It was another stellar year for CCIM members completing big deals with the strongest performances shown in office, retail, multifamily, and financing. Within sectors, self-storage, student housing, and senior housing were standouts, experiencing strong and steady demand throughout the year. Those CCIMs who closed the biggest deals reported in 2016 Deal Makers columns share their experiences and insight, and predict what the future holds for closing large transactions.
CIRE: What advice would you give other CCIMs interested in developing and closing big deals in their markets?
Brian Whitmer, CCIM: It's a long-term personal proposition to establish yourself to build the skills, reputation, and relationships requisite to navigate the larger transactions. With bigger transactions comes an increased number of professionals involved. The more of those professionals that a commercial real estate professional has some relationship and rapport with, the better. There is a certain level of trust and respect all involved must show to help see these deals through possible impasses.
Trisha Talbot, CCIM: Big deals, like any others, are a combination of hard work, knowledge, experience, and a little luck. Analyzing opportunities and developing a cold-calling strategy based on potential deals from the biggest to smallest opportunities creates an effective strategy for targeting larger transactions.
David J. Stevens, CCIM: The key to the business seems to be the ability to identify off-market opportunities on the supply side. There's so much capital chasing with so few sensible deals that spending any time trying to generate capital sources, while necessary, would be better allocated to the supply side.
Kenneth M. Fox, CCIM: I don't generally go out looking for big deals, but I've been in the business long enough to know the players. Even so, it's ultimately about adding the best value for your clients.
Todd Perman, CCIM: My focus has always been healthcare, and by no stretch of the imagination is healthcare the path of least resistance. But performance over time and specialization has been a huge differentiating factor for me and my team. I would recommend differentiating yourself through specialization, whether by a vertical specialty or geographically.
Frank Rodriguez Melo, CCIM: It's all about reputation, persistence, and teamwork. Having these ingredients will help to open the right doors.
Leonard P. Deering, CCIM: Team up with people who have experience in that product line. If you don't have experience in a certain product, the lenders are going to be much more conservative, if willing to do the deal at all.
CIRE: What is the greatest challenge to closing big deals?
Whitmer: As the deal size increases, so does the level of scrutiny and due diligence from all parties involved. Getting everyone comfortable that the investment is prudent is paramount.
Talbot: A big deal has big details. The best approach is to execute with an experienced team that can handle any obstacle in a professional, problem-solving approach.
Stevens: It's important to stay actively connected with the decision makers on both sides of the transaction. If an emotional moment or an ego-driven moment comes up, you can better manage it. That is the point that the deal usually falls apart.
Fox: Big deals definitely have a level of scrutiny that small deals don't. When you're closing bigger loans, you are generally dealing with a more focused group both from the borrower side and the lender side. You have to be a good orchestra leader and coordinate all the pieces, especially on the mortgage finance side.
Perman: You need to have the knowledge and experience to see challenges and pitfalls coming ahead of time, so that you can handle objections and challenges early in the process. There will always be challenges, and navigating those proactively is where I see the difference between success or failure on execution.
Melo: It's a challenge to have the proper timing between all the parties that are involved in the transactions. Sometimes the buy side may be ready but not the sell side.
Deering: You probably have fewer people willing to do big deals because of the risk. There are less lenders out there willing to handle the larger deals. Finding the ones that do is the challenge.
CIRE: What market forces are at work right now to provide big deal opportunities?
Whitmer: There is an abundance of capital that is seeking to be placed into commercial, investment grade real estate, which is helping keep cap rates compressed.
Talbot: In my focus of healthcare real estate, recent legislation is providing big deal opportunities. Legislation is causing change and the uncertainty is fostering healthcare providers and healthcare property owners to make decisions to acquire or sell properties.
Stevens: It would be a hyper abundance of capital chasing real estate as a favored portfolio piece combined with still historically low cost of capital.
Fox: There's lots of money out there, so it's a matter of looking for opportunities. It is all about finding need and matching that need with the most appropriate capital to create value for your client. And that goes for both small and large loans.
Perman: In the healthcare space, there is a tremendous amount of capital chasing a scarce supply of quality assets, so it is an opportunity for current owners or providers to monetize at future value. That is driving big projects and portfolios to come to the market opportunistically. The changing healthcare environment and the flight to quality from other investments is also driving the projects in our space.
Melo: There's a lot of liquidity in the market allowing for larger players to obtain low interest financing that is conducive to big deals right now.
Deering: Everyone is still looking to lend money. All the lenders are looking for good quality products to lend on, even while the banks are being regulated more tightly.
CIRE: What does the future look like for closing large transactions?
Whitmer: I expect to see them continue as investment advisers and foreign buyers seek out larger transactions for the efficiency of placing larger slugs of equity.
Talbot: Real estate is always adjusting to changes in the marketplace. As a result, there is always an opportunity for large transactions.
Stevens: When you look at the level of capital that is looking for these types of deals, I think the demand for the larger transactions will always be high. This is especially the case for the larger institutional investors that find that the $50- to $100-million deals require the same amount of time and effort as sub-$10 million deals. A commercial real estate professional just needs to find a willing seller.
Melo: I believe the outlook to be conservative. The market has consolidated quite a bit. As interest rates start to rise, there will be a balancing out for multifamily after an incredible run over the last two years.
Perman: The future is bright for our team, and the demand doesn't look like it is slowing down in the near term. Politics and capital influences will bring significant motivation for change in healthcare, so it will definitely keep it interesting.
Deering: There's money out there, so the future looks the same as now.
CIRE: What is the key to being involved in big deals?
Whitmer: It is a balance of trust, experience, relationships, and reputation that combine to have clients put their trust in you to execute on the largest transactions. These are also the deals that are typically high profile within their organizations.
Talbot: I think everyone has a strategy for targeting big deals. My approach is to strategically target opportunities and execute with an experienced team.
Stevens: It is about being supply focused and relationship focused. Personal relationships are the key and to also have the ability to identify off-market opportunities.
Fox: Experience obviously comes into play, but so does being a good listener for need. Listening to clients, I can match what I perceive as the need of the client with the most appropriate capital in the most competitive way.
Perman: Being consistent and performing over time are generally two qualities that I look for in my team, which also helps get us involved in big projects. Having a keen understanding of our specialty, knowledge of capital, healthcare demand, and the process to making decisions all tie in as well.
Melo: Speed of execution is important. There's so much competition with the bigger outfits that the boutique players like me really have to keep our ears very close to the ground. If we see any movement or opportunity, we try to get there first.
Deering: Surrounding yourself with players who know what they're doing has always been the key.
CIRE: How has your CCIM education prepared you for closing big deals?
Whitmer: My CCIM training helped to lessen the learning curve and reinforce the most important elements to completing an investment sale.
Talbot: While I have a master's degree in business administration, the CCIM education is a focused and specific overview of all the targeted qualitative and quantitative components that clients use to consider real estate decisions.
Stevens: The full completion of the CCIM courses gives you the confidence and the ability to understand, at some level, all aspects of the deal and the decision-making process.
Fox: The CCIM education has added tremendously to my experience set. It's an integral piece of the whole pie and something I highly recommend.
Perman: My healthcare knowledge of more than 25 years has been a catalyst for success. However, the CCIM training has been a huge asset for me and my team. The principles and fundamental analysis that the CCIM course work has delivered has been a cornerstone of our success. The knowledge and understanding of the capital markets, user decision analysis, and financial analysis has been a huge asset for our team.
Melo: It is the cornerstone of my education and training. I've coupled it with a recent master's degree in real estate. So all along, CCIM has been the door opener. The CCIM education has allowed me to speak the same language as the investors and to become an investor myself.
Deering: I tell everyone that if you're getting into the commercial real estate industry, you need to get up to speed. And that is exactly why you really need CCIM education. I received my designation after getting my master's degree in business administration, but if I could do it all over again, I would get my CCIM designation first.
2016’s Biggest Deals
Brian Whitmer, CCIM, with five partners Cushman &
Wakefield, East Rutherford, N.J. - $299 million office sale
Trisha Talbot, CCIM, of Newmark Grubb Knight Frank, Phoenix and Todd M. Perman, CCIM, of Newmark Grubb Knight
Frank, Atlanta - $140 million medical
office portfolio sale
Brian Whitmer, CCIM, with four partners Cushman &
Wakefield, East Rutherford, N.J. - $82.3 million office sale
Jackie Noel, CCIM, with three partners Colliers International, Richmond, Va. - $81 million multifamily sale
David J. Stevens, CCIM
Investment Properties Corp., Naples, Fla. - $74.3 million office sale
Edward Hanley, CCIM, with a partner Hanley Investment Group, Corona Del Mar, Calif. - $72.5 million shopping center sale
Kenneth M. Fox, CCIM
Cohen Financial, San Francisco - $58.8 million acquisition loan for apartments and town homes
Frank Rodriguez Melo, CCIM Melo Real Estate, Miami - $53.7 million multifamily sale
Leonard P. Deering, CCIM Berkadia Commercial Mortgage LLC, Chicago - $44 million refinancing of apartments