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Bridge loans are in favor while the extent of commercial distress today is likely to depend on how long interest rates are high, and the impact on pricing.
MINNEAPOLIS, MINNESOTA (February 8, 2023) – While there is plenty of debt capital available waiting to deploy, fewer borrowers are willing to transact unless they must and there is an increase in activity from private capital, and regional and local banks from those who do, according to a new report from CBRE.
Rachel Vinson, President of Debt & Structured Finance, U.S. for Capital Markets at CBRE, said in prepared remarks that she expects demand for shorter-term, fixed-rate debt with shortened call protection to endure well into the second half of 2023.
“The Federal Reserve’s commitment to reduce inflation with aggressive rate hikes continues to heighten market uncertainty, as borrowing costs increase and a lack of price discovery persists,” Vinson added.
CBRE’s Lending Momentum Index declined 27% year-over-year in January.
Who’s Lending, And How Much
Banks had the largest share of CBRE’s non-agency loan closings for the third consecutive quarter at 58.3%—up from 46.4% in Q3 2022. More than 80% of bank loans were floating rates. Construction loans accounted for 37% of total bank lending volume, followed by 36% for refinancing and 27% for acquisitions.
Life companies were the second-most active lending group in Q4 2022 with 21% of closed non-agency loans—up from 16.7% in Q3 2022. More than half of life company volume in Q4 2022 was for industrial deals. Multifamily accounted for 22%.
Alternative lenders, such as debt funds and mortgage REITs, accounted for 18.7% of loan closings in Q4 2022, down significantly from their 32.3% share in Q3 2022.
Higher spreads and interest rate cap costs created a challenging environment for financing floating-rate bridge loans. Collateralized Loan Obligations (CLOs) issuance was limited to $2.95 billion in Q4 2022, bringing the 2022 total to $30.3 billion—down 33.3% from 2021.
CBRE’s Agency Pricing Index, which reflects the average agency fixed mortgage rates for closed permanent loans with a seven- to a 10-year term, increased by 60 basis points (bps) in Q4 2022 and 193 bps from a year ago to an average of 5.21%.
Higher mortgage rates and loan constants were the key feature of loan underwriting criteria in Q4 2022. Underwritten debt yields and cap rates on closed loans inched up in Q4 2022. Meanwhile, the average loan-to-value (LTV) ratio increased by 0.3 percentage points from the previous quarter. The percentage of loans carrying interest-only terms remained high, increasing to 72.6% in Q4 2022.
Government agency lending of multifamily assets totaled $47.1 billion in Q4 2022—up from $30.6 billion in Q3 2022. For the entire year, volume totaled $142 billion—up slightly from $139.6 in 2021.
Appetite for Shorter-Term Loans
Daniel Trebil, Northmarq, executive vice president and regional managing director, tells GlobeSt.com that he’s seeing an increased appetite for shorter-term loans in the 3- to 5-year range.
Normally this would lend itself to a bank execution, and local and regional banks are active in that space. Both life insurance companies and agency providers, however, are targeting that space with both fixed- and floating-rate executions that include prepayment flexibility in the last few years of the term.
“That way borrowers can take advantage of aggressively underwritten non-recourse financing but still preserve flexibility should rates fall in the next few years.
Property Owners Being Squeezed by Rates
Yardi Matrix’s director of research Paul Fiorilla tells GlobeSt.com that debt availability has diminished, and property owners are being squeezed by an increase in commercial mortgage rates, which have increased by 200 to 400 basis points since reaching historically low levels in the spring of 2022.
“The extent of the commercial distress today is likely to depend on how long interest rates remain high and the impact on pricing, Yardi Matrix said. “If interest rates settle in at 200 basis points higher, cap rates will settle in (approximately) 200 basis points higher. With values falling and much uncertainty about pricing, the only sales taking place “need to transact rather than want to transact.”
The circumstance has created an opportunity for high-yield capital to fill the gap between the balance of maturing mortgages and take-out loans.
Deals Not as Robust as a Year Ago
Peter Margolin, commercial loan originator at Alliant Credit Union, tells GlobeSt.com, “Similar to other capital providers and traditional lenders, opportunities are surfacing, and we are seeing deal flow in all our markets albeit not as robust as it was 6 to 12 months ago.
“Deal requests in this market are for shorter terms of five years or less. Sponsors and investors are expecting that the recent spike in interest rates will come down in the near term, so requesting shorter tenure loans will allow them to take advantage of future rate decreases.
CMBS and Larger Lenders Leave a Void
Andrew Spindler, senior vice president of Green Street’s Advisory Group, tells GlobeSt.com that it’s positive to see an increase from private capital and smaller banks as the decreased activity from the CMBS market and larger lenders leaves a void to be filled with impending maturities.
“These sources can sometimes provide more customizable solutions that may be more difficult to address with larger lenders,” Spindler said.
“Even though private capital and smaller banks are increasing activity; the cost of debt is still comparatively very high,” he said.
“Those looking to tap into debt markets are likely only there out of necessity and will be doing what they can do extend current financing with lenders or special servicers. The sectors that are already hard hit from a fundamentals perspective (malls and offices for example) will also be negatively affected by the changes in lending. These sectors can have longer term, larger balance debt that is typically sourced through large banks or public markets.”
Keeping Interest Risk, Credit Risk Under Control
Xiaojing Li, managing director of CoStar Risk Analytics, tells GlobeSt.com that CRE loan lenders to need to carefully strategize to achieve multiple goals of benefiting from a long-waited profit margin without draining the demand pipeline and keeping interest risk and credit risk under control.
“The shorter-term, fixed rate and shortened call protections are financing options that contain favorable features for both lenders and borrowers under the current conditions when macroeconomic indicators, rates, and valuations are yet to stabilize,” Li said.
“In an upside scenario of the economic outlook, the shorter term and shortened call protections prepare borrowers for better rates and higher loan proceeds when rates start to fall, and valuations resume the rising momentum.
“Loans with fixed-rate will also help cap the debt service obligations from rising, a probable situation throughout 2023 with the variable-rate counterparties.
“The combination of shorter term and fixed rate could mitigate the credit default risk potentially caused by insufficient debt service coverage and shortens the credit exposures for lenders.”
Li said the cost of being agile and flexible with borrowers, from lenders’ perspective, is giving way to the opportunity of locking a higher rate for longer, and a higher prepay risk.
“However, these types of losses are more likely to be realized in a recovery or expansionary scenario where credit risk is overall lower, and the profit of higher lending activities can offset the loss,” Li said.
Transaction Volume Not Showing Significant Traction
Lauren Gerdes, real estate senior analyst with RSM US LLP, tells GlobeSt.com that there continues to be a gap in valuations between buyers and sellers.
“We are seeing an increase in short-term financing solutions on upcoming maturities until the lending environment stabilizes rather than exiting,” Gerdes said. “This trend is likely to be in play throughout 2023 with interest rates expected to stay elevated through the end of the year.”
She said for the private capital debt market to take off, deals need to close.
“Transaction volume has not yet shown significant traction and most analysts are not predicting a recovery in deal count through the second half of 2023,” Gerdes said.
“Until transaction volume picks up and we see where valuations land, lenders will continue to be cautious keeping loan-to-value (LTV) ratios low and focusing on debt service coverage ratios which are likely to continue into 2024. This keeps the opportunity open for private debt funds.”
Data shows private capital real estate funds in the U.S. have over $200 billion of dry powder available, according to RSM.
“With lower LTV ratios, investors are deploying capital to fill the gap between equity and senior loans,” she said. “We have seen a significant increase in mezzanine debt and preferred equity strategies allowing investment in commercial real estate to continue at high yields while transaction volume stays quiet and interest rates stay elevated.”
Impairments Must Be Taken
Christopher Arruda, chief investment officer, SALMON Health and Retirement, tells GlobeSt.com there’s no question that liquidity is absent from the debt capital markets.
“I don’t expect conditions to normalize until impairments are taken on both debt and equity positions and the Federal Reserve stops raising rates,” Arruda said.
“Impairments won’t happen until trading resumes and trading won’t resume until the market knows where debt pricing stabilizes but with that said, I think we are getting close to these trigger events happening.”
Fed Close to Ending Rate Hikes
Ted Jung, chief credit officer, Parkview Financial, a direct private lender specializing in ground-up commercial and residential real estate financing, tells GlobeSt.com that it’s difficult for all lenders to navigate risk in a rapidly increasing interest rate environment.
“This is especially true for banks and life insurance lenders with strict credit boxes and the need for longer duration loans,” Jung said. “However, the Fed has telegraphed they are close to ending rate hikes with a terminal rate in sight. This should allow lenders to better forecast future refinance risk.”
Jung said that today’s borrower needs to come to terms that more equity is necessary to get deals done in a higher rate environment compared to years past as debt coverage is playing a stronger role in underwriting new loans.
“The expectation is that capital markets will stabilize once the Fed reaches its terminal rate,” he said. “Bridge and perm lenders will likely increase their originations as volatility in the bond markets is reduced. Construction lending will stay low as expectations of a recession in the second half of the year remain high.”
Private Capital as the Source Means Certainty of Execution
Malcolm Davies, founder & senior managing partner, Way Capital, tells GlobeSt.com that as the supply of capital from money center banks has receded and debt funds have had a tougher time souring back leverage, private capital sources and regional and local banks have stepped into the void.
“They can lend out discretionary balance sheet capital or deposits,” Davies said. “This pattern is familiar in a challenging market. We saw similar activity in the back half of 2020. One of the positives of borrowing from a private capital source with discretionary capital or a regional or local bank is the certainty of execution.
“They are generally not back levering so are insulated from the volatility in the note-on-note market. Understanding how a lender is capitalized is critical when market conditions become more challenging.”
Some Banks Experiencing Payoff Delays
Zachary D. Streit, founder & managing partner, Way Capital, tells GlobeSt.com that one thing to look out for when borrowing from a regional or local bank is liquidity.
“Some banks are experiencing delays in payoffs due to more conservative permanent financing markets and are also subject to regulatory audits,” Streit said. “As such, liquidity for them is at a premium. We are seeing an uptick in feedback from banks where deposits are requested or required to close a financing.”
Using Bridge Products to Wait Out Uncertainty
Keyvan Ghaytanchi, chief investment officer at BEB Capital, tells GlobeSt.com that he’s seen very strong demand for bridge products.
“Borrowers typically utilize bridge loans to ‘bridge the gap’ and execute their business plan, therefore, take-outs of our loans are typically permanent financing or dispositions,” Ghaytanchi said.
“We are now seeing borrowers looking at bridge products to wait out the debt market uncertainty and hoping to refinance with more attractive terms in 12 to 18 months.
“While this trend has increased demand for this product, lenders need to be careful in properly examining the borrower’s business plan and staying disciplined.”
Lending in 2023 Will Be Muted
Constantine (“Tino”) Korologos, NYU clinical assistant professor, founding principal of Leonidas Partners; and member of the Counselors of Real Estate, tells GlobeSt.com that many private lenders use credit facilities/warehouse lending lines, which are getting pricier, and many lenders are finding the cost of their debt (to leverage the loans that they are making) is too expensive now.
With limited transactions available for price discovery, and a wide disconnect between buyers and sellers, the lending in 2023 should be muted, he said.
“Better assets, better markets, better sponsors, and more conservative leverage metrics will attract capital,” according to Korologos. “Shorter-term debt allows for the borrowers to get to the other side of the mountain, where they are counting on the scenery being better than today.”
A Major Pickup in Underwriting Activity
Thomas Foley, co-founder and CEO of Archer.re, tells GlobeSt.com that with the capital markets in flux, he’s seen a major pickup in underwriting activity to figure out how to make new deals pencil.
“Lenders are more frequently needing to evaluate property performance on prior loans they made, while traditional equity investors are shifting into trying to become mezzanine debt or preferred equity investors,” Foley said.
The pressure is on for lenders to get very smart, very quickly as to the performance, current value, and risk they are holding as they continue into uncertain waters, he said.
Bridge Capital Can Get Projects Off the Ground
Jack Laughlin, senior investment associate with Pangea Mortgage Capital, tells GlobeSt.com that while private lenders have a higher cost of capital in the current environment, other factors can justify a higher rate.
“Balance sheet bridge lenders, for example, provide speed, flexibility, and oftentimes relatively higher leverage,” he said. “A tradeoff of 400 to 500 basis points affords borrowers quick closes, creative capital structures, limited recourse, and prepayment, all at LTCs in the 70% to 80% range or greater. Borrowers can use private bridge capital to both get their projects off the ground as well as buy themselves time until market volatility cools.”
Credit to ‘Exceptionally High-Quality’ Projects
Alex Horn, managing partner and founder of BridgeInvest, tells GlobeSt.com he is seeing unique opportunities to provide credit to “exceptionally high quality” projects.
A transitional bridge lending fund, BridgeInvest Credit Opportunities Fund LP, has provided flexible short-term financing solutions to projects that would have met a bank’s DSCR and LTV requirements less than a year ago, he said.
C-PACE Financing a ‘Bright Spot’
Chris Robbins, managing principal at GreenRock Capital, tells GlobeSt.com that one bright spot in the capital markets landscape is C-PACE financing where we are experiencing a significant increase in interest from owners, developers, and in some cases, senior lenders, for C-PACE to round out new construction projects and recapitalize deals recently completed with maturing loans.
“These are fixed-rate loans with 20- to 30-year terms,” Robbins said. “In many cases, this non-recourse capital is pricing 200-plus basis points below senior debt. We are seeing combined senior and C-PACE executions in the 65 to 75 percent range with the senior financing attaching below 50 percent.”
Highlights:
MINNEAPOLIS, MINNESOTA (November 8, 2022) – CoreLogic says that housing recessions do not always lead to overall recessions. In fact, in recent years, housing downturns are batting just .500 with that correlation.
“Recently, housing has been losing its status as a reliable predictor of recessions,” its economist, Thomas Malone, wrote in a report issued Nov. 7. The connection has been weaker statistically. If there is a recession next year, housing will be at two for four since 2000. “If there isn’t a recession, housing will be one for four, with the only recession it predicted being one where it was the cause of the recession.”
Housing Prices Tell Only a Partial Story
It has been widely reported that the housing market is in a recession.
Though prices remain high, sales of existing homes were down 30% as of August 2022, as were sales of new homes. Housing declines are historically a harbinger for recessions, but does this mean that a recession is imminent?
Though prices are typically the most widely discussed housing statistic, they tell us a partial, and often misleading, story about the overall state of the housing market. This is because housing typically follows a volume cycle, not a price cycle.”
Interest Rates: This Time It’s Different
Thomas Foley, Co-Founder and CEO of Archer.re., tells GlobeSt.com that the biggest difference in this period compared to prior “housing recessions” since 1980 is the direction of interest rates.
“We’ve largely seen a downward trend in interest rates, which has led to continuous inflation in asset prices for the same relative monthly payment,” Foley said.
“Not only are we seeing an increase in interest rates, which leads to less house afforded for every monthly payment, but we are also seeing a massive downward repricing across all assets along with layoffs across key employment sectors – which will put consumers on the sidelines for longer.
“The only caveat over the coming years with lower volume of residential sales may actually be misleading because of the fact that current homeowners that secured historically low mortgages may just be disincentivized to get a new loan at a much higher rate, but they could still be healthy consumers in the overall economy, even if the housing market will be slower.”
Current Interest Rate Spike ‘Doesn’t Matter’ to Many
Peter Ciganik, partner, head of capital markets at GTIS Partners, tells GlobeSt.com drew comparisons to earlier housing recessions and he agrees that home prices exhibit downward stickiness and sales volumes should show higher volatility than prices and are already down substantially.
“The reasons why prices are stickier and perhaps even more this time around is that most homeowners have locked in their mortgage rates and the current interest rate spike does not matter to them directly in regard to their mortgage payment,” Ciganik said.
He said that 65% of borrowers locked in their mortgage below 4% and 86% locked in below 5% in aggregate.
“Only about 10% of owners have adjustable-rate mortgages today vs. 35%+ in the last housing crisis. There is simply less likelihood of payment distress today and less reason to sell your house at a depressed price.
“Also, in contrast to the last housing cycle, supply remains relatively measured in most markets. At the last peak in 2005, we had well over 1.6 million new housing starts and the excess building lasted for several years.
“This time we have peaked at around 930,000 new home starts while the country’s population is significantly bigger than 15 years ago.”
Little Danger of a Negative Equity Spiral Like Last Time
Ciganik said that there are still markets that are short of housing today, manifested not just in high prices, but high rents.
“There is a substantial amount of builder inventory in construction, which may turn out to be excess supply – we will see how this plays out in the next few months,” he said.
“There are very few subprime mortgages today due to changes in underwriting standards following the GFC, therefore lower likelihood of foreclosures and little danger of the kind of negative equity spiral that engulfed the housing market in the last cycle.
“High mortgage rates and home prices are certainly causing a dramatic slowdown in the for-sale housing market, especially in contrast to the last few years of robust growth. As more millennial households form, many now with children, the desire for a suburban lifestyle will continue, but will likely shift to the rental side.
“The biggest beneficiary in relative terms will likely be the single-family rental sector, which can offer the same lifestyle without the high and often unattainable cost of ownership.”
‘Clear Disconnect’ Between Housing and Apt Finance Rates
David Fletcher, Excelsa Properties’ managing director and head of acquisitions, tells GlobeSt.com that there is a “clear disconnect” between agency home financing rates at ~7.16% and apartment financing rates at ~5.90%.
“These coupon rates massively constrain liquidity and in particular liquidity for houses, the largest asset in most households’ portfolios,” Fletcher said.
“Will that cause job losses: Yes, and it already has. Large lenders, builders, and brokers have announced slowing or negative revenue growth and are reducing hiring or employment. Housing is ~15 to 18% of GDP. Banking is ~7 to 8% of GDP.
“Sure, there are offsets: NIMs are up, households will rent instead of buy. But as long as [Federal Reserve Chair] Jerome Powell is swinging his biggest ax and cutting the biggest trees in the forest, planning for anything but a recession is purely a hope trade.”
Housing Situation Differs for Luxury Market
Michael Jalbert, CEO of Forbes Global Properties, tells GlobeSt.com that sales volumes may have declined from the “frenetic pace” set over the past two years, but this doesn’t necessarily signify an impending market correction across the luxury end of the housing market.
“Many wealthy buyers, especially those purchasing in US dollars, still have leverage to acquire properties for investment, and have more negotiating power in markets where prices have softened since the height of the pandemic,” Jalbert said.
“In fact, with the fluctuation in currencies this is a great time to buy in Europe for US purchasers leveraging the dollar. For savvy investors, economic uncertainty and stock market volatility spells opportunity for the acquisition of tangible assets such as prestige real estate.”
No Steep Run-Up in Construction Unemployment
Jeff Budish, managing director at Northmarq, tells GlobeSt.com that the health of the housing market certainly has an impact on the overall economy and whether we remain in an expansion or retreat into recession.
“In this case, the current decline in housing is almost entirely related to a drop in demand for for-sale housing, and that slowdown is almost entirely associated with the steep runup in mortgage rates,” Budish said.
The average 30-year mortgage rate has more than doubled year to date, beginning 2022 near 3 percent and topping 7 percent in late-October. This is different than in past cycles and certainly different than during the Great Recession from 15 years ago, he said.
“Looking ahead, the impacts of declines in housing demand that could spill over into the larger economy include a decreased need for construction employment that could weigh on overall employment and a decline in consumer sentiment as existing homeowners ‘feel’ less wealthy as they see their home equity decline.
“These potential outcomes are real but shouldn’t drive the economy into recession.
“For one, there hasn’t been a steep runup in construction employment as housing prices were pushing higher. We were supply constrained and labor constrained, so the prospect of millions of workers being let go is remote. Current construction employment at the national level is up just 2.2 percent from the pre-Covid peak.
“Second, the biggest drag on consumer sentiment right now is not about declines in home values, but rather because of a steep rise in inflation, and the biggest driver of inflation right now is the cost of housing. As housing costs come down, inflation will come down, and sentiment should improve—as long as the labor market continues to expand, even if the pace of job growth is modest.”
‘Bound to Have a Negative Effect’
Charles Byerly, CEO of Westport Properties, tells GlobeSt.com that the housing market drives so much economic output and every indicator is pointing to an abrupt and prolonged housing slowdown.
“The question is will it remain shallow due to inventory constraints or become deeper as more and more folks have a selling requirement,” Byerly said.
“In our self storage business, we need people to remain mobile, moving to new houses, larger or smaller and remodeling their homes. This remains a major driver of self storage usage and will hurt us a bit.
“However, in our multi-family business, we anticipate the housing slowdown to help us as the higher interest rates will limit new buyers from graduating from rental living to purchasing a home. However, the housing market drives so many other industries, it is bound to have an overall negative effect on the macro economy for some time.”
© 2022 ALM Global Properties, LLC. All rights reserved.
MINNEAPOLIS, MINNESOTA (October 26, 2022) – Bill Mork, vice president of Northmarq’s Minneapolis debt/equity team, recently joined the ranks of other top industry leaders as a 2022 honoree of Finance & Commerce’s Rising Young Professional recognition. The awards are featured in a special publication, as well as highlighted during a networking event at the Lumber Exchange on December 8, 2022.
In 2016, Mork became an investment analyst at Northmarq and served on Northmarq’s investment council where he quickly proved a tremendous aptness for the job resulting in his promotion to vice president just three years later. His fast rise to success in the Minneapolis area serves as an inspiration to his team on a daily basis. His leadership skills are evidenced in his team closing more than $750 million of multifamily, industrial, and office debt and equity transactions.
Mork is a member of NAIOP Developing Leaders Committee, a networking group for professionals under 35, where he has connected with other members of the commercial real estate industry in an effort to make a greater impact on the industry outside of Northmarq.
The criterion for which Mork was evaluated as a top candidate included:
Highlights:
MINNEAPOLIS (October 3, 2022) — Jeffrey Weidell, Northmarq’s chief executive officer, announced today that Dan Trebil and Dave Link have been promoted to executive vice president/regional managing director of the company’s debt & equity business.
Trebil and Link have been managing directors of the Minneapolis and Denver debt & equity teams respectively since 2014.
“Not only are Dan and Dave top producers, but they have also demonstrated the ability to lead in the direction we want to go, including recruiting and developing young talent, expanding our agency and related serviced businesses, and integrating with our investment sales platform,” said Weidell.
In their new roles, Trebil and Link join the debt & equity leadership team and will increase their focus on lender relations, capital platform expansion, and broader Northmarq initiatives. They will continue to produce in their respective markets as well.
Trebil joined Northmarq in July 2002 and was promoted to managing director in 2014. Prior to joining Northmarq, he worked in investment sales at Fuller and Company, a Denver-based commercial real estate brokerage. He also spent several years playing professional hockey for Anaheim, Pittsburgh and St. Louis in the NHL.
Link joined Northmarq in 2003 and has been the managing director of the Northmarq Denver office since 2014. He has been involved in mortgage banking since 1997 with a stop on the equity side of the real estate business working with an affiliate of Black Creek Capital.
As the first sponsor of Project Destined in the Twin Cities, Northmarq will provide mentorship to underserved students who are the future leaders of the CRE industry
MINNEAPOLIS, MINNESOTA (September 26, 2022) – Northmarq, a national commercial real estate organization specializing in debt/equity financing, investment sales, and loan servicing, announced its sponsorship of Project Destined. Since its founding in 2016, Project Destined has worked with more than 3,500 participants in 35 cities across the U.S., Canada, United Kingdom and Europe.
As the first sponsor to commit its resources to the organization in the Twin Cities, Northmarq recognized and acted upon the need to bring diverse talent and backgrounds in the industry. Northmarq’s partnership will support Project Destined and its mission to provide training in financial literacy, entrepreneurship, and real estate to students from underserved communities.
“We are thrilled to officially launch in Minneapolis,” said Cedric Bobo, Co-Founder of Project Destined. “Minneapolis is an exciting business and real estate market with tremendous demand for diverse talent, which is the core goal of this partnership. Northmarq, as a lead sponsor, is opening the door and supporting us in building a scaled pipeline of diverse talent in the market.”
“With diversity rooted in our company’s core values of integrity, respect, and community, we couldn’t be more thrilled to help open a new market for Project Destined’s crucial work,” said Jeff Weidell, CEO – Northmarq. “We believe in giving back and contributing the success of the communities in which we operate and broadening the pipeline of incoming talent is a mutually beneficial goal for Northmarq and the industry.”
Project Destined leverages a work-based learning approach where students join executives to evaluate actual commercial real estate deals in their community and compete in a pitch competition to industry leaders to earn scholarships. Northmarq’s industry veterans will prepare, engage, and guide students one-on-one to help them develop a range of fundamentals—including financial, technical, presentation, and leadership skills—designed to aid them in obtaining internships, certifications, and full-time employment, launching their careers in commercial real estate.
“It is a great program because it provides a sense of community and inclusion,” said Cristina Ciacciarelli, Head of Corporate Partnerships at Project Destined. “We refer to it as the Fantasy Football League of real estate. You have professionals and students working together with a shared goal of changing the sector and doing so in a fun and vibrant way. For the students, it is an exciting program that allows them to understand the basics of real estate, and the power of ownership while being surrounded by peers with similar interests, and backgrounds. As a graduate of the program myself, I can attest: it is powerful.”
The program will officially launch in the fall, and will consist of the following schedule:
Highlights:
Jeff Budish, Ted Bickel join as Managing Directors
Minneapolis, Minnesota (September 6, 2022) — Northmarq’s expansion into Investment Sales has moved into the company’s corporate headquarters market of Minneapolis/St. Paul following four years of growth that added more than 100 multifamily investment sales experts across the Sunbelt and Midwest. Managing Directors Jeff Budish and Ted Bickel joined Northmarq along with their team, Senior Associate Ryan Spengler, Senior Investment Sales Analyst Lauren Panzer, and Senior Marketing Coordinator Lacey O’Connor. They will collaborate closely with the Minneapolis/St. Paul debt and equity team led by Dan Trebil, managing director – debt & equity.
Budish, with more than 14 years of industry experience, joins Northmarq after five years at Colliers and nearly nine years with CBRE. Bickel spent 11 years with Colliers, starting in their legal department while in law school before transitioning into multifamily investment sales. Budish and Bickel have worked as a team since 2017, completing $1.62 billion in transaction volume.
“We’re excited to expand to the Midwest, where Jeff and Ted can also collaborate with our teams in Kansas City, St. Louis, and Chicago to provide better support for clients with assets from the Dakotas to Missouri,” said Trevor Koskovich, president – Investment Sales. “They both bring strong client service and deep insights about the Minneapolis-St. Paul market. Finally, they are a great cultural fit, which is an important element in all of our recruiting.”
Northmarq’s Minneapolis debt & equity team is comprised of five producers with a strong track record of arranging debt and equity for all property types. “We are excited to join forces with a team of industry veterans. With debt/equity capital being so closely linked with acquisitions and dispositions, this will enhance our ability to more fully advise our extensive client base,” said Trebil. Northmarq’s Investment Sales platform sold more than 300 properties in 2021 totaling over $11.7 billion; in the second quarter of 2022, it has a robust pipeline of more than 240 properties valued at $8 billion. See the company’s listings.
MINNEAPOLIS, MINNESOTA (August 31, 2022) – Multifamily developers feeling the squeeze from rising costs are sharpening their pencils and looking for creative solutions to get projects off the drawing board.
Despite the overwhelming demand for all types of housing, developers have been recalculating costs due to a triple whammy of rising interest rates, inflation and supply chain pressures. In some cases, developers are seeing revised cost estimates that are between 20 and 30% higher than what they had originally estimated.
That large delta is forcing some developers to push pause, while others are able to power through by raising rents, adjusting return expectations, modifying designs and value-engineering their capital stack.
Developers continue to find good liquidity in the market on both the debt and equity side, but underwriting is more challenging for both developers and lenders. One question everyone is grappling with is how much of the higher costs can be passed on to renters before it starts to impact lease-up. The answer to that varies depending on the location. Developers building in markets with more robust rent growth are better able to adapt to increases on the cost side.
Although the Sun Belt is attracting a lot of attention for its double-digit rent growth, there are pockets of opportunities all around the country. Some submarkets are experiencing razor thin vacancies of 2-3%. St. Louis, for example, is seeing strong demand for rental housing, including pent-up demand for new builds. Those market dynamics have spurred a surge in development activity over the last four years. Northmarq recently closed on a $46 million construction loan for the 266-unit Flats of Wildhorse Village in Chesterfield, Mo. In this case, the borrower thought rates were likely to rise and chose to do a 5-year fixed-rate loan with a local bank, locking in an attractive rate and taking interest rate risk off the table.
Rising rates impact loan size
Although interest rates are still low by historical standards, financing costs have moved higher along with Fed rate increases. SOFR has increased from about 0.1% in January to 0.9% in late May, while the 10-year treasury has increased from 1.65% to 2.85%. Construction lenders recognize potential risks developers face in this higher cost environment, and they are starting to dig a little deeper on loan underwriting. Some are asking how current the general contractor bids are to confirm the costs reflect the current market.
Another challenge of rising rates is that borrowers will need to bring more money to the deal to layer on top of their construction loan. Rising rates creates a de-levering effect. If a lender underwrites a loan at a rate of 3.75% and then the rate moves to 4.25%, simple math means the loan amount will go down in order to maintain the lender’s target debt service coverage ratio (DSCR). What that means for borrowers is that they may need to work harder to fill the capital stack and limit exposure to interest rate risk.
Value engineering capital stacks
Despite cost hurdles, deals are still getting done, and lenders are willing to be creative and flexible to win business and originate loans. Some lenders are willing to offer a “stretch” senior loan with an oversized first mortgage that is internally tranched into a separate A and B note within one structure. It’s an engineered structure that helps the lender get a little more yield, and it also helps the borrower get higher leverage at a blended rate. Life insurance companies also are willing to do a participating mortgage where they will do up to 90% of the cost and then they share in half of the profit or upside of the deal.
Banks are typically offering up to 65% loan-to-cost on non-recourse loans or up to 75% on recourse financing. Borrowers can still get 80% leverage on a non-recourse loan from Northmarq’s HUD team if they are able to be patient with the longer lead times to get those deals done. Northmarq’s correspondent life insurance companies represent an attractive option as they offer construction to permanent financing. Borrowers can lock in a fixed rate today for a 2-year interest-only construction period, which then converts to a 10-year amortizing non-recourse loan.
Borrowers can find a variety of solutions to help fill any gaps that occur in that capital stack, including mezzanine debt, preferred equity and higher leverage bridge loans. Now more than ever, it’s important to have a very diverse base of financing options. Working with a debt and equity professional will give developers access to a broad base of lenders and financing options, including institutions, banks, debt funds and agency lenders in order to structure the best capital solution as things change in a very fluid market.
MINNEAPOLIS, MINNESOTA (July 11, 2022) – Dan Trebil, managing director of Northmarq’s Minneapolis debt/equity team, addressed the Federal Reserve’s recent interest rate raise, the agency’s most aggressive hike since 1994, in the most recent edition of REJournals. The story notes that while the Fed’s decision was designed to address inflation, it raised concerns for commercial real estate professionals about what lies ahead.
Trebil provided a nuanced view of the CRE industry’s potential response, highlighting that CRE boasts some advantages that should help keep the deals and financing requests flowing, even with higher interest rates. In short, investors still require a place to put their money and commercial real estate remains a favored investment type.
“The good news is, there is still a lot of money out there,” Trebil said. “Real estate fundamentals are still good. People’s properties are still operating well. A quick run-up in interest rates like this has put the brakes on some refinances that might have made sense before but don’t make sense now. But there is still demand for commercial real estate.”
Trebil, though, is realistic. He says that the rising rates have caused some investors who were ready to acquire new properties to pause their plans. These investors are waiting to see the full impact higher interest rates might have on commercial real estate.
“There is a price discovery going on now between buyers and sellers, and lenders, too, on where to price debt now that rates have risen,” Trebil said.
Midwest Real Estate News spoke with Dan Trebil on June 18, 2021. Below is the full interview as it was published in REjournals.com.
Multifamily has remained one of the most resilient commercial real estate sectors throughout the COVID-19 pandemic. And that’s been the case in the Minneapolis-St. Paul market, too.
But what’s behind this resilience? And what makes the Twin Cities such a strong market for multifamily?
We spoke with Dan Trebil, senior vice president and managing director in the Minneapolis office of NorthMarq, to find out. Here is some of what Trebil had to say about apartment living in the Twin Cities, the strength of the local multifamily market and his expectations for the future of this sector.
Midwest Real Estate News: Let’s start out with a big question: How strong is the multifamily sector today in the Minneapolis/St. Paul area? Now that COVID-19 cases are falling, is the apartment market seeing even more sales and leasing activity?
Dan Trebil: Our apartment market overall has been very resilient. There were some pockets of some concessions here and there, but overall we’ve been fortunate. Our suburban markets have done really well. But so have some of the more urban markets. The North Loop submarket, for instance, has been very strong. The apartment markets in Uptown and downtown have been a little soft. But some of the deals that I know are in lease-up right now are taking place even in Minneapolis. There might be some concessions with some of these deals, but the concessions are trending downward. The indicators are all heading in a positive direction.
We are seeing some sales and acquisition opportunities out there in this sector, too. I expect that to continue with the low cost of debt and the health of our market. The Twin Cities market is always going to be a desirable place for people to buy units and continue to own units.
On the refinancing side, interest rates are great and there is a ton of money in the debt markets. All of that leads to continued refinance opportunities.
Midwest Real Estate News: Why has the Twin Cities apartment market been so resilient during this last 16 months or so?
Trebil: I think it goes to the diverse economy we have here. We have a lot of different large companies in the Twin Cities and we don’t rely on just one company or industry. We also tend not to have the big swings like other markets do in terms of occupancy. I think we are relatively constant in our market. And for a long time, there was nothing built here. There had not been a lot of building for a long time. Some locations had been starved for newer product. So we weren’t overbuilt when COVID hit.
Midwest Real Estate News: What about downtown? Do you think renters will be returning in greater numbers to downtown Minneapolis/St. Paul soon?
Trebil: I am a big believer in Minneapolis and St. Paul. I think Minneapolis in particular does have some serious challenges. We need people back in the city. Some of that will happen organically as people come back to their offices in person.
One of the beauties of living downtown, is that all these new apartment projects have great amenities. But the chief amenity is downtown itself. There are so many restaurants and entertainment options that are a few steps away. When those haven’t been open and aren’t open, then downtown is less of a draw. Leasing in downtown Minneapolis has been a little slow. But once some of the bigger companies bring their workers back, that will start to change. Hopefully, starting Sept. 1 is when the bulk of the companies in downtown will have their people back. That is what it is going to take to bring downtown back. We need people in the city to get some of those downtown venues open again. And we need that critical mass of people so that other people will be more comfortable and feel safe.
Midwest Real Estate News: It has been strange to see so many downtowns across the Midwest so quiet these last several months.
Trebil: I was downtown in the middle of April before the restrictions were lifted. The North Loop was packed with people. But a few blocks away in downtown, it was very, very quiet. There were people out and about, but there wasn’t really a reason for them to be downtown. There was more for them to do in the North Loop and Northeast.
Midwest Real Estate News: When people do come back to city apartment buildings do you think these tenants will expect any of the changes that came about because of COVID to remain in place?
Trebil: From a personal perspective, I think we have gotten used to and become comfortable with doing things virtually. People are comfortable in leasing a building or taking a tour of a building without a leasing agent there. They are comfortable doing this electronically and not having to do it all in person. Some of that will carry over. I’m not sure if this will carry over so much because people are worried about COVID. It might be that people have realized that doing some activities virtually make sense.
Midwest Real Estate News: How is the apartment market doing in the suburbs of the Twin Cities today?
Trebil: The suburban multifamily market has been great across the board. Newer projects have leased up. There hasn’t been much in the way of concessions. Has there been a mass exodus of renters out of downtown? I don’t know about that. Again, there is not much draw to come downtown today. As you have natural turnover, there are fewer people looking for apartments downtown. That has led to some vacancies in downtown and the necessity for downtown owners to increase concessions.
At the same time, the projects being built in the suburbs now have amenities that weren’t available in those markets before. It’s pretty compelling with these new amenity packages to be out in the suburbs. And the suburbs themselves are seeing new restaurants and entertainment options. There is more life in the suburbs now than there had been historically. This has combined to make the suburbs more attractive to renters.
Midwest Real Estate News: With the pandemic hopefully waning, what type of commercial lending business do you think NorthMarq will be seeing in the near future?
Trebil: With the interest rates where they are and the amount of capital that is out there, we expect to see a lot of refinance activity. There are still enough newer projects that are in lease-up or about to come online, too. If they finance those with standard construction loans with a bank, as those deals fill up the natural tendency is to flip them to a more permanent loan. That is our bread-and-butter business. We expect that to continue. I also think we’ll be seeing more construction deals, whether with HUD or just with banks.
Midwest Real Estate News: It also looks like you are seeing more investors coming from out of town to invest in commercial properties in the Twin Cities area.
Trebil: Historically, our market has been characterized by a high degree of local, long-term ownership. A handful of years ago, our market started seeing more national and foreign investors coming in on the multifamily and commercial side. That has increased. A lot of the deals that have traded lately have ended up being purchased by out-of-town buyers. The more outside investors come in, the more acceptable a market this becomes to everyone else. It feeds off itself. The local long-term investors are still here. We still have a good core of local owners. But over the last few years, we are seeing more out-of-town investors coming in.
Midwest Real Estate News: What do you think is behind this trend?
Trebil: This is a good market. We have a large number of Fortune 500 companies. We have an educated workforce. We don’t see the big ups and downs of other markets. The fundamentals are good. Big international and national firms that are choosing markets want enough liquidity in those markets. If they want to get out for whatever reason, they want to know that there are buyers there.
MINNEAPOLIS, MINNESOTA (February 15, 2021) — Patrick Minea earned a place among the Midwest Real Estate News 2020 CRE Hall of Fame inductees.
Minea has steadily risen up the ranks at thee Minneapolis office of NorthMarq. Since joining the company in 1992, he has moved from producer to managing director to his current position of executive vice president/executive managing director.
At NorthMarq, Minea co-leads the Production Committee and the Equity Advisors Group. He also serves on the company’s executive committee, where he takes a leadership role in helping grow NorthMarq’s three business lines: debt and equity, investment sales and loan servicing.
Minea was nominated for his deep knowledge of the commercial finance business and for his top service provided to clients. He doesn’t shy away from hard work needed to meet client goals, which is a formula that has led him to become one of the most respected financial professionals in the Minneapolis commercial real estate market.
Patrick Minea participated in a panel discussion for a Real Estate Journals webinar. The panel discussed the impact of the novel coronavirus pandemic, as well as how despite the dramatic job losses and business decline following March stay-at-home orders across the country, actions by the federal government have enabled the capital markets to carry on—albeit with lower deal volume than in early 2020.
Other topics included:
Credit unions are an attractive option for borrowers who are seeing fewer lender bids, particularly from banks and debt funds.
Credit unions that have been working to grow market share in the commercial real estate lending space in recent years are taking advantage of open runway as other capital sources have pulled back in recent months. In fact, these institutions are willing to offer competitive terms and creative solutions.
“What we have seen from credit unions is that they are willing to finance property types that others aren’t doing,” says Pat Minea, executive vice president, debt and equity at NorthMarq. NorthMarq estimates that its financing activity with credit unions is about 50 percent higher this year compared to last year. Since March, the firm has closed more than two dozen financing transactions with credit unions as the lender for borrowers across the board involving multifamily, industrial, retail and office projects.
There are plenty of capital sources still willing to finance multifamily and industrial assets. Interest drops off, however, for office and retail properties with financing that has become tougher because of COVID-19.
“We are having to dig a little deeper to find the terms that borrowers want in the current climate, and credit unions are a great example of that alternative,” says Minea. “They are more receptive, for whatever reason, to doing these deals that, in today’s world, are a little more on the edge.”
Dan Trebil, senior vice president/managing director of NorthMarq’s Minneapolis office participated in a webinar hosted by Barnes & Thornburg’s Real Estate Development. The event took place on Wednesday, April 22.
During the presentation, the group shared insights on how to navigate business relationships and operations during this time of crisis and addressed:
Presenters included:
How Can Developers Access Capital While Minimizing Risk? Structured Finance
The Twin Cities of Minneapolis and St. Paul continue to be a very attractive marketplace for multifamily investing due to an average vacancy across the metro of 3.1 percent, as well as average 2019 rent growth of 5.8 percent, according to a recent report issued by Marquette Advisors. The Twin Cities currently has nearly 30,000 multifamily units in the development pipeline that are expected to be delivered between 2020 and 2022.
With all of this development activity and an abundance of local and regional banks in the area, the Twin Cities continues to be a very well-banked market, particularly with regard to apartment construction. Local and regional banks are all very active. In addition, national banks are eager to invest in the healthy, consistent Twin Cities multifamily market.
But despite capital being relatively plentiful and accessible, local, regional and national developers are exploring more efficient ways to capitalize on the abundance of development activity. They also pursue ways to stretch their own equity through a variety of financing alternatives. Developers may be tapped out with their current banking relationships, or as projects get larger and more expensive, desired loan sizes may drift higher than their banks’ lending limits.
Pat Minea, executive vice president/regional managing director, led the Minneapolis NAIOP capital markets update on March 11 at the Golden Valley Country Club in Golden Valley, Minnesota. The session was titled, “Lender and investor appetite for commercial real estate continues to be strong in 2020.”
Along with a look at local, regional and national market trends, the panel also covered the recent news regarding the industry’s reaction to the coronavirus and the drop in index rates and the stock market.
Topics covered during the conversation included:
Panelists included:
The Twin Cities apartment market is historically characterized by high occupancy and minimal volatility, with consistent and solid year over year rent increases, minimal concessions and sustained vacancy rates well below 5 percent. As a result, there is abundant interest from investors and lenders alike to place capital in the Twin Cities. The lending environment for Twin Cities’ apartment owners appears poised for another great run in 2019, with all lender types having a large appetite to place capital in the market.
Agency lenders (Freddie Mac, Fannie Mae, HUD) have been extremely active, and that will not change. Their allocations remain high, and all agencies are expected to compete aggressively for business. Additionally, there is an increased focus on products catering to affordable and workforce housing, not only for existing properties, but in providing loan commitments and locked interest rates for takeout financing for affordable or workforce housing projects The agency reach extends geographically to secondary and tertiary out-state markets as well with minimal impact on underwriting standards. Agency lenders are able to provide relatively high leverage, longer term, non-recourse financing for all classes of apartments. Their ability to offer partial or full-term interest only is a significant competitive advantage over other lender types.
Heading into 2019, life insurance company allocations are also up over last year, with nearly all lenders’ goals 10 percent or more as compared to 2018. Multifamily continues to be a favored property type, and while nearly everyone acknowledges where we are in the cycle, life company appetite for multifamily deals seems insatiable. Furthermore, in an effort to expand production volume, several life companies have introduced non-recourse bridge programs for transitional property, and most will consider funding pre-stabilized projects that are still in lease-up. Because of the velocity with which most new construction deals are leasing, lenders are comfortable extrapolating out the leasing trend and funding deals well before they are fully occupied. Many of our life company options are also willing to provide construction-permanent financing which removes interest rate risk by fixing the interest rate prior to construction for periods as long as 40 years. These segments of the market have traditionally been occupied by banks, but these new programs provide yet another option for multifamily borrowers.
As far as recourse lending goes, we are a very well-banked market. Despite a number of recent consolidations, there are still a plethora of banks with an affinity towards commercial real estate, and multifamily lending in particular. There is some caution, however, with not all lenders willing to pursue new construction as aggressively as they have in years past. However, repeat borrowers for well-located projects are still able to obtain construction loans with relative ease. The biggest determination of new construction may end up being rising construction costs as opposed to the availability of suitable financing.
Commercial Mortgage Backed Securities (CMBS) lenders and debt funds are yet a couple of other capital sources looking to capture their share of the multifamily lending market. Debt funds are targeting higher leverage transitional properties, providing up to 85 percent loan-t- cost on a non-recourse basis, with pricing that is typically slightly higher than bank and life company bridge options. CMBS lenders have been largely a non-factor in the multifamily space in our market. The CMBS market is currently more volatile and higher priced than alternatives, so very little CMBS business has been done as of late in the Twin Cities.
Internally, life company commercial mortgages compete with corporate bonds as alternative investments, and other lenders are reliant on bond markets to set their pricing. Chief investment officers would generally like to see a premium of 50-100 bps for commercial mortgages versus corporate bonds. Yields on corporate bonds widened in fourth quarter 2018, and commercial real estate investor loan spreads followed suit. To exacerbate the situation, Treasury rates also spiked around 3.25 percent. Since then, the market has settled back down to a point where spreads are 150-170 bps over the respective index for full leverage life company and agency loans.
With rates cooperating and lenders flush with capital, borrowers should have ample options for acquisition financing and refinances. The wall of loan maturities is behind us, so lenders are going to have to rely upon acquisitions, new construction and other transitional properties in order to fulfill their goals for 2019. They will look to stable markets such as the Twin Cities in order to do so. While lenders will continue to be prudent and keep a close eye on market metrics, their appetite for quality loan opportunities in the Twin Cities will exceed the number of available deals, leaving borrowers with ample options and continuing expectations for aggressive terms.
Minneapolis office senior vice president/senior director James Hoopes moderated a panel titled “Capital’s King: Equity & Debt Solutions for Apartment Investors & Developers” on Friday, January 11 as part of the 2019 Apartment Summit held by the Minnesota Real Estate Journal at the Radisson Blu located in the Mall of America in Bloomington, Minnesota.
In front of a crowd of more than 650+ commercial real estate professionals, Hoopes led his seasoned panelists through the following topics:
The panel featured the following industry experts:
MINNEAPOLIS (November 15, 2018) – Andy Finn has joined the Minneapolis regional office of NorthMarq Capital, the largest privately held commercial real estate mortgage banking firm in the U.S., in the role of vice president. Finn will be responsible for structuring debt and equity capital for all types of commercial and multifamily real estate transactions in the Midwest region and throughout the U.S.
Finn arrives at NorthMarq having been involved in more than $5 billion worth of commercial real estate transactions. His most recent experience involves time spent with several commercial investment and development organizations in the Twin Cities, including Ryan Companies US, Inc., Founders Properties, and most recently, The Excelsior Group. At these organizations, Finn’s roles centered on acquisitions and dispositions, the origination of joint venture debt and equity and asset management. Finn began his real estate career in New York City, working for several principal investors focusing on acquisitions, development, and finance and asset management.
Finn is a member of NAIOP and a board member of JFCS (Jewish Family and Children’s Service). He was the recipient of the Minneapolis Business Journal’s 40 Under 40 in 2018. Andy has a BA in Finance from Northeastern University in Boston.
“We are anticipating Andy hitting the ground running,” said Dan Trebil, senior vice president/managing director of NorthMarq’s Minneapolis regional office. “With his experience structuring both equity and debt, our clients will benefit from a seasoned CRE professional who can now leverage NorthMarq Capital’s extensive list of capital relationships.”
MINNEAPOLIS (June 22, 2018) – NorthMarq Capital’s Mike Padilla, in collaboration with the company’s Freddie Mac team, arranged the financing of The Provinces, a 118-unit apartment property in Little Canada that will preserve the affordability of the apartment homes. Nonprofit investor Aeon and the NOAH Impact Fund of Greater Minnesota Housing Fund (GMHF) acquired the property from Dominium. The acquisition also received grant funding from the Ramsey County Housing and Redevelopment Authority.
NOAH—naturally occurring affordable housing—has been disappearing as investors acquire older properties and remodel or demolish them, raising rents and forcing existing tenants to leave. Aeon, a nonprofit developer, owner and manager of affordable homes has purchased 1,447 NOAH apartment homes in recent years to preserve their affordability.
“NorthMarq Capital appreciates the opportunity to work with Aeon and Freddie Mac, in preserving affordable housing in our market,” said Padilla, vice president in NorthMarq’s Minneapolis production office.
“We are grateful for the strong relationships we have with our local multifamily housing partners,” said Blake Hopkins, vice president of Housing Development at Aeon.
The purchase is Aeon’s second partnership with GMHF with funding provided by its recently formed NOAH Impact Fund. This is a $25 million equity fund established to preserve NOAH properties in Minnesota.
The Twin Cities is in the middle of an apartment construction boom, but just 10 percent of new units will be available for low-income renters, according to the 2017 report “State of the State’s Housing Report, Twin Cities Region,” released by the Minnesota Housing Partnership (MHP).
The property preserves affordability of 118 apartment homes in Little Canada.
Minneapolis office senior vice president/senior director James Hoopes moderated a panel titled “Capital’s King: Equity & Debt Solutions for Apartment Investors & Developers” on Friday, January 5 as part of the 2018 Apartment Summit held by the Minnesota Real Estate Journal in Golden Valley, Minnesota.
In front of an audience of more than 500 commercial real estate professionals, Hoopes guided his experienced panel through the following topics:
The panel featured the following industry experts:
Patrick S. Minea, executive vice president/regional managing director, recently authored an article titled “Forward Commitments: Transaction in a Rising Interest Rate Environment that was featured in the Outlook: 2018 section of National Real Estate Investor. In the article, Minea notes how the uncertainty surrounding where interest rates are headed can significantly affect borrowers in the commercial real estate industry. In the last 90 days, the 10-year treasury has wavered between 2.05 percent and 2.45 percent. Closing a loan that is 40 basis points higher than when the application was signed erodes a borrower’s expected cash flow and ROI and may change the “out-of-pocket” capital required to close the transaction.
Whether borrowers are in the midst of a transaction or looking to refinance an asset in the next 24 months, hedging against the uncertainty has some appeal. Locking in a forward commitment from the lender is one option, but borrowers need to evaluate their risk tolerance and decide if minimizing risk is worth the cost. Real the full story as it appeared in NREI here.
MINNEAPOLIS (Dec. 12, 2016) – NorthMarq Capital Presidents Jeff Weidell and William Ross announced today two promotions to the company’s executive team. Patrick Minea, managing director-Minneapolis, and Jeffrey Erxleben, managing director-Dallas, were promoted to the new position of Executive Vice President/Regional Manager, becoming permanent members of the company’s Executive Committee.
Both Patrick and Jeffrey will retain their local production roles but will add more oversight of NorthMarq Capital’s regional offices, primarily in achieving hiring, development, and production goals. Both will join the company’s Executive Committee, which includes Presidents Weidell and Ross; Jay Donaldson, president-Fannie Mae and FHA Platforms; Travis Krueger, chief financial officer; Mike Myers, chief operations officer; and Eduardo Padilla, chief executive officer.
“Both Jeff and Pat have excelled in diversified production experience, working with multiple capital providers, and uphold the NorthMarq values of quality, fairness and teamwork,” said Weidell.
“We are pleased to have such strong leaders to add to the Executive Team as we position our company for continued success,” said Ross.
Pat has been in real estate finance since 1987 and joined NorthMarq Capital in 1992. He is a proven producer who is highly experienced in all areas of debt and equity finance, and has been a Managing Director of the Minneapolis Office since 2000. He is a member of the Minnesota Multi-Housing, Minnesota Shopping Center Association, ULI and the MBA. He served as Treasurer for the NAIOP Minnesota chapter and on the NAIOP Board for three years. He obtained his undergraduate degree from Saint John’s University.
Jeffrey is responsible for managing NorthMarq’s Dallas office and for originating debt and equity transactions throughout the United States. He currently serves on NorthMarq’s DUS/FHA Advisory Board, Freddie Mac’s Seller Servicer Advisory Board and has served on NorthMarq’s Producer Council. He is also vice-chair for the Mortgage Bankers Association’s (MBA) Originations Council, an active member of within National Multifamily Housing Council (NMHC) and active within the Folsom Institute for Real Estate. He joined NorthMarq in 2002 and obtained his bachelor of arts from Southern Methodist University.
MINNEAPOLIS (Jan. 28, 2016) — Rodrigo Lopez, executive chairman of NorthMarq Capital Finance, a subsidiary of NorthMarq Capital, was sworn in as Chairman-Elect of the Mortgage Bankers Association at the MBA’s 102nd Annual Convention & Expo, October 18, 2015 and will officially kick-off the MBA’s Commercial Real Estate Finance conference on Monday, Feb. 1, 2016. The MBA’s last Chairman from a commercial finance company was EJ Burke, Key Bank, who was MBA Chairman from Oct. 2013 – Sept. 2014.
Bill Emerson, CEO of Quicken Loans Inc. is serving as Chairman and J. David Motel, president of Colonial Savings FA as Vice-Chair.
Previously, Lopez was the founder, president and CEO of AmeriSphere Multifamily Finance in 2000. AmeriSphere originated $800 million of multifamily loans for the Fannie Mae DUS program and $125 million of FHA loans in 2014, and was acquired by NorthMarq Capital in 2015. NorthMarq Capital Finance has offices in Washington DC, Dallas, Denver and Omaha. He’ll become Chair of the MBA in October 2016, serving through October 2017.
“We are excited and proud to have one of our own lead the prestigious Mortgage Bankers Association,” said Ed Padilla, CEO of NorthMarq Capital. “Being named as Chairman-Elect is a well-deserved honor and reflects the extensive effort made by Rodrigo on behalf of all members of the MBA over his career. He will undoubtedly perform as an exceptional Chairman and elevate the MBA to even higher levels of notoriety, engagement, credibility and success.”
Lopez is an immediate past chairman of the MBA Commercial/Multifamily Board of Governors and served on the Association’s Board of Directors since 2009, along with a previous stint on the board from 2003-2004. He received MBA’s Distinguished Member Award in 2010, the Burton C. Wood Legislative Service Award in 2002 and the MBA Master Faculty Award in 2000. He also obtained MBA’s Certified Mortgage Banker designation.
James Hoopes
MINNEAPOLIS (January 8, 2016) James Hoopes, senior vice president of NorthMarq Capital’s Minneapolis regional office moderated a panel at the Real Estate Journal’s Apartment Summit titled Capital’s King: Equity & Debt Solutions for Apartment Investors & Developers. The event took place at the Golden Valley Country Club in Golden Valley, Minnesota on Friday, January 8.
Hoopes and the panelists addressed what types of deals Fannie Mae and Freddie Mac are targeting; how has underwriting changed; what is the future for the agency lenders; what is the 2016 outlook for lenders, buyers, sellers, developers and investors; who is lending; what changes should we expect to the underwriting criteria and what types of governmental programs are available and how are they accessed.
Dan Trebil
Borrowers Push for More Interest-Only Loans
A resurgence of interest-only loans is a bit reminiscent of the frothy lending market that existed pre-recession. But while the rise in interest-only loans is another sign that lenders are relaxing their tight grip, underwriting on commercial real estate loans remains markedly more prudent than compared to 2006 and early 2007.
Today’s interest-only (IO) loans are still a far cry from the deals available at the previous peak of the market, when borrowers could secure 10-year IO on loans with an 80 percent loan-to-value (LTV) ratio.
“It is not as aggressive as it was, but there is some interest-only financing that is readily available,” says Dan Trebil, senior vice president and managing director with debt and equity provider NorthMarq Capital in Minneapolis. Borrowers are typically only finding IO between one to five years at the most on full-leverage loans that are at 75 percent LTV rather than the 80 percent leverage that was attainable in the past cycle, Trebil notes. Read the complete story here.
MINNEAPOLIS (April 2, 2015) NorthMarq Capital has completed its acquisition of the remaining outstanding interest in AmeriSphere Multifamily Finance, a Fannie Mae DUS and FHA MAP lender from its founding partner Rodrigo Lopez and the investment firm McCarthy Capital (Fulcrum). NorthMarq Capital, which previously owned a 40-percent stake in AmeriSphere, will now operate it as a wholly-owned subsidiary, NorthMarq Capital Finance. Terms of the acquisition were not disclosed.
NorthMarq originates multifamily loans for Fannie Mae under their DUS program and for FHA, including all underwriting, closing and asset management functions through its 35 regional offices. “This acquisition strengthens our multifamily platform and leverages our existing production platform throughout the U.S.,” said Eduardo “Ed” Padilla, CEO-NorthMarq Capital and NorthMarq Capital Finance. “Robust Fannie Mae and HUD offerings are a great complement to our Freddie Mac platform and create the best options for our borrower clients.”
Jay Donaldson, has been appointed president of the NorthMarq Capital Finance group; Scott Suttle continues as executive vice president and national production director. Both will join NorthMarq Capital’s Executive Leadership Team and report to Padilla.
The existing former AmeriSphere offices in Omaha, Washington DC, Dallas, and Denver will continue to support the 35 regional offices in underwriting, closing, servicing, and asset management of DUS and FHA loans.
MINNEAPOLIS (February 3, 2015) NorthMarq Capital has signed a purchase agreement to acquire 60 percent of AmeriSphere Multifamily Finance, a Fannie Mae DUS and FHA MAP lender from founding partner Rodrigo Lopez and the investment firm McCarthy Capital. NorthMarq Capital previously owned a 40-percent stake in AmeriSphere, but will now operate it as a wholly-owned subsidiary. The acquisition is expected to close in 30-60 days pending agency and regulatory approvals. AmeriSphere will be then known as NorthMarq. Terms of the acquisition will not be disclosed.
NorthMarq will continue to operate as an originator of multifamily loans for Fannie Mae under their DUS program and for FHA, including all underwriting, closing and asset management functions. No employee reductions or changes are anticipated except at the CEO/president level. The acquisition will allow for enhanced integration of operational support with NorthMarq and its platform of 35 production offices across the country.
“Since we already had a strong partnership with AmeriSphere, this opportunity can only strengthen our platform and make our production experts more valuable to borrowers looking for multifamily acquisition financing or refinancing,” said Eduardo “Ed” Padilla, CEO-NorthMarq Capital.
Lopez will remain with the firm following acquisition as executive chairman. Jay Donaldson, who has been serving as AmeriSphere’s chief operating officer, will become president and Scott Suttle will remain in the role of executive vice president and national production director. Both will report to Padilla.
“NorthMarq’s acquisition is the logical culmination of a very successful decade-long relationship. Because of NorthMarq’s outstanding loan producers and excellent borrower clients, the AmeriSphere team will continue growing the best performing portfolio in our industry,” said Lopez.
NorthMarq will continue operations out of AmeriSphere’s existing regional offices in Washington DC, Dallas, Denver and Omaha.
MINNEAPOLIS (June 16, 2014) – Dan Trebil has been promoted to managing director in NorthMarq Capital’s Minneapolis office. In his new position, Trebil will manage borrowing relationships and oversee the delivery of debt and equity financing solutions for commercial real estate transactions. His clients will benefit from his 13 years of experience as a producer at NorthMarq.
Prior to joining NorthMarq in 2002, Trebil worked in investment sales at Fuller and Company, a Denver-based commercial real estate brokerage. He also spent several years playing professional hockey for Anaheim, Pittsburgh and St. Louis of the National Hockey League.
In his community, he served on the conservation commission for the City of Eden Prairie and is currently on the board of directors of Riverton Community Housing, a local, non-profit housing developer. Trebil earned his bachelor of science degree from the University of Minnesota and is a member of NAIOP, MSCA and the Minnesota Multi-Family Housing Association.
“With Dan’s promotion to managing director within our Minneapolis office, we are looking forward to his continued success at NorthMarq Capital,” said Patrick Minea, Minneapolis’ senior vice president/managing director. “I look forward to working with Dan in his new role and we are excited to continue to grow the Minneapolis production office.”
MINNEAPOLIS (April 9, 2014) – Jon Miller has been promoted to vice president of production in NorthMarq Capital’s Minneapolis office. In his new position, Miller will focus on cultivating new borrowing relationships and delivering debt and equity financing solutions for commercial real estate transactions. His clients will benefit from expertise gained throughout his more than 10-year career in real estate capital markets and banking.
Joining NorthMarq in 2011, Miller served two years as senior portfolio advisor to the loan servicing platform where he handled complex credit events and other mortgage banking initiatives. Prior to NorthMarq, Miller spent seven years in New York City working in CRE mortgage banking; including five years on the CMBS capital markets desk at Morgan Stanley. He started his career at a real estate development and management firm based in Monterey, Calif.
Miller graduated from the University of Wisconsin-Madison with a finance and real estate degree, holds the Chartered Realty Investor (CRI) designation and is a licensed real estate salesperson in Minnesota.
“The Minneapolis office looks forward to Jon utilizing his contacts and expertise to help expand our network of clients and lending sources,” said senior vice president and managing director Pat Minea. “We are excited about adding a quality professional like Jon to our team.”
