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SAN FRANCISCO, CALIFORNIA (March 15, 2023) – NAIOP’s 9th Annual Best of Bay Awards was recently held at the Four Seasons Hotel in San Francisco, California on March 2, 2023. Two transactions closed by Northmarq were recognized during the ceremony. 1900 Broadway, located in Oakland, California, was nominated and selected as the winner of “Most Creative Financing Transaction.” The 452-unit Class A+ mixed-use development is being led by Behring Companies. John Kerslake, senior vice president/managing director, and Briana Harney, vice president of Northmarq’s San Francisco debt/equity team, secured a construction loan and preferred equity for the property..
1900 Broadway – Most Creative Financing Transaction of the Year
Bay West Group/Pacific Development’s The Launch at Alameda Marina received a nomination for “Multi-family Deal of the Year.” Kerslake and Harney also collaborated on this transaction, securing debt and joint venture equity for the development of the 368-unit waterfront multifamily community in Alameda, California.
Categories for awards included:
SAN FRANCISCO, CALIFORNIA (December 5, 2022) – Northmarq’s early childhood education expert, Milo Spector was recently featured in a Wealth Management story highlighting the increasing interest from investors. With rising interest rates, net lease assets occupied by early childhood education centers are growing in popularity. Indeed, the entire sector is doing very well, with most centers either meeting or beating pre-Covid enrollment, explained Spector.
“The pandemic really cemented how essential of a service these operators are providing,” Spector said. “It is important for children to have face-to-face interaction to develop social skills, and when you only have online learning it is impossible for a child to learn and develop to their full potential.”
Spector noted that in early 2022, his firm saw a much higher demand for early childhood facilities than ever. Investors started looking at everything they could to fulfill their 1031 exchanges, and the cap rates in this space were higher than what they could get on most retail NNN properties like dollar stores, banks and quick-serve restaurants. The strength of that demand is demonstrated by the average cap rates hitting all-time record lows, Spector added.
Other topics covered include:
SAN FRANCISCO, CALIFORNIA (December 1, 2022) – The development report focuses on the proposed and under construction multifamily inventory of the nine-county Bay Area. Overall, the Bay Area’s inventory is projected to grow by 13.2 percent in the next three years with 25,700+ units currently under construction and another 65,200+ units proposed. Northmarq’s San Francisco Office is active in the construction debt and equity space. Please contact us for your financing needs.
SAN FRANCISCO, CALIFORNIA (November 17, 2022) – Interest rates have increased substantially in a short period of time, which significantly impacts commercial real estate financing. As the cost of capital increases, it obviously becomes more expensive to borrow. While this article focuses on the multifamily sector, the financing fundamentals apply to other commercial real estate product types as well.
On Nov. 2, the Federal Reserve hiked interest rates by 75 basis points for the fourth consecutive time. The current target rate is 3.75 to 4.0 percent, the highest level since 2008. In comparison, one year ago, the rate was 0.25 percent. Fed officials forecast hiking rates as high as 4.6 percent in 2023.
Why the increases?
The Fed continues to raise interest rates to curb inflation, which currently sits at 8.2 percent. Although the increases may be beneficial for long-term economic health, what about in the short term? And specifically, how do the increases affect real estate financing?
The Fed’s actions have ripple effects throughout the economy. The rate hikes impact the overall markets, which in turn, affect treasury rates and SOFR (Secured Overnight Financing Rate), which are also on the rise. The 10-year U.S. Treasury has increased from a low of 0.52 percent in August 2020 to its current rate of 4.07 percent in just over two years. The SOFR 30-Day Avg has increased from 0.5 percent in March 2022 to 3.03 percent today.
Rock-bottom rates are currently over
The days of historically low interest rates are over for now. Here is an example of a unique financing deal that closed in July, in which Northmarq secured $33 million in permanent debt refinancing for the 385-unit Granite Pointe Apartments in Sacramento. The deal included a forward rate lock that allowed the sponsor to hedge against rising interest rates for the nine months prior to funding. With rates rising significantly over that period, the opportunity cost of not locking the rate would have been several million dollars in additional debt service over the life of the loan.
Today, the focus is on what rising rates mean for multifamily borrowers. Higher interest rates will constrain maximum loan proceeds since lenders utilize metrics like debt service coverage ratio to size loans. In other words, if the debt payments increase with no increase in NOI, the total loan amount must be reduced.
The good news is that as the Fed tries to slow rising inflation, multifamily may be less affected than other real estate sectors since demand for housing remains relatively strong. The multifamily market is more recession-resistant due to the need for affordable housing. Additionally, as mortgage rates rise and the ability to afford a home attenuates for many in the working class, more people may be renting for longer than they expected. This is especially true for Millennials and Gen Z, who have been saddled with higher costs of living and found purchasing a home to be difficult even prior to the rising interest rate environment.
Work from home gave people flexibility to relocate, Sacramento saw large migration
By way of example, the multifamily market in Sacramento remains on solid footing. The COVID-19 pandemic drove an increasing number of residents to move out of urban areas to markets like Sacramento in search of a higher quality of life, lower cost of living, and proximity to outdoor recreation.
As companies eased restrictions on employee location, Sacramento significantly benefited by surpassing net migration figures by 50 percent over the prior decade’s average, according to the CoStar Multifamily Capital Markets Report (Sacramento). At the end of the second quarter 2020, 40 percent of potential renters in the Sacramento area were looking from outside the metro, meaning this trend continued long after the early surge fueled by the pandemic.
This confluence of factors led to Sacramento’s multifamily market vacancy rate falling to an all-time low of 3.6 percent paired with a 12.5 percent year-over-year rent growth as of Q3 2021, according to CoStar. Since then, new product has been delivered to the market, and the vacancy rate currently sits at 5.2 percent, with 2.3 percent rent growth year-over-year as of Q3 2022. Despite the supply pressure and slower rent growth, Sacramento’s multifamily market remains “full.”
Borrowers may find themselves in difficult situations
Despite solid fundamentals in the multifamily market, the impact of interest rates and inflation will create headwinds for sponsors, regardless of what stage in the real estate lifecycle they participate.
There are a several scenarios that borrowers may be currently facing or will face in the next few months:
For example, the borrower may have an existing loan of $100 million, but because interest rates have increased, a new loan is only going to provide maximum proceeds of $90 million. If they want to refinance, they will have to put $10 million of cash into the deal.
For instance, the investor thought they could achieve a 65 percent loan to purchase price, but today the loan is sizing to only 60 percent. The investor must try to obtain more equity or lower the purchase price they are offering.
For example, the borrower might have been getting up to 75 percent leverage when they acquired the asset with the plan to either sell the asset or refinance it at the end of the three-year period. They are unsure whether selling the property would provide them the returns they anticipated, and if they are looking to refinance, the permanent loan may not size to where it needs to be.
Workable options
The good news is that there are viable options for borrowers in all these situations:
Work with the current lender to find a solution
In most cases, the lender is not in the “loan to own” business, and therefore, would rather work out a mutually beneficial solution with the borrower. It is not always apparent to borrowers that the loan can be extended even if there are no built-in extension options. Similarly, the terms of a rate cap requirement can be renegotiated. It is helpful to work with an experienced commercial mortgage banker, who has a deep relationship with the lenders.
This can provide the borrower with additional negotiation power.
However, if it is not in the best interest of the lender and/or borrower to continue, there are other options as well:
Obtain additional rescue capital to make up the difference
There are many groups that specialize in deploying joint venture LP equity, preferred equity, or mezzanine financing that can help to round out the capital stack in the case where a new loan is constrained in proceeds. The cost of capital for these options is higher, so it is important to utilize the help of a commercial mortgage banker with existing relationships to help “clear the market” and obtain the best terms. Similarly, borrowers could obtain a stretch senior bridge loan from lenders that are focused on basis rather than current cash flow, even in the case where a borrower is going from a bridge loan to another bridge loan.
Refinance with a lender that can maximize proceeds like Fannie Mae or Freddie Mac
With a federal mandate to provide affordable workforce housing and liquidity to the marketplace, the agencies will continue to lend even during the toughest economic times. Freddie Mac and Fannie Mae compete on pricing and loan terms to reach their loan purchase cap goals determined each year by the FHFA, which this year was $78 billion each. The agencies are therefore a strong option, particularly if the property contains some degree of affordability (either naturally or by right) to the property. A commercial mortgage banker that is licensed by both agencies to originate loans can run an affordability calculator to determine the best execution for borrowers.
Evaluate a sale by getting a broker’s opinion of value (BOV) from a multifamily investment sales team
A BOV helps determine a property’s value and provides a potential seller with rental and sales comp analysis. The broker then partners with the client to position the property to maximize the sale and achieve their goals — whether the asset is for sale today or down the road.
In the case of Sacramento, it is still a good time to sell because the multifamily market fundamentals are very good, and the market has performed extremely well coming out of the pandemic, says Shane Shafer, managing director of investment sales in Northmarq’s Irvine office.
Shafer points to the strong rebound in job growth in the leisure and hospitality sector as well as the solid growth in public-sector jobs. Additionally, Sacramento experienced a 2.23 percent increase in population growth due to its quality of life and affordability.
“Rate increases due to the Federal Reserve have changed pricing and buyers’ expectations,” Shafer notes. “But due to Sacramento’s strong fundamentals, especially on the rental demand side, is allowing those changes to be more minimal than in other parts of the country and other parts of California.”
The best-performing areas of Sacramento, Shafer says, are the northeastern markets, and particularly the newer, more core properties, which recorded the largest year-over-year rental gains.
“Demand, rent growth, and population increases are driving some folks to widen their options as buyers to find the best next market,” Shafer says. “Sacramento is offering those investors that type of opportunity.”
Conclusion
While one borrower may be faced with a difficult situation on one property, a lender may be on the other side of that same situation with hundreds of different borrowers on hundreds of different properties. Therefore, it is vital for borrowers to seek the assistance of commercial mortgage bankers that can provide the attention needed to resolve any problems and act as intermediaries at the negotiation table.
In a fluid capital markets environment, brokers and developers are using innovative financing to raise capital for multifamily deals. Banks, REITs, and funds are eager to lend for core projects with strong borrowers.
SAN FRANCISCO, CALIFORNIA (September 22, 2022) – The capital markets tightened significantly during the pandemic. Those reins have loosened, and now more capital is available for ground-up multifamily residential construction in the Bay Area.
Lenders have a significant amount of capital that needs to be deployed, and the Bay Area’s multifamily market is fundamentally strong. Although the market struggled during the pandemic, it is on the rebound. For example, apartment rents in metro San Francisco increased 9.7 percent year over year through June, according to a Yardi Matrix report.
The housing story today in the Bay Area is similar to the story pre-COVID, housing is still in high demand. Even concerns about the increases in interest rates and construction costs and supply constraints are having little effect on the fundamental demand metrics for multifamily product.
After more than two years of pandemic-associated starts and stops, multifamily builders have returned to the marketplace and are eager to meet pent-up demand. Permitting accelerated, while materials and construction costs skyrocketed. However, in the past few weeks lumber and copper costs have started to soften. With materials costs coming back down, more multifamily projects are beginning to pencil out, becoming more favorable from a cost-on-return ratio.
Demand drivers for Bay Area
One of the primary drivers of demand for multifamily in the Bay Area is jobs. Venture capital still flows in the region, which creates employment and fuels the need for housing. While there are fewer initial public offerings (IPOs), there is still plenty of seed and early-round capital.
According to recent data by analytics firm Pitchbook, venture dollars are still very much focused in Northern California. The Bay Area attracted $52.3 billion in venture capital in the first half of 2022, which is 36 percent of the total across the U.S.
Additionally, Bay Area companies are encouraging employees to return to the office following COVID. In July, office occupancy in the San Francisco metro reached a pandemic high of 38.1 percent, according to data from Kastle Systems, which monitors keycard activity in 2,600 office buildings nationally. Although the Bay Area continues to lag behind other major metro areas, progress continues as companies attract workers back to the office to promote culture, connection, and creativity.
Bay Area is supply-constrained
The primary historical driver for the Bay Area’s multifamily residential sector is the pent-up demand due to geographic barriers. All parts of the Bay Area have defined geographical barriers, which limit the amount of city growth and expansion. This means the only places to find development sites are infill locations that are more susceptible to political/governmental challenges, which can make it difficult to get deals done. Multifamily construction often hits roadblocks due to restrictive zoning policies and not-in-my-backyard (NIMBY) attitudes.
When a developer can get through these challenges and has a viable project, she will need to obtain construction financing. Across the board, we have seen the cost of borrowing increase with the rise in interest rates. Developers and their brokers must monitor the capital markets to track which lenders are most active for what product type.
Multifamily rents are keeping pace with rising costs, and occupancy is at pre-pandemic levels. There are lenders that are very comfortable with projects in the Bay Area, particularly those that are shovel-ready. The location and type of construction matter, but capital is available to build.
Who is lending for ground-up multifamily construction in the Bay Area?
Real estate-focused commercial banks are fueling many recent multifamily residential projects in the Bay Area. These are typically groups offering low-leverage 60% to 65% loan-to-cost (LTC).
The Bay Area is also seeing significant capital from unionized pension funds, particularly if there is a union component or requirement to build, which is occurring in nearly every core market in Oakland and San Francisco.
Additionally, debt funds are offering high-leverage loans at 80% to 85% LTC.
Also, it is important to note in today’s construction lending environment, there is an increasing number of groups that will participate higher in the capital stack. They will participate with the senior lender and reach a higher leverage point. This can be accomplished through mezzanine debt or preferred equity. We are seeing that part of the market increase in this current environment where senior lenders are pulling back on their leverage points, and developers need more funds to complete their projects.
Deal reflective of today’s market
A current project that exemplifies what is occurring in construction financing in the Bay Area is a ground-up condominium development on El Camino in the heart of Silicon Valley. The owner obtained a low-leverage loan at 65% LTC and maintained the relationship with his senior lender. Northmarq introduced a local fund that was able to participate higher up in the capital stack by providing preferred equity, which brought the total leverage to approximately 80% LTC.
This allowed the owner/developer to have higher leverage at market cost, so he had a fixed rate, as opposed to having additional equity come in where he had to share in the percentage of return.
Although many national players were sourced to finance the project, the local preferred equity group best understood the project and the sponsor and was familiar with the market’s nuances and strengths. The condo project is slated to break ground in the fall.
Conclusion
The capital markets have always been selective when partnering with developers. In today’s atmosphere, it is important as ever to ensure that you are canvasing the market for the right lender for the right capital stack. Even in the Bay Area where demand drivers are constant and building costs are becoming more stable, knowing who and where the capital is coming from can make or break a project. Capital is available when you know where to look.
Robust leasing activity and growing rents are fueling investment activity.
SAN FRANCISCO, CALIFORNIA (August 18, 2022) – The San Francisco Bay Area industrial market continues to experience relentless demand as the e-commerce explosion fuels retailers and third-party logistics providers to fiercely compete for space.
This includes highly coveted, last-mile, urban distribution centers for quick delivery of products and warehouses to stockpile goods to hedge against supply chain backups. Demand, however, far outweighs supply.
Furthering the space crunch is the competition for big warehouses by expanding life sciences and biotech companies looking for new R&D and lab space. This is creating new demand for industrial space in the Bay Area on a scale that has not been seen before.
Why is the market so hot?
A major driver for the industrial boom is the region’s access to major ports and airports for distribution nationally and globally. The Port of Oakland in East Bay, for example, is one of the most active ports in the U.S. Additionally, the Bay Area offers access to major thoroughfares throughout California and the western states, including Highway 101 and Interstates 5 and 80.
Due to the dwindling pool of available options, companies are jockeying for existing space. Amazon, FedEx, UPS, Target, Walmart, and other e-commerce players as well as logistic providers are gobbling up warehouses and distribution facilities. To meet the growing demand for warehouse/distribution space in the red-hot East Bay, for example, that submarket needs 13 million square feet of additional inventory while only 5.7 million square feet is in the proposed pipeline, according to a report by JLL.
High barrier-to-entry market makes development difficult
The Bay Area is a high-barrier-to-entry region. The availability of land is very limited, particularly for large parcels that would be necessary to develop major industrial assets. That makes it challenging to develop new product.
There are also regulatory obstacles to develop new industrial properties. Further, steep land values and increasing construction costs hinder new development. These factors, among others, will keep the development pipeline quite limited going forward.
Pent-up demand means rates continue their swift ascent
Vacancy rates are below 1 percent in the South Bay and 3.7 percent in the East Bay Oakland industrial market. In San Francisco, vacancy is hovering around 4 percent. Tight market conditions produce increasing rents and tenants are willing to pay to maintain their Bay Area locations.
These robust fundamentals are catching the attention of investors. As demand for industrial soars, investors are hot on the trail spending millions on San Francisco-area properties. Buyers are attracted to the higher lease rates combined with cap rate compression. Those factors combined have created high asset values and strong fundamentals for investors, who believe that their properties will increase in value over time.
San Francisco-based private REIT Prologis Inc. and private equity giant Blackstone are active in the Bay Area as are other private and public REITs, pension funds, private equity, and family offices. Some core investors are seeking stabilized assets that are leased and operating. Others are value-add investment firms focused more on transitional assets. There are also opportunistic or development firms seeking to build new industrial properties and parks.
Getting creative due to space shortage
With a dwindling number of options, big players like Prologis are looking at multistory facilities in tight urban areas so their tenants can deliver products to consumers quickly. Additionally, there have been acquisitions of sites that were formerly other uses being converted to industrial uses.
Lending markets are highly liquid
Lenders have historically been very active in industrial, and particularly, in the post-pandemic world, industrial is recognized as a safe and secure asset for both investors and lenders.
In 2020 and 2021, industrial assets composed a large part of many lenders’ portfolios, and that trend continues in 2022. The most active lenders for middle market and institutional product are life insurance companies and banks. Life companies are highly competitive on industrial assets and able to provide long-term, fixed-rate financing with attractive terms including early rate lock. In today’s volatile interest rate environment, early rate lock takes the interest rate risk off the table for the borrower for the 60 days that it can take to close a loan, as well as for the next five to 10 years, depending on the loan term. Additionally, life companies often can offer some interest-only periods, whether it is several years or full-term interest only, which can help with investor returns as well over the lifecycle of the loan.
Also, for value-add acquisitions and business strategies, debt funds are competitive in this space.
While capital is available for borrowers, rising interest rates are having an impact. Most forecasts call for an extended period of rising interest rates. Interestingly, oftentimes there is a cap rate adjustment that accompanies a rise in interest rates. In the Bay Area, however, that has not really played out yet. The Bay Area has still seen trades at very compressed cap rates in the industrial sector, in the low to mid 3 percent range.
Deals exemplify financing options and competitive market
Financing options for industrial assets are available and often customizable to meet investors’ business plans. Northmarq recently closed a 1,000,000 sq. ft., six-property industrial portfolio with properties in Arizona, Virginia, Georgia, and Maryland. Fundrise, the largest direct-to-investor real estate investment platform in the U.S., acquired the assets either all cash or with short-term debt, enabling the company to close quickly and aggregate the properties into a portfolio.
Northmarq worked with Fundrise to place $97.75 million in debt on the assets via a portfolio loan. One of Northmarq’s correspondent life insurance companies offered a competitive interest rate with early rate lock and compelling structure that allowed flexibility for Fundrise during the term of the loan. Financing the assets as a portfolio enabled both borrower and lender to spread risk across the assets. This deal structure is indicative of how investors throughout the country including the Bay Area can be competitive on acquisitions while still leveraging the debt markets to optimize returns.
In a Bay Area deal in February, Northmarq negotiated a $35 million refinance for a private owner of a seven-building, 337,585 sq. ft. industrial property in San Jose. The multi-tenant property is well located, just off Interstates 101 and 880, with easy access to the San Jose International Airport. The transaction was structured with a 10-year, interest-only term. Northmarq secured the permanent-fixed loan for the borrower through its relationship with a correspondent life insurance company.
Northmarq was able to quickly rate lock while the 10-year Treasury rate was attractively low. This transaction is indicative of how strong market conditions in the Bay Area attract competitive financing options from lenders.
What will drive financing for the remainder of 2022?
For lenders, there is a flight to quality for both assets and sponsors. Lenders will be most competitive on well-located properties that are stabilized and have solid tenancy. Meanwhile, the sponsor’s track record and experience in the market are very meaningful to lenders, particularly during volatile times. Lenders will be more diligent in considering those two aspects of a given transaction before committing to lending.
SAN FRANCISCO, CALIFORNIA (July 20, 2021) – Cody Field, an eight-year debt/equity professional specializing in securing multifamily debt/equity placements, joined NorthMarq as a senior vice president based in NorthMarq’s San Francisco office. During his career, he has originated more than $2 billion in financing through HUD, Freddie Mac, Fannie Mae, Life Companies, debt funds, private capital, hedge funds, CMBS, commercial banks and international funds. Field will join the debt/equity team led by managing directors Nathan Prouty and Dennis Williams.
“I am excited to be able to leverage the strength of the NorthMarq platform for current and future clients. NorthMarq has an unparalleled approach to securing capital, with direct access to the largest lenders in the nation and rolodex of investors that spans decades, making this company the best partner for commercial real estate,” said Field.
Prior to joining NorthMarq, Field spent six years delivering Agency debt at Greystone in their San Francisco office. During that time, he specialized in Fannie Mae, Freddie Mac and FHA. In addition, Field represented multifamily clients in the acquisition and disposition of multifamily assets at Marcus & Millichap.
“We are very excited to have Cody join our team in San Francisco,” said Williams. “His expertise in Fannie Mae and Freddie Mac financing will be of tremendous value to our multi-family clients and his proven ability to collaborate with Investment Sales teams will enhance our position in the marketplace.”
Notable Multifamily Transactions Include:
A career in the commercial real estate industry requires problem-solving, teamwork and determination – making it a natural fit for Briana Harney, a recipient of NAIOP’s 2020 Developing Leaders Award. She played on the women’s Division I field hockey team while pursuing her undergraduate degree at the University of California at Berkeley, and she now competes on the Olympic Club’s Women’s Field Hockey team in San Francisco. Harney earned a Master of Business Administration degree at the University of California at Berkeley’s Haas School of Business.
As vice president with NorthMarq, Harney places both debt and equity for her clients, leveraging her knowledge of the market, a reliable out-to-market strategy, and strong relationships with lenders to bring the best capital markets execution to her clients. During her career at NorthMarq, she has been involved with closing over $2 billion in debt and equity transactions covering the full spectrum of property and transaction types.
She is an active member of the NAIOP San Francisco Bay Area chapter, where she currently serves as co-chair of the Young Professionals Group alumni committee as well as co-chair of the membership committee. NAIOP San Francisco Bay Area honored her as Developing Leader of the Year in 2019; that same year, the chapter also recognized her with the Financing Transaction of the Year for 1 DE Haro. She graduated from the chapter’s Young Professionals Group in 2017. Harney also serves on the board of directors of the Berkeley Real Estate Alumni Association.
NAIOP reached out to this driven dynamo for her thoughts on career development, professional highlights, and opportunities during this time of great change.
NAIOP: What do you think will be the biggest opportunity emerging from the past year?
Harney: The confluence of the pandemic and racial injustice in the U.S. has placed a spotlight on how our communities and social systems have failed to protect the most vulnerable populations and provide equal opportunities for all to thrive. I believe the biggest opportunities emerging from today’s crisis lie in developing new ways to build and use real estate to promote meaningful change.
Personally, I am passionate about addressing the complex issue of creating a more diverse, inclusive, and equitable workforce in commercial real estate. I joined NorthMarq’s DE&I (Diversity, Equity, and Inclusion) Committee; as co-chair of NAIOP San Francisco Bay Area’s membership committee, I have worked cross-functionally with our chapter’s I.D.E.A. (Inclusion, Diversity, Equality, and Accountability) Committee to address diversity initiatives; and through BREAA (Berkeley Real Estate Alumni Association), I have helped develop a series of panel events focused on racial issues and community development. It is my hope that our industry emerges from this crisis with a more diverse workforce so that commercial real estate, and the economic opportunities it represents, is more reflective of and better serves the communities in which we live and work.
NAIOP: What has been a highlight of your career so far?
Harney: Closing $260 million in construction financing on 1900 Broadway in Oakland has been the highlight of my career thus far. This was a highly complex transaction that my team and I had been involved in for over a year. We had a fully negotiated deal and were in the closing process when COVID-19 struck the U.S. The week that closing was scheduled, the Bay Area announced shelter-in-place orders. The entire transaction team buckled down and navigated through the extreme uncertainty of the time and successfully closed that week. The project is now under construction and I can’t wait to see it as a living, breathing asset. The experience taught me the value of having a solid team on all sides of the table that will bring grit and tenacity to a deal they believe in.
NAIOP: What is one piece of practical advice you would give to Developing Leaders who are just starting out in their careers?
Harney: The piece of advice I always give to other Developing Leaders and young professionals is to work for people that you admire, can learn from, and who will invest in your success. I cannot over-stress the importance of company culture and working in an environment where you feel inspired and supported.
I have been fortunate in my career to work for fantastically smart people who are willing to spend time openly and honestly answering my questions, responding when I seek advice, and encouraging me to reach for the next level. Through these relationships, I have soaked up professional knowledge, best practices, and career guidance from each one of my many mentors and emerged with a vault of collective wisdom that I would otherwise not have been able to acquire.
In its annual Rainmakers recognition, Real Estate Forum has selected Mike Elmore and Nate Prouty as part of the 2020 class. Elmore was previously selected for the recognition in 2017; this is the first time Prouty has been selected. Real Estate Forum selects the winners based upon their transaction track-record, community involvement, and industry leadership. See the full story.
Given the challenges in 2020, the publication noted that the winners had key traits in common: “As we went through the nominations we were more struck than ever with the grit, expertise, and dedication of the people in this particular slice of the CRE industry. Despite the paralysis, deals did get done, complex structures were put in place and innovation ran amok.”
Mike Elmore’s recognition focused on both his transaction volume over many years and his mentoring and leadership in his office:
With more than 30 years of experience, Michael Elmore has demonstrated acute financial skills to guide and oversee complex financial transactions. As an EVP and managing director at NorthMarq, Elmore structures debt and equity transactions. During his 27-year tenure with the firm, he has closed 600 transactions totaling nearly $13 billion, and he has regularly been named as a top producer. Advanced Real Estate Services is one of Elmore’s longest standing clients. The firm has a 10,000-unit multifamily portfolio, and Elmore has worked with them to secure $2.3 billion in financing transactions, leading to loan servicing of $1.2 billion for the firm. When he isn’t working with clients, Elmore is mentoring new talent, both students and new entrants into the firm. Brendan Golding is a prime example of Elmore’s mentoring. Golding joined the firm two years ago and worked closely with Elmore to develop his book of business, resulting in $40 million in loan volume.
Nate Prouty was recognized for his book of business with institutional investors and his significant transaction volume over the last few years:
In 2016, Nathan Prouty became the youngest managing director at NorthMarq. Based in the San Francisco office, Prouty completes debt and joint venture equity production and works with the firm’s life company correspondent lenders to finance core stabilized assets. He has a notable roster of institutional investors and structured finance lenders on hand for opportunistic transactions, as well as relationships with traditional financing sources, including Freddie Mac, Fannie Mae, institutional equity investors, debt funds, and banks. In 2019, Prouty’s office completed $1.42 billion in financing transactions. Personally, his average annual transaction volume is $700 million. In the last five years, he has closed $3.5 billion in debt and equity deals, and he is consistently ranked in the top five producers at the firm. Prouty has closed several notable multifamily deals, including a $336 million Fannie Mae loan on the 1,000 unit Mansion Grove Apartments and a $75 million cash-out refinance on Mediterranean Village, a garden-style apartment building.
MINNEAPOLIS, MINNESOTA (November 23, 2020) — Raphael House, a privately funded non-profit focused on helping low-income families and families experiencing homelessness in San Francisco, was nominated by Anika Sachse and Nate Prouty to receive a 2020 grant from NorthMarq’s Community Involvement program.
This year, the grant will be used to offset the impact of COVID-19, helping the non-profit continue our essential services for families experiencing homelessness during this public health crisis. Many families are struggling to pay groceries, back rent, utility bills, and healthcare due to illnesses, layoffs, and reduced work hours, according to Marc Slater, executive director – Raphael House.
“Because Raphael House is 100 percent privately-funded, we are able to adapt our services to meet the most immediate needs of our families, whether it’s shelter or after-care support through our Bridge Program,” said Slater.
The Bridge Program provides services to families who previously stayed at Raphael House to help them maintain stability and housing. Just recently, the non-profit launched our Family Stability Services which will provide direct aid to up to 40 families in our post-shelter Bridge Program. The Family Stability Services will provide families with funds to cover rent, utility bills, food and clothing, childcare costs, and technology access through subsidies for Internet service providers.
“We selected Raphael House as they focus on helping families in the Bay Area achieve stable housing, a mission they’ve been on since 1971 with a proven success rate of over 85%,” said Sachse.
Briana Harney, vice president, Debt & Equity in NorthMarq’s San Francisco office, was recognized with NAIOP’s 2020 Developing Leaders Award. NAIOP is a leading commercial real estate association focused on the investment and development industry. The annual award honors up-and-coming professionals under the age of 35 for their remarkable professional accomplishments, strong leadership, and significant community involvement.
In the San Francisco chapter, Briana has completed the Young Professionals Group (YPG) program, chaired the YPG alumni committee, and currently co-chairs the membership committee. Briana also won the Developing Leader of the Year at the Chapter’s Best of the Bay Awards on February 19, 2020. The winners will be recognized during NAIOP’s CRE Converge Virtual 2020, Oct. 7-8.
Briana Harney recognized as Developing Leader of the Year; One De Haro project won Financing Transaction of the Year
SAN FRANCISCO, CALIFORNIA (February 27, 2020) – NorthMarq’s San Francisco office featured prominently in the NAIOP “Best of the Bay” awards, winning “Developing Leader of the Year” and “Financing Transaction of the Year.” The award ceremony was held on Wednesday, February 19 during the NAIOP SFBA 8th annual Best of the Bay Awards Dinner. The event honors the best deals and dealmakers of the previous year.
Briana Harney – Developing Leader of the Year: As vice president in NorthMarq’s San Francisco office, Briana places both debt and equity for her clients, leveraging her knowledge of the market, a reliable out-to-market strategy, and strong relationships with lenders to bring the best capital markets execution to her clients.
Key transactions that contributed to her nomination included:
– One De Haro: $93 million in senior + mezzanine construction-to-perm financing for 133,000-sq.-ft. office and PDR development. Read more here.
– Firestone: $67 million in JV equity and construction financing for 130-unit urban mixed-use project in Downtown San Jose. Read more here.
– Menlo Gateway Phase I & II: Three loan placements totaling $447 million financed the construction and permanent debt on the 773,000-sq.-ft. Menlo Park property leased to Facebook. Read more here.
During her career at NorthMarq she has been involved with closing over $2.3 billion in debt and equity transactions covering the full spectrum of property and transaction types.
Briana is an active member of NAIOP, where she currently serves as co-chair of the Membership Committee. She is also the current President of the Berkeley Real Estate Alumni Association. Additional organizations that keep her connected and in front of market trends are Urban Land Institute San Francisco, the Bay Area Mortgage Association, the Mortgage Bankers Association, and CREW.
One De Haro – Financing Transaction of the Year: Dennis Williams, senior vice president/managing director and Briana Harney secured $93 million in construction-permanent financing for this 92,000-sq.-ft. office + 41,200 PDF spec development.
The transaction, involving one lender, featured a senior/mezzanine loan that financed 90 percent of actual costs with the loan converting to permanent full-term IO upon project completion.
NorthMarq secured financing for the developer, SKS Partners, through its correspondent relationship with Northwestern Mutual Life Company.
At the time of the closing, SKS Director of Finance Victor Lau noted, “Dennis and Briana successfully sourced multiple financing alternatives and advised us every step of the way. We couldn’t be more pleased with the execution that paired us with a best-in-class lender that appreciates the design hallmarks of a SKS project and financing option that closely aligned with our business strategy.”
The transactions NorthMarq competed against for “Financing Transaction of the Year” included:
• 225 Bush (JLL)
• Gateway Millbrae Station (JLL)
• 101 California, San Francisco (Goldman Sachs/J.P. Morgan Chase)
Nate Prouty, co-managing director of NorthMarq’s San Francisco office, which completed $1.42 billion in financing across 50 transactions in 2018, spoke to Connect Media to discuss financing trends he noticed in his transactions as well as predictions for 2019 based on an equally strong pipeline for the first quarter.
What are the big trends you are tracking in the finance sector this year?
Availability of capital. With respect to the capital markets overall, both life companies and the agencies are expecting stable to rising supply of funds for 2019. Commercial banks, largely due to the perceived late stage in the cycle, continue to curtail their construction activity in 2019. Much of this void has been filled by debt funds. This capital source has been a large source of growth in our origination activity. The CMBS markets, with “loss retention” now fully in place, had another solid year and the number of players seems stable at this point.
One of the biggest trends we’re tracking is the availability of construction financing for projects in the pipeline for 2019. Following a steady trend of annual construction cost increases the last several years due to competition for labor and rising material costs, developers are increasingly having to get more creative in their approach to project financing. While equity investors may be willing to place equity in new projects in core markets at a return on cost below five percent based on optimistic future rent growth expectations, which can often translate into a potentially under-leveraged project using traditional lender exit underwriting. If lenders are not able to underwrite rent growth assumptions in line with historical trends, the resulting loan will fall significantly short in terms of desired leverage—in some cases below 50 percent loan-to-cost (LTC).
Nathan Prouty, senior vice president/managing director of NorthMarq’s San Francisco office provided his insight in GlobeSt.com’s recent article titled, “Transit-Orientated Projects Virtually a Must in the Bay Area.” Prouty referenced a recently completed transaction as an exemplar of why transit-orientated projects continue to appeal to develops and investors in the Bay Area.
Cheryl Jett in our San Francisco office celebrates 20 years with the company this week. Thanks for being part of the team, Cheryl!
NorthMarq Capital President Jeffrey Weidell recently sat down with Commercial Property Executive Magazine to discuss the state of the commercial real estate financing industry and what to expect in the coming year.
In the video interview, Weidell identifies current market and investment trends, including a trend toward longer-term financing in this low interest rate environment. He also shares his insight into three components of a healthy market and what the company is doing to stay competitive.
Watch the video from the Mortgage Bankers Association’s annual CREF conference:
Jeffrey Weidell, president, Nathan Prouty, senior vice president/managing director and Andrew Slaton, vice president of NorthMarq Capital’s San Francisco-based regional office, were featured in GlobeSt.com for securing the $103 million refinancing of Madrone Apartments, a 272 unit, class “A” multifamily property located in Mountain View, California. Check out the full coverage here…
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Dennis Williams was recently selected as one of Real Estate Forum’s Rainmakers. The Rainmakers compilation was the publication’s first-ever ranking of the nation’s top debt and equity originators. To be selected, nominees received a score for two fields—the total number of transactions and the total volume of all transactions. Check out Dennis’ recognition here…
SAN FRANCISCO (January 20, 2016) – The San Francisco regional office of NorthMarq Capital is proud to announce the promotion of Nathan Prouty to managing director. In his new role, Prouty will co-manage the San Francisco office’s production for insurance companies, agency lenders Freddie Mac and Fannie Mae, CMBS lenders, equity investors and other financing sources represented by NorthMarq.
“Nathan has established himself as part of the next generation of NorthMarq leadership through his proven ability to structure the proper financing for clients amongst the multitude of capital sources in the current financial markets. Through his promotion he will help keep the San Francisco office at the cutting edge of capital resources and client service,” said Jeffrey Weidell, NorthMarq Capital president.
Prouty joined the San Francisco office as an analyst in 2002, before briefly leaving to place joint venture equity for a California-based “fund” company. He returned to NorthMarq as a producer in 2007 and has steadily achieved increased success, resulting in a personal record production year in 2015 and selection to NorthMarq’s Producers Council for the past two years.
Prouty represents NorthMarq in the MBA’s Future Leader program this year. He previously served as president of the Bay Area Mortgage Association (BAMA) from 2011-2012 and is an active member of ULI, NMHC, as well as several other local and national real estate organizations.
Dennis Williams, senior vice president/managing director of NorthMarq Capital’s San Francisco office was featured in GlobeSt.com for securing financing of $20.5 million for a medical office building located in Presidio Heights, California and $16 million for a class “A” multifamily property located in Petaluma, California. Check out the full coverage here…
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NorthMarq Capital’s San Francisco office was featured in GlobeSt.com for the refinancing of two amenity-rich apartments. Jeffrey Weidell, president, Nate Prouty, senior vice president, and Andrew Slaton, vice president of NorthMarq Capital arranged financing for the borrower, Prometheus Real Estate Group, through its correspondent relationship with a life insurance company.Timberleaf Apartments at 2147 Newhall St. and Alderwood Apartments at 900 Pepper Tree Lane received refinance loans totaling $93 million. The new senior mortgage loans allowed the borrower to lock in historically low interest rates while benefiting from a period of interest-only payments for part of the loan term.
Prouty tells GlobeSt.com: “Both properties were constructed by Prometheus in the late 1980s and have undergone substantial upgrades over the last decade with a rolling renovation of unit interiors and modernizations of the clubhouse and amenities. Prometheus is an owner-operator in Silicon Valley, particularly in Santa Clara, where it has nine communities with nearly 3,000 units, including the 1,000-unit Mansion Grove project and recently completed new construction of the 289-unit Hearth Apartments one block from Alderwood.”
