2A — May 25 - June 7, 2018 — M id A tlantic

Real Estate Journal


M id A tlantic R eal E state J ournal Publisher, Conference Producer . .............Linda Christman AVP, Conference Producer ...........................Lea Christman Associate Publisher ......................................... Steve Kelley Associate Publisher ........................................... Kim Brunet Associate Publisher ..................................... Miriam Buttrick Senior Editor/Graphic Artist ..........................Karen Vachon Office Manager, Social Media and Public Relations Coordinator ..............Marisol Chase Contributing Columnists: ............................................. Lisa Cassidy, ecoImagine; Jon Leifer, Case Real Estate Capital, LLC; Chris Mavros, Case Real Estate Capital, LLC; Mid Atlantic R eal E state J ournal ~ Published Semi-Monthly Periodicals postage paid at Hingham, Massachusetts and additional mailing offices Postmaster send address change to: Mid Atlantic Real Estate Journal 350 Lincoln St, Suite 1105, Hingham, MA 02043 USPS #22-358 | Vol. 30, Issue 10 Subscription rates: $99 - one year, $148 - 3 years, $4 - single copy REPORT AN ERROR IMMEDIATELY MARE Journal will not be responsible for more than one incorrect insertion Phone: 781-740-2900 | Fax: 781-740-2929 www.marejournal.com The views expressed by contributing columnists are not necessarily representative of the Mid Atlantic Real Estate Journal

M id A tlantic Real Estate Journal

Insights on Trends in Capital Markets

C ompe t i t i on among commercial real es- tate lenders shows no sign of abating as borrowers continue to turn to private lenders for an influx of turn- around capital, according to Chris Mavros and Jon Leifer of Case Real Estate Capital, LLC (Case). How will recent tax reforms and rising inter- est rates affect the market? And what asset classes are garnering the most interest in this stage of the cycle? Q. On the lending side, there remains a steady stream of available capital. What is your prediction on demand in 2018 and how will lenders react? Mavros: Demand from bor- rowers will remain steady in 2018, which will only serve to further increase competition among lenders as new loan capital sources enter the mar- ket. The average lender will likely feel pushed to stretch on rate, leverage and structure to win deals this year. Leifer: The influx of new players is particularly notable in the bridge lending space. Overall, it is an excellent time for borrowers to receive multiple quotes, but they must keep in mind that lenders with a strong history of execution provide the best opportunity for quality financing. Q. What asset classes are garnering themost interest in themetro NewYork area and Florida in this stage of the cycle? Leifer: Industrial and mul- tifamily have the strongest fundamentals in the metro New York area and Florida markets. At eight-plus years into the economic recovery, new household formation con- tinues to create opportunities for redevelopers in the mul- tifamily sector. At Case, we have a healthy appetite for funding the repositioning of both industrial and multifam- ily assets. Q. How is the unrelenting force of e-commerce affect- ing the retail sector? Leifer: There’s no question that e-commerce, particularly Amazon, is remaking the sec- tor, and retail properties con- tinue to be adapted for new

uses. Urgent care and food hall facilities are springing up like weeds in former storefronts. We’ll continue to see improve- ments in multitenant property performance as we “right size” retail supply. Q. What are your predic- tions on land lending this year? Mavros: Case is actively lending on land development deals, even where there re- mains a level of uncertainty. We are targeting acquisition loans on entitled land and de- velopment ready deals. Overall, with regard to loans for unentitled land, lenders will hesitate to underwrite them given the multitude of risks inherent in early- to mid- stage projects. Borrowers will be pressured to pay significant fees and interest rates if they do not have entitled land. Q. What shifts in invest- ing will result from rising interest rates? Mavros: These rate-in- crease trends undoubtedly affect cap rates and real es- tate values. By extension, if underwriting loan payoffs in future refinancing becomes difficult as asset values de- cline, the dollar amounts lend- ers are willing to extend will be affected as well. Investors, especially institutional ones, will likely focus on debt rather than equity to avoid taking last-dollar risks. Q. How will recent tax reforms under the current administration affect CRE finance? Mavros: The real impact of the tax bill will be seen next year - 2019 - and from the commercial real estate per- spective, the reforms are very favorable. Any perks, though, will be offset by increasing interest rates. Corporate tax cuts and pass- through deductions are a sig- nificant boon to partnerships,

LLCs and S corporations that will not be taxed at the entity level. On a personal tax level, the elimination of the state income and property tax de- ductions will clearly have a negative effect, particularly in New York and New Jersey. Q. How is the aging Baby Boomer generation creat- ing opportunities in the market? Leifer: We are seeing in- creased opportunities in the medical office and assisted liv- ing property sectors, although the market has five to seven more years before the peak retirement years of the Baby Boomer generation. Self-storage is garnering a lot of interest as well, and new supply in this sector is trend- ing up and down the southern coasts of Florida, where de- velopers are building housing of every stripe. Baby Boom- ers are trading out of larger homes, generating demand for storage. Questions are arising about overbuilding in that sec- tor, though. Q. What are the major concerns in this stage of the cycle? How is Case ad- dressing them? Leifer: My main concern is that sponsors and their lend- ers maintain discipline in their underwriting. This is not a time to ignore the importance of mitigating risk. While there are good deals out there for strong sponsors with solid operational capabilities, if a deal seems too good to be true, it probably is. On a separate note, pricing expectations on the limited number of nonper- forming loans out there seem to be getting more realistic. At Case, we have the dis- cretionary capital that allows us to deliver on our promises, which distinguishes us in the market. We remain interested in senior secured financings continued on page 14A


$80,000,000 IN NEW LOANS BY OUR BALTIMORE TEAM Gaithersburg, Baltimore, and Fulton, Maryland

Visit northmarq.com to learn more!


ORDER TODAY Call Lea Christman 781-740-2900 for details

lea.christman @marejournal.com

Made with FlippingBook - Online catalogs