As much of the commercial real estate market waits in the wings for a cue, multifamily deals continue to capture the spotlight. But as the drama of the economic recession begins to lift, financing sources are auditioning new players for the industry’s next act. Commercial Investment Real Estate asked financing industry expert James R. Kirkpatrick, CCIM, MAI, vice president at Grandbridge Real Estate Capital in Houston, to review the market’s past and current performance.
CIRE: With the credit market loosening slightly, what types of deals are getting funding right now?
Kirkpatrick: The perception in the industry is that commercial real estate debt is only available for multifamily deals. While no one will argue that multifamily is where most of the money has been and probably will continue to be, Grandbridge’s deal pipeline includes office, retail, industrial, and even hospitality loans in various stages of closing. We’ve even got a joint-venture structure on a yet-to-be-built condominium project right now.
A lot of this business might not have been possible six months ago. Of course, I’m not saying any of these deals are easy to put together. By no means is the industry back to the 2007 peak and I don’t see those days returning in the foreseeable future. Underwriting standards remain stringent, but unlike 12 to 24 months ago, if you have a good, solid real estate play, you can get it financed.
CIRE: So which financing sources are willing to lend right now?
Kirkpatrick: Of course the quick answer is the government service agencies — Fannie Mae, Freddie Mac, and Housing and Urban Development. But is everyone ready for a blast from the past? Commercial mortgage-backed securities version 2.0 is here! Right now Grandbridge is tracking 24 or 25 active CMBS lenders, but that number changes daily. It seems that every time I check, another conduit program is being fired up.
The life insurance companies also are out looking for new loans. For the right opportunity, life companies will push leverage, and on a lower-leverage opportunity they are hard to beat. Even the banks are getting back into the financing game now. Ultimately, time heals all and with replenished balance sheets and limited opportunities for earnings, commercial real estate lending is suddenly in vogue once again.
CIRE: What advice can you offer to those who are seeking financing for their transactions in the recovering market?
Kirkpatrick: My colleague at Grandbridge John Fenoglio coined the phrase “the art of the possible” in relation to what is necessary to transact in times when transactions are tough to come by. While things are not nearly as bleak today, the advice is still applicable. First, understand leverage: How much can you borrow and at what cost? Second, time and patience are necessary. Third, set expectations and the capital stack realistically. Fourth, understand your deals. And finally, think proactively, not reactively. In today’s climate, these remain words to live by.
CIRE: What advantages does your CCIM/MAI dual designation give you?
Kirkpatrick: Whether it is an office building or a vacant parcel bought as an investment, commercial real estate is basically all about cash flow. It’s really as simple as that. The coursework and experience required of me to earn both of these designations taught me how to best interpret, understand, and implement this key real estate investment principle.
CIRE: How can commercial real estate lenders benefit from a CCIM education in today’s market?
Kirkpatrick: The CCIM program offers two things. First, it provides you with the ability to understand and interpret key real estate concepts. Without question, the courses CCIM offers are second to none. You will walk away with practical knowledge that you can put to use right away. However, there is a second benefit that is almost as useful and potentially more rewarding — the networking both in the course and as a CCIM designee in the commercial real estate industry. Combined, the CCIM education and designation is truly the gift that keeps on giving in commercial real estate.
Jennifer Norbut is senior editor of Commercial Investment Real Estate. If you have a story worth sharing in CCIM Q&A, send it to jnorbut@ccim.com.
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