www.marejournal.com
20C — April 29 - May 12, 2016 — Spring Preview — M id A tlantic
Real Estate Journal
F inance
By Israel Schubert, Meridian Capital Group A reason to consider refinancing now: It’s not rising interest rates
I
banks are experiencing an increasingly stringent regu- latory environment, causing them to behave more conser- vatively on deals. The challenge – while na- tional, regional and local banks remain strong and well-capitalized, lenders tend to be regulated from a national level by the Fed- eral Reserve, OCC and FDIC. Broader trends, such as the appreciation of commercial real estate in the Northeast and Mid-Atlantic regions, are being viewed by these regula- tory bodies as increasingly risky for lenders while they are not properly accounting for the specific dynamics of each submarket and the mer- its of each loan. Lenders have done a great job adapting to the policies mandated by Dodd-Frank, but in 2016 we
expect additional controls as regulation begins to address the recommendations out- lined by the Basel Committee for Banking Supervision. This uncertainty regarding capital requirements and risk reten- tion has begun to influence lenders to take a more con- servative stance until these matters are resolved. For instance, Meridian recently closed a cash-out construction take-out loan on a large multifamily asset located in Philadelphia where we forward rate locked for over six months, with a go- ing in DSCR of 1.05X, condi- tioned upon a 1.20X DSCR at stabilization. We expect that structures like this will be increasingly less available as regulatory pressures increase and uncertainty persists. What we’re telling clients is
that if they want to refinance, don’t do it solely because they think rates are going to go up—do so because lending parameters are changing. For instance, you might see a difference in proceeds and interest-only terms. In 12 to 24 months from now term sheets will inevitably look different, and we are encour- aging clients to capitalize on a strong lending environment where there is still a lot of competition and liquidity. In 24 months borrowers may not be able to close the same types of deals they can today. Family-owned real estate companies are counting on refinancing to make capital available for acquisitions and investment. But if they don’t take a proactive approach to the changing market condi- tions and wait for their mort-
gages to mature, they may experience a significantly dif- ferent lending environment than what they have become accustomed to over the past five years when they seek to refinance. Fortunately, change hap- pens slowly enough that it gives us time to strategize with our clients and create longer-term plans for man- aging their loan maturities and capital needs. We are still seeing property values supported by appraisals and lenders who haven’t been financing overzealously like the last cycle, but a shift is occurring. Now is the time to plan for it. Israel Schubert is senior managing director and head of the New Jersey and Florida Offices at Me- ridian Capital Group. n
f you’re an investor in the middle market, now is the time to consider taking
advantage o f ma rke t liquidity by refinancing, whether you plan to use the proceeds for acquisi- tions or in- vestment in your portfolio.
Israel Schubert
While it’s difficult to tell where interest rates will go, concern is beginning to per- meate the market that while banks will remain strong, un- derwriting will be increasing- ly conservative. As a result, Meridian Capital Group has seen a significant increase in refinance and acquisition activity since the beginning of this year. Both CMBS and •There are currently 1,868 medical buildings in North- ern New Jersey, which con- sists of 13 counties, repre- senting 25,649,555 s/f •The Bergen County mar- ket accounts for 277 (15%) of those medical buildings or 3,442,933 s/f •Average asking rates end- ed the quarter at $19.53 psf base rent in Northern New Jersey compared to $22.89 psf base rent in Bergen County. Market Update The Northern New Jersey market saw over 86,000 s/f leased in the first quarter of 2016. Average asking rates decreased from $19.69 psf (base rent) in the fourth quar- ter to $19.53 psf in the first quarter of 2016. Compared to a year ago in the first quarter of 2015, rates are up $0.26 psf. Vacancy, on the other hand, decreased from 18.3% in the fourth quarter to 15.4% in the first quarter in 2016. This is the lowest the vacancy has been since the third quarter of 2014. Net absorption has stayed positive and ended the quarter at 445,575 s/f. Top lease transactions include 8,469 s/f at 1135 Broad St. in Clifton; 6,335 s/f at 30 W Century Rd. in Paramus; 5,750 s/f at 1 Robertson Dr. in Bed- minster; and 3,500 s/f at 1527 Route 27 in Somerset. Bergen County ended the
NAI Hanson’s Medical Office 1Q’16 Report NEW JERSEY — At a Glance...
investment based on capital- ization rates. > Capitalization rates range from 6% to 11% depending on the size of the facility > Independent living - rates from 6% to 8% > Assisted living - rates from 6.5% to 9% > Skilled nursing - rates from 8.5% to 11% 11) Analyze the site to de- termine the value health care operators will pay for raw land.General values will be between $5,000 per proposed bed to $30,000 per bed depend- ing on the site amenties and location. 12) The size of facilities will continued from page 18C vary depending on whether the proposed community con- tains Independent Living, Assisted Living and Skilled Nursing or a combination of these lifestyles. Investing in, or developing, a seniors housing community offers a number of rewarding opportunites in an industry that will continue to grow at a significant rate for many years. 1 Alzheimer’s Association - www.alz.org 2. National Investment Center for Se- niors Housing & Care (NIC) - www.nic.or g Robert Gaines is SVP of the Senior Housing Group at Colliers|Philadelphia. n Although the Memorandum should not be cited as legal authority for the position con- tained therein, it does provide clear guidance in determining the IRS’ position on these is- sues. The result of this guid- ance is that the IRS Office of Chief Counsel has again taken a position that is consistent with the IRS’ historical treat- ment of the “bad boy” guarantys and the expectations of parties to such a financing transaction. Troy Rider is a partner at Barley Snyder. n The path to investing in a seniors. . . financing or transfer of the secured property, (2) the bor- rower files a voluntary bank- ruptcy petition, (3) any person in control of the borrower files an involuntary bankruptcy petition against the borrower, (4) any person in control of the borrower solicits other credi- tors of the borrower to file an involuntary bankruptcy peti- tion against the borrower, (5) the borrower consents to or otherwise acquiesces or joins in an involuntary bankruptcy or insolvency proceeding, (6) any person in control of the borrow- er consents to the appointment of a receiver or custodian of as- sets, or (7) the borrower makes an assignment for the benefit of creditors, or admits in writing or in any legal proceeding that it is insolvent or unable to pay its debts as they come due. continued from page 3C “Bad boy” guaranty developments. . .
1225 McBride Ave., Woodland Park, NJ
first quarter of 2016 with over 23,000 s/f leased. Average asking rates remained stable at $22.89 psf (base rent). Compared to a year ago in the first quarter of 2015, rates are down $0.37 psf. Net absorption posted negative numbers for the quarter ending at -14,588 s/f absorbed and vacancy in- creased 1.9% ending the first quarter at 10.2%. Top Transactions for 1Q’16 SALES 190Midland Avenue, Saddle Brook - 18,140 s/f sold for $3.8 million Buyer: Undisclosed Seller:BrookDevelopmentLLC *NAI Hanson represented both sides of the transaction 2083 Center Ave., Fort Lee 13,000 s/f sold for $3.5million Buyer: NJY Vista LLC Seller: TKK Center LLC PediatriCare Associates, a
practice that specializes in pediatric and adolescent care, opened their newest location on February 1, 2016. The location, their fourth, is on McBride Avenue in Woodland Park, NJ. It was designed to specifically meet the needs of the doctors and their young patients by The Ives Architec- ture Studio. PediatriCare believes in pro- viding their patients the most comprehensive, progressive, consumer oriented health care available. Their goal is to keep their young patients and their parents always comfortable and informed. Working closely with the doctors and the staff, The Ives Architecture Studio designed a state of the art fa- cility for PediatriCare so that their patients from toddlers to adolescents enjoy an excep- tional patient experience. n
Made with FlippingBook - Online catalogs