This Is What Lenders Want Today
What’s enticing lenders? The debt panel at Bisnow’s capital markets event last week—Greystone managing director Jef Elm, Realty Mogul VP Rick Clark, Goldman Sachs regional director Nick Losada, moderator Winstead shareholder Chris Nixon and Wells Fargo director Billy Hurst—tackled the question. Jeff says you can’t get a better deal than Freddie Mac’s small deal plan, which offers a 3.2% fixed five-year coupon. Nick says the majority of his business is office and retail, but he’s starting to look hard at multifamily and occasionally hospitality. Meanwhile, Billy says it’s amazing how much self-storage has come into its own in the last decade. He thought CMBS maturities would slow that segment, but it hasn’t, which is making him take notice.
Recourse isn’t always a benefit to deals, Nick, here with CBRE’s Mike Landon, says. He has to turn down recourse offerings sometimes (which “seems perverse,” he jokes) because conduit lenders sometimes see it as a sign that something must be wrong with the asset. (He’ll happily take your recourse on Goldman Sachs balance sheet deals, though.) Nick and Billy both say they had been heavy on value-add deals for a while, but since the spring, they’ve been doing more Class-A lending.
Mezz lending has picked up lately, our panelists say—Rick is going up to 85% LTV on bridge loans with a mezz piece. (Rick’s pictured here with Bisnow’s Karen Pierre overlooking the Plaza of the Americas—they discovered they both worked there in the early ‘80s, when it had an ice rink.) Jef’s up to 90% on some of his internal bridge loans. Jef says the huge pipeline of securitized deals ($20B hitting the market in September and October) is allowing B-piece players to cherry-pick what deals they want. That’s pushed spreads up 35 bps since May.
Considering EB-5 financing? You’ll need to talk to these gents—NES Financial EVP Reid Taylor and Wright Johnson principal Charles Hutton of the EB-5 Alliance. They say no one really knew about the program five years ago (even though it was founded in 1990), but suddenly it’s exploded as a capital source, with 59 regional EB-5 centers in Texas alone. Besides being an alternative source of funding, it’s also an immigration program (providing foreign investors with a green card) and job creation program (the only one in the US that costs no taxpayer money). The duo says these foreign investors will sometimes take higher risk/lower yield because what they really care about is the green card. EB-5 has been especially prominent in the hospitality sector.