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July 22, 2010
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NOMA GOES RESIDENTIAL
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| Join 900 of your colleagues to find out the future of Tysons Corner and the Dulles Corridor, at our next Bisnow Breakfast & Schmooze, one week from today, July 29, at the Tysons Ritz. Sign up now! |
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| Sure, we’ve gotten used to the GSA populating office space, but now real human beings are arriving and more apartments are going up by the day. |
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| This was taken two hours ago of The Flats 130 (that’s the address on M, NE) at Constitution Square, which will open its 440 luxury apartment units in September. Although it’s still got stickers on the windows and is pouring sidewalks, it’s already got Lincoln Properties on the job leasing in a trailer. It’ll feature one acre of courtyards, a large upper floor pool, a two story health club, and front door valet parking for occupants of its 103 signature flats. Oh, and a 50,000 SF Harris Teeter opens there December 1. |
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| This is Cohen’s Loree Grand at Union Place, on 250 K St, NE, that began leasing June 1, and into which initial residents have already moved, featuring 212 apartments, including 30 units reserved for artists. Nearby, the Washington Center welcomed 300 student interns into a six-story residential and academic facility in May. And although some think of already established Senate Square and Landmark Lofts as being anchors of the H Street/Atlas area or even Union Station, you could consider them in the NoMa mix as well. |
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| This was yesterday’s groundbreaking for Archstone’s 469 luxury studios and one and two bedrooms, to be ready by mid-2012; among others in that shoveling chorus line were Archstone’s Rob Seldin and Al Neely, Deputy Mayor Valerie Santos, and NoMa BID president Liz Price. The project, designed by Davis Carter Scott, accesses $151 million of construction and permanent financing from CW Capital under HUD’s Section 220 loan program, and will feature a two-story library (we presume it'll be rows of Kindles), movie theatre, a click café (we think that means it’s got wi-fi), a test kitchen for cooking classes—and 421 parking spaces. |
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| MORE ON SENIORS |
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| A lot of you expressed interest in more detail on our Seniors Housing Summit of last week, which we wrote about a bit in our Friday National edition. So here, just for you, a little more: Mike Hargrave of the National Investment Center, which collects and distributes performance data for the industry (think CoStar for senior housing product) said performance of senior properties has remained strong in recent years with occupancy averaging 88%. |
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| We heard some contrasting views from developers/managers vs. investor owners. Shelter Development’s David Carliner, left, said that while construction financing is tight now, they’re managing to develop by putting increased equity into deals, sourced from their private funds. He says the lack of other development activity in the CRE market gives them the ability to build high quality at a reasonable price and execute a strategy of long term holds using self-management. Frank Small of JER Partners described his company’s preference for NNN deals to third-party operators who focus on shorter stays and rehab services. Instead of building product, Frank said he's happy to buy at an 11% cap at 70% LTV, still earning a more than sufficient risk-adjusted return. |
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| Moderator Wayne Tatusko, left, of law firm Tatusko Kennedy, asked about management strategy, since senior living is sometimes described more as an operations business than a real estate play. All panelists agreed that the right location is important, but a good operations team (both upper management and on-site) is the true determinant of revenue (and value) of a property. Dan Gorham of Fountain Square Properties said his firm believes so strongly in top-notch staffing that it just started an internal management group, and depends on its input even during the design and development phases. |
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| On the other hand, Carlyle Group Senior Housing founder Scott Stewart said he thinks it makes more sense to self-manage, and likes to hire experienced third-party operators on a fee basis. |
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| Moderator David Kessler of Reznick, right, led off the finance panel by pointing out that the senior living business is seeing a lot of growth versus traditional CRE product types partially because 68% of the revenue base comes from the government through Medicaid. Walker & Dunlop’s Doug Bath said that for assisted and independent living properties, Fannie and Freddie are open for business, can do LTV’s of 75%, and the rates are “awesome.” He did caution that the loan criteria are very tight, as they underwrite a property’s worst recent performance period to determine a value, and the eligibility standards are set very high in terms of occupancy, ownership experience, and project location. Doug says an exciting new financing development is that Freddie can now package loans for securitization, rather than doing just one property at a time. |
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| Capital Funding Group’s Brian Reynolds works mainly with HUD, and recently placed a 30-year fixed, fully amortizing loan for 4.45%. HUD can lend only on skilled nursing or assisted living facilities, and 90% of his business is for the former. Brian says HUD’s programs are working too well right now and they are short on staff, so it’s time-consuming to get a loan through the system, especially since each property has to be underwritten; there’s no portfolio program. But with 80% LTV possible and great rates, it’s a good option if you qualify. |
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| GE Capital’s Stephanie Anderson pointed out the contrasts between her programs and the GSE’s, readily admitting that if an owner can qualify for a government backed loan, they should take the low rates, which she said (to audience laughter) can’t be beat because they are “subsidized by taxpayers.” But she compared GE’s lending group to a “gymnast” and flexible. Her typical deal is about $80 million, in the 70 to 75 LTV range, on a portfolio of 3 plus properties, and closes in 30 to 45 days. Echoing the first panel, she said they are very operations-oriented in their underwriting, and have nurses on staff to evaluate property staffing and policies. But sorry, they don’t loan on new construction or single properties. |
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| Legal guru Wayne Tatusko (on the right) got together this week with colleagues Brian Kelly and Bill Kennedy at our sponsor Tutusko Kennedy to reflect on the Summit. One conclusion that resonated, he feels, was the emphasis on good operators. “While location remains important, it’s clear that the lenders and investors are increasingly focused on excellence in operations.” And Brian took away that there will be additional development opportunities down the road as aging baby boomers “demand even better facilities that fulfill a different set of needs.” |
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This newsletter is a journalistic news source which accepts no payment for featured interviews. It is supported by conventional advertisers clearly identified in the right hand column. You have been selected to receive it either through prior contact or professional association. If you have received it in error, please accept our apologies and unsubscribe at bottom of the newsletter. Copyright 2010, Bisnow on Business, Inc., 1323 Connecticut Avenue, NW, Washington, DC 20036. All rights reserved.
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