment company, and in the following commentary, industry veteran Sanford Herrick , Case’s founder and managing principal, addresses these questions and more – and looks to the future for a market that has been getting stronger. Q: The last recession left a landscape of under-performing properties. Now that the mar- ket has been on an upswing, how’s the market doing in terms of such properties? A: “The banks still have ‘problem children’ on their bal- ance sheets, such as those that are subject to litigation, which they would like to dispose of if possible. In many cases, capital costs are too high, or the borrower/developer didn’t have the necessary capital or expertise to work out the problems. As a result, there is still a lot of product ‘hidden’ on bank and institutional balance sheets. Much of that ‘hidden’ part of the ‘iceberg’ consists of smaller deals, and the banks tend to be notoriously slow about working things out, even in a market that looks and feels like it has been getting better for years. Their hope is that time will cure all ills.” Q: That being said, how much of a factor are tradi- tional lenders and investors right now? Are they finally coming back into play as fund- ing sources? A: “Yes, they are finally coming back, but the reality is that they’re getting scared again. Simpler is better for the traditional banks.” Q: What’s the profile of to- day’s typical value-add prop- erty? A: “Because the market has been on such a long bull run since the end of the recession, The CRE Market Looks and Feels Like it’s Getting Better Sanford Herrick
each value-add property today has its own characteristics. And again, shortage of capital, the lack of expertise by some on the borrower/developer side, or a bank’s unwillingness to add money to solve prob- lems are among the classic problems the market contin- ues to face.” Q: What geographic markets are the best for value-add op- portunities right now? A: “Our firm is very tied to the New York tri-state area, as well as to Florida—the ‘sixth borough.’ We believe that there is sufficient activ- ity here. I know that many of our competitors are going into secondary and tertiary markets, but that is not what our instinct is to do.” Q: What’s the status of situ- ational lending in the current market? A: “We’re finding deals and would like to find more of them—and there should be more of them. There are people that are buying debt and looking for financing, and we would like to help finance them to give them the chance.” Q: In terms of traditional assets, how can risk be mini- mized going forward? A: “Among the factors that minimize risk are lower lever- age, pre-leasing or substantial leasing, credit tenants, and a strong hand on the part of the developer.” Q: Industrial real estate has been a focus for Case—how is that sector doing? A: “In the Northeast and the New York metropolitan area, it’s booming. For warehouse/ industrial, this market and Los Angeles are two of the strongest markets.” Q: A lot has been said about the strength of the multifam- ily market. How do you view
that sector? A: “We’ve looked at multi- family and have indeed taken advantage of some opportuni- ties in that sector. Right now, however, so many building permits that have been issued, and so much product is under construction that we’re taking a bit of a wait-and-see attitude for the time being.” Q: Are you seeing opportuni- ties in the retail sector? A: “Yes, we are. This month, we finalized a $20.5 million deal, purchasing two NPLs secured by a group of nine net-leased properties and simultaneously assumed own- ership through a deed-in-lieu of foreclosure agreement. The transaction involves retail and industrial/warehouse assets in prime locations across New Jersey, NewYork, Connecticut and Massachusetts.” Q: How do you approach any opportunity? What’s your process? A: “I answer the phone. I try to understand what is being requested and why it’s being requested—that’s on the situational lending side. Jon Leifer, our director-ac- quisitions, spends much of his time connecting with sources at banks and on Wall Street, as well as prospecting for new transactions. It’s all a mix of personal relationships and responsiveness.” Q: Bottom line, how can investors benefit from doing business with your firm? A: “We have a 30-year track record. We know what we’re doing. We get people into and out of deals.” Based in Rochelle Park, NJ, Case is active as a high-yield private lender, a purchaser of sub- and non-performing debt, and an equity investor. n
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