Financing Update August Dan Trebil

Transcription

1 Financing Update August 2011 Dan Trebil

2 NorthMarq Capital, LLC National Mortgage Banking Firm Arrange Debt/Equity for Commercial RE $7 Billion Annual Production Volume $40 Billion Servicing Portfolio Sister Company of NorthMarq RE Services

3 OVERVIEW What types of lenders are active now? What types of projects are financeable? What are the rates on these loans? Equity requirements and sources Lending as we move forward

4 What Types of Lenders are Active Now?

5 Life Insurance Companies Several buckets of money, all seeking yield Mortgage yields high compared to alternatives Long term lenders on high quality assets Relatively conservative

6 Life Co Quarterly Commitments $50 $45 $40 $35 $30 $25 $20 $15 $10 $5 $

7 Commercial Mortgage Backed Securities i (CMBS) Provided by Wall Street Packaged together and sold as bonds Mid to long term lender on mid to high h quality assets

8 $80,000 $70,000 $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 $0 CMBS Origination Volume Millions 1Q00 1Q01 1Q02 1Q03 1Q04 1Q05 1Q06 1Q07 1Q08 1Q09 1Q10 1Q11

9 Government Agencies Fannie Mae, Freddie Mac & HUD Multi family, Asst Living, Affordable etc. properties Long term lender Fannie/Freddie future in question

10 Banks Transitional & term lending (short to mid term) Personal guaranty required Look to sponsor, so willing to lend on lower quality real estate

11 MBA Originations Index 2001 Average Quarter = Q101 Q301 Q102 Q302 Q103 Q303 Q104 Q304 Q105 Q305 Q106 Q306 Q107 Q307 Q108 Q308 Q109 Q309 1Q10 3Q10

12 Property Types LENDER COMPARISON Life Co CMBS Agency Bank All High Quality All Mid to High Quality Multifamily All Personal None Typically None Typically None Typically Personal Guaranty Required Required Required Guaranty Required Loan to Value 65 75% 70 75% 75% 75 80% 75% Term 5 25 Years 5 10 Years 5 20 Years 3 7 Years Amortization Years 30 Years 30 Years Years Rates % % % %

13 WHAT TYPES OF DEALS ARE GETTING DONE NOW? Multifamily Definitely the desired property type Sought by all lender types Life Co s winning high quality, low leverage Fundamentals very eysound right now

14 WHAT TYPES OF DEALS ARE GETTING DONE NOW? Retail Lenders prefer grocery anchored Necessity retail Prefer #1 or #2 grocer in the market Life Co s, CMBS, Banks Careful underwriting in place rents as compared to market Unanchored retail is difficult (CMBS/Bank)

15 WHAT TYPES OF DEALS ARE GETTING DONE NOW? Industrial/Office Life Co s only at high quality and lower leverage Near term lease rollover makes it difficult Careful underwriting in place rents as compared to market

16 WHAT TYPES OF DEALS ARE GETTING DONE NOW? Single tenant (Investor owned) owned) Extremely difficult unless tenant is investment grade (BBB+) and has long remaining lease term

17 WHAT TYPES OF DEALS ARE GETTING DONE NOW? Single tenant (Owner occupied) Bank and/or SBA program is the best option SBA has expanded criteria as part of stimulus SBA fees decreasing and maximum loan sizes increasing Up to 90% financing

18 WHAT TYPES OF DEALS ARE GETTING DONE NOW? Construction (All property p types) Multifamily is preferred property type Up to 80% Loan to cost Numerous examples across metro (8,500+/ proposed right now) Commercial Build to suit Ex. Whole Foods Edina Large pre leasing requirements (75%+) Ex: Ford Centre Minneapolis

19 Area Property # of Units Uptown Bennett Site 217 Uptown Flux 216 Uptown 1800 Lake 57 Uptown Track Uptown The Walkway 87 Uptown The Greenleaf (Affordable) 63 Uptown Buzza Building (aka Lehmann Center, Affordable) 120 Downtown Holden Building (Historic Rehab) 120 Downtown Precision Building (Historic Rehab) 130 Downtown 800 3rd North (Historic Rehab) 207 Downtown 222 Hennepin (Downtown Jaguar) 284 Downtown FloCoFusion Fusion (Student) 84 Downtown Oak Street Apartments 60 Downtown Stadium Village Flats 120 Downtown 100 3rd Ave SE (Affordable component) 200 Downtown 701 2nd Street Apartments 100 Downtown Mill & Main 375 Downtown Stone Arch Apartments Phase II 56 Downtown North Loop Village (aka Dock Street Apts) Phase I 185 Downtown North Loop Village (aka Dock Street Apts) Phase II 200 Downtown 103 Second Street North 259 Downtown Turnstone Group site 19 N. 8th St 140 Downtown Soo Line Building 120 Downtown 401 Oak Grove (Brad Hoyt Site) 124 Downtown Magellan Development Site (Loring Park) 355 Bloomington Genesee (Penn & American) 234 Bloomington Slosburg The Richdale Group 282 Bloomington Covington at Norman Pointe 250 Edina Southdale Site 300 St. Louis Park Ellipse on Excelsior Phase II 60 St. Louis Park The West End 119 St. Louis Park Park Summit Apartments 192 Plymouth Plymouth Apartments 157 St Paul Farmer's Market Flats 58 StPaul Pioneer Endicott (Historic Rehab) 55 St Paul Penfield 250 St Paul West Side Flats (142 market, 36 affordable) Corridor Lake & Hiawatha (350 market, 100 senior, 100 affordable) Corridor 29th Avenue Apartments Corridor Longellow Station Corridor Oaks Station Place 104 PARTIAL TWINCITIESDEVELOPMENT PIPELINE

20 Mortgage Rates Life Co CMBS Agency Bank Index 10 Yr Treasury 10 Yr Swap 10 Yr Treasury 5 Yr Swap Index Rate 2.17% 2.37% 2.17% 1.25% Spread 2.10% 3.40% 2.40% 3.00% Total Note Rate 4.27% 5.77% 4.57% 4.25% Misc Most Life Co s have floors of 5% +/ No Floors No Floors Many Banks have floors of 5% +/

21 Capital Stack 100% 75% 4% Equity Mezzanine Financing Piece 16% of total (80% of equity) 25 35% Equity 50% 25% 80% First Mortgage 5.50% Rate 65 75% First Mortgage 5.0% Rate 0%

22 How is the Equity Gap Being Historic Tax Credits Filled? Low Income Housing Tax Credits New Market Tax Credits TIF

23 How is the Equity Gap Being Filled? CASH $$

24 Filling the Equity Gap Institutional Equity Larger Deals ($5 million in equity per deal) Class A assets Provide 90% of equity needed dd Desired returns in high teen s to 20+% Friends & Family or Country Club Smaller equity increments Longer term investment horizon Desired returns in mid to high single digits More typical with smaller investors

25 What Will Effect Lending as We Amount of distress Move Forward? Large volumes of maturing loans Interest rates Health of economy

26 Total Outstanding Distress $350 $300 $250 $200 $150 $100 $50 $0 J '08 F M A M J J A S O N D J '09 F M A M J J A S O N D J '10 Troubled REO Restructured Resolved F M A M J J A S O N D J F

27 Commercial/Multifamily Delinquency Rates Among Major Investor Groups 9.00% 8.00% 7.00% 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% 2007 Q Q Q Q Q Q Q1 CMBS Life Co Fannie Freddie Banks & Thrifts Source: Mortgage Bankers Association

28 CMBS Monthly Delinquency CMBS Monthly Delinquency 8.219% 9.000% 8.219% 6.000% 7.000% 8.000% 3 000% 4.000% 5.000% 6.000% 1.000% 2.000% 3.000% 0.000% May 08 Jul 08 Sep 08 Nov 08 Jan 09 Mar 09 May 09 Jul 09 Sep 09 Nov 09 Jan 10 Mar 10 May 10 Jul 10 Sep 10 Nov 10 Jan 11 Mar 11 May 11 M S N J M M S N J M M S N J M M

29 Commercial Mortgage Maturities

30 Interest Rates At historical lows Federal Govt will keep short term rates low through 2012 Long term rates are more difficult to control artificially

31 Health of Economy Jobs! Jobs! Jobs!

32 Parting Thoughts Banks are working their way out of their problems This could lead to opportunities for investors Cash is King

33 Show Me The Money! Bill Keenan Builder s Development & Finance (BDF)

34 BDF Have been in business for 38 years Niche is residential construction and land development in metro Funding sources include owner capital and bank debt db

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37 How do we keep moving forward? General guidelines Development loans Presold construction loans Construction loans on spec homes Opportunities for the smaller builder

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