Brokerage Secures Excellent Rate and Terms for Well-Situated Hospitality Property
GREENSBORO, N.C. (March 20, 2018)
Mission Capital Advisors today announced that its Debt and Equity Finance Team has arranged a $21.35-million non-recourse loan to refinance the DoubleTree by Hilton Greensboro, a 175-key, full-service hotel located at 3030 West Gate City Boulevard in Greensboro, North Carolina. The Mission Capital team of Beau Williams, Steven Buchwald, and Justin Hunt represented Milestone Hospitality Management in arranging the loan, which refinances the property’s existing financing and includes funding for a brand-required property improvement program (PIP).
The DoubleTree by Hilton in Greensboro is one of the region’s premier full-service hotels, featuring 4,350 square feet of banquet space, a modern business center, fitness center, and a wide range of in-room amenities. The planned PIP will completely refresh and enhance all guestrooms, further raising the hotel’s profile in the local market.
The property benefits from its strong location near the Greensboro Coliseum Complex (GCC), a major demand driver that hosts 1,100 events annually, including NCAA and ACC basketball championships and live musical performances.
“Due to the hotel’s strong location in the Greensboro market and significant forward bookings, we were able to generate significant lender interest and receive attractive financing for the sponsor,” said Williams. “We were also able to achieve a closing of the transaction in less than 30 days, to meet the expedited timing requirements of our client.”
Charles Clinton delves into the risks and benefits of this new source of capital that is drawing in more and more institutional real estate companies, as well as targeted individual investors.
March 7, 2018
Real estate crowdfunding is increasingly attracting investors with its strong yields, potential for outsized returns and reduced volatility, among other potential advantages. This fairly new form of online investing offers a great deal of opportunity, but it also comes with some risks. Charles Clinton, co-founder & CEO of investing platform EQUITYMULTIPLE, delves into the mechanism behind commercial real estate crowdfunding and underlines the most important factors an investor must consider for long-term success.
What opportunities does real estate crowdfunding offer investors?
Clinton: Private commercial real estate investing has numerous benefits as a portion of an investor’s overall portfolio. Despite its advantages, individuals are substantially under-allocated into real estate compared to institutional investors, primarily because real estate has lagged behind other asset classes in terms of transparency and accessibility. By moving real estate syndication online, real estate crowdfunding has begun to change that old paradigm. Individual investors can now invest in private market real estate transactions at low minimums (our investment minimum at is typically $10,000 per offering) and start allocating a portion of their portfolio into real estate without taking on the burdens of direct ownership.
Investors have full transparency into what properties they’re investing in and the low minimums help facilitate diversification. The best platforms also pre-screen the real estate companies and investments that they present, easing the selection burden on investors.
What are the benefits of crowdfunding investment compared to traditional instruments?
Clinton: Strong yield—after years of near-zero interest rates, investors have been forced to look for yield in new places. Less volatility—these investments are illiquid and non-traded, as opposed to public stocks, traded REITs or cryptocurrencies (a topic on everyone’s mind). While illiquidity has its drawback, it also reduces market correlation, making direct real estate investing less subject to market swings and, in aggregate, exhibit less volatility.
Potential for outsized returns—because private real estate markets are inefficient, there is potential for market-beating returns by investing in markets and submarkets that are underserved by traditional sources of capital, and in properties with untapped potential. Downside protection is also an advantage. Real estate—as an irreplaceable resource with tangible value—is also less vulnerable to recessions. The economy will expand and contract cyclically, but a growing number of humans will always need places to live and work.
Then we have tax advantages. Real estate investing platforms allow individual investors to share in the same unique tax advantages as institutional real estate investors—namely write-offs for depreciation, and a new 20 percent deduction for investments made through an LLC, courtesy of the recently-signed tax bill.
What can you tell us about the risks of real estate crowdfunding for investors?
Clinton: First, all investments carry risk, which is important for investors to remember. The risk/return profiles of investments offered through real estate crowdfunding platforms vary quite a bit. For example, we offer shorter-term senior debt and preferred equity investments, which are more secure, offer a flat rate of return and are more appropriate for risk-averse or less experienced investors. We also offer higher-upside, higher-risk equity investments, as a number of other platforms do. It’s important that investors take time to understand the specific risk factors for each offering they consider. Even more so, it’s important that platforms make those risk factors apparent and practice transparency in their presentation of the investment thesis and attendant risks.
Platforms should also practice conservative return modeling, stringent underwriting of both the real estate company running the deal and the deal itself, and a quality-over-quantity approach. Lastly, many platforms only offer investments to “accredited investors.” This helps ensure that the individuals who invest are adequately experienced and have the requisite capital for adding a new asset class to their portfolio.
Crowdfunding hasn’t been around for a long time, but it’s becoming more and more popular. What do investors need to look at before putting their money into such platforms?
Clinton: Investors should consider the people and practices behind any platform they consider investing with. If the management team doesn’t possess significant real estate experience, if the details of investments—and their attendant risk factors—aren’t presented in a forthright, transparent way, if return projections seem too good to be true, if they are unable or unwilling to answer questions. All these things should raise red flags.
It’s still relatively early in the game for the real estate crowdfunding industry. Though results so far have been good for many platforms, keep in mind that we’ve been riding a bull market for the entirety of the young industry’s lifetime. In the long run, winning high marks from investors will be less about hitting home runs 100 percent of the time and more about reasonable expectations, sound diligence measures, transparency and great customer service.
What are your expectations regarding real estate crowdfunding in 2018?
Clinton: The concept is gaining more legitimacy, both among individual investors who fund the deals and the real estate companies looking to tap into a new source of capital. We see this in the growing demand on our platform and investment volumes on other leading platforms, and understand this anecdotally from our customers who were skeptical of the new investment class at first but have grown more comfortable with the new investing paradigm. From that standpoint, I would expect the industry to post triple-digit, year-over-year growth again in capital invested.
On the other hand, macroeconomic factors are a looming challenge. The longer the market remains strong, the more platforms will be tempted to loosen credit standards to find yield. We will eventually, of course, see a market correction (depending on who you ask, we’re well overdue).
In sum, the future is bright for the industry. The U.S. economy and real estate market remains healthy overall, individual investors remain under-allocated in real estate, and real estate crowdfunding continues to win esteem among individual investors seeking yield and greater portfolio diversification. We’re also increasingly seeing institutional real estate companies turn to crowdfunding as a means of financing their projects. These are all great signs. Big picture, we’re seeing the creation of a new type of real estate financial product. In that light, the billions of dollars that will flow through the industry this year are only a drop in the bucket.
Walker & Dunlop provided the non-recourse loan secured by the 320-key Sheraton Bay Point Resort
February 03, 2018
The owner of a 320-key Sheraton hotel in Panama City Beach got a $42 million loan secured by the renovated property.
An affiliate of Torchlight Investors, LLC, the owner of the Sheraton Bay Point Resort, got the non-recourse loan from Walker & Dunlop Commercial Property Funding.
In June 2016, the sponsor acquired the Sheraton Bay Point Resort, located along Saint Andrews Bay at 4114 Jan Cooley Drive in Panama City Beach.
After the acquisition, the hotel underwent a multi-million-dollar renovation program that upgraded guestrooms, banquet facilities, building exteriors and the hotel’s lobby as well as 120 on-site golf villas.
Amenities include an 18-hole golf course designed by Jack Nicklaus, three outdoor swimming pools, four restaurants, five clay courts for tennis, a 12,000-square-foot spa and a private beach with its own wait staff. The property manager is Crescent Hotels & Restaurants.
Chicago-based hospitality investor AJ Capital refinanced a portfolio of nine hotels with $275 million from Blackstone Real Estate Debt Strategies, according to a press release from the borrower.
The hotels, part of the college town-focused Graduate Hotels brand, are located in Ann Arbor, Mich.; Athens, Ga.; Berkeley, Calif.; Charlottesville, Va; Lincoln, Neb.; Madison, Wis.; Oxford, Miss.; Richmond, Va. and Tempe, Ariz. Altogether, the portfolio holds 1,388 rooms.
The five-year, floating rate loan was brokered by Eastdil Secured, according to a representative for the borrower.
AJ Capital launched the Graduate brand in 2014.
In February of this year, AJ Capital closed nearly $100 million in a mix of recourse and non-recourse funding from two undisclosed debt funds to convert two other Graduate Hotels projects, which will be located in Minneapolis and Seattle. That deal was brokered by Mission Capital Advisors.
AJ Capital plans seven more Graduate Hotels locations including on New York City’s Roosevelt Island, which will serve Cornell Tech‘s new campus on the island, the first phase of which will open in September.
Economists overwhelmingly predict a short-term interest rate hike coming this week following the Federal Reserve’s two-day board meeting on Tuesday and Wednesday.
Should the Fed proceed as projected and bump its benchmark rate by a quarter point to a range of 1% to 1.25%, it will mark the fourth move made since December 2015. Bisnow reached out to commercial real estate experts to take their pulse on the current economic environment and how a rate boost, coupled with the volatility plaguing Washington, will affect the industry. From compressed cap rates to reduced deal flow, this is what industry experts had to say.
“When we look at the recent rate hikes, the Fed waited a year after December 2015 to raise rates last December, but that really wasn’t about our economy — it was due to a range of geopolitical issues. From the Chinese stock sell-off in the beginning of the year, which drove the S&P down precipitously, to Brexit to the raucous U.S. elections, 2016 was a tumultuous year headlined by non-economic issues; the result was that the Fed chose to keep rates low, despite strong economic performance.
“With unemployment at 4.3%, its lowest level in 16 years, and the economy performing well across the board, there’s every reason to believe that the economy is prepared for another rate hike.
“Following the most recent rate hikes, we’ve seen cap rates stay tight, as high liquidity and strong foreign investment activity have counteracted the interest rate rise. The Fed hiking rates further is really a signal that the economy is in a period of growth. While borrowing costs will clearly rise, the strong economy may also give investors the ability to achieve higher rents (in all asset classes). Because of this, we don’t expect to see significant moves in terms of either valuations or cap rates.”
“When we look at the recent rate hikes, the Fed waited a year after December 2015 to raise rates last December, but that really wasn’t about our economy — it was due to a range of geopolitical issues. From the Chinese stock sell-off in the beginning of the year, which drove the S&P down precipitously, to Brexit to the raucous U.S. elections, 2016 was a tumultuous year headlined by non-economic issues; the result was that the Fed chose to keep rates low, despite strong economic performance.
“With unemployment at 4.3%, its lowest level in 16 years, and the economy performing well across the board, there’s every reason to believe that the economy is prepared for another rate hike.
“Following the most recent rate hikes, we’ve seen cap rates stay tight, as high liquidity and strong foreign investment activity have counteracted the interest rate rise. The Fed hiking rates further is really a signal that the economy is in a period of growth. While borrowing costs will clearly rise, the strong economy may also give investors the ability to achieve higher rents (in all asset classes). Because of this, we don’t expect to see significant moves in terms of either valuations or cap rates.”
Chris Muoio, Ten-X quantitative strategist
“The commercial real estate market has seen deal volume drop in recent quarters as rising interest rates have increased financing costs and caused a divergence in pricing expectations among buyers and sellers. This was particularly affected by the spike in rates seen towards the end of 2016. The sudden nature of the shift in rates caused some deals that were agreed upon to be scuttled or renegotiated. Pricing has remained steady near cycle highs as cap rate spreads compressed to offset the rise in rates for the most part, but growth has plateaued, as the tailwind from interest rates has dissipated and the growth in fundamentals has cooled in many sectors.
“We believe the economy is prepared for at least one more hike this year, and possibly two … A rate hike in June feels fully baked into interest rate markets, and we would imagine most commercial real estate investors are prepared for this eventuality. Cap rate spreads would likely compress slightly to offset the modest rise, and we wouldn’t imagine a substantive effect on volumes due to the visibility around the move.
“With the tailwind of falling rates disappearing, fundamentals will become more important to pricing. This makes the hotel and retail sectors most vulnerable, as they have struggled to generate [net operating income]. Apartment is also potentially vulnerable as it has the tightest cap rate spreads, begging the question of how much more compression is possible, but apartment fundamentals have been solid thus far.”
Chris Thornberg, Beacon Economics principal
“Actually rates have barely budged and they are already fading from the Trump bump. The 10-year is hovering barely above 2% currently. As such I would be hard-pressed to call this a rising interest rate environment.
“If they raise (which may not happen), the real question is how much of a spillover [will there be] into long-run rates. The primary issue is the yield curve. If they do keep tightening, it will put the squeeze mainly on banks and other lenders. Banks have already become shy of construction and commercial lending — both in terms of volumes and spread. Tighter credit will have some dampening effect on the industry — but it’s not the interest rate, rather credit availability.
“The sectors that will see the biggest hit from tighter credit are those already on the front lines: construction and multifamily.”
Rajeev Dhawan, Georgia State University/J. Mack Robinson College of Business director of economic forecasting
“This June rate hike has been telegraphed for a while, but the Fed is now becoming cautious about any more hikes this year as some of their recent speeches have broadly hinted.
“Rate hikes are almost always in response to the economy running above its potential growth, and the evidence of that has been very mixed in recent months. Throw in the D.C. politics and the picture gets muddy when you look ahead. Has that impacted deal-making in CRE? It certainly hasn’t helped.
“Remember, foreign investment in domestic real estate deals is the icing on the cake and at some coastal cities it may be the entire cake. That is the flip side of the trade deficits … we run with our major trade partners, such as Germany, China, Mexico and the EU as a whole. Any impediments to trade, promised during the campaign time, which are now being considered, will not be good for the real estate sector as a whole, especially in the coastal markets. These areas should brace themselves for the inevitable ‘trade skirmishes’ later this year.”
Raymond Torto, Harvard Graduate School Of Design lecturer
“REITs indices kept pace with the general market in the last six months [and were] even a bit better as the assumption [took hold] that a better economy will be good for real estate.
“The economy can handle a rate increase, [though it remains] unclear if turmoil in D.C. will undermine confidence and the economy. “There has been no impact to date on [property valuations] as prices have held during the first half of the year. Volume is down, reflecting a pause in buying.”
Even as the Federal Reserve hikes interest rates, average yields on investments in commercial real estate have stayed low in New York City. That’s because real estate in New York keeps becoming more desirable.
“Capitalization rates in New York City, even compared to just one year ago, have remained stable as property values have continued to rise,” said Jillian Mariutti, director at Mission Capital Advisors. (Cap rates represent the income from a property as a percentage of the sale price.) The average cap rate for New York City Class-A office properties was 4.3% in 2016, and has held steady at the same rate this year, according to Mariutti.
“the investment demand, especially from foreign investors who are eying top markets such as New York City, has helped counteract the rise in interest rates we saw this past year,” said Mariutti.
Also, potential buyers in New York have lots of choices for financing. “The availability of capital today, in particular in New York City across all asset classes, is one of the key factor’s that’s driving this trend and keeping cap rates tight,” said Mariutti.
Top brokers shared how they built their careers in New York City real estate at Connect NY Next Generation, held May 17, 2017, at The Flatiron Room in New York City.
“If you want to be a broker in this market, in this city, you have to be incredibly tenacious,” said Brian Flax, managing director with Meridian Capital. And even then, working long hours and over weekends, success can still take time. “You can sometimes go a year, two years, three years without experiencing much success.”
(Pictured: Gabe Marans, managing director for Savills Studley; Flax; Alan Glick, senior investments analyst for Equity Residential; Mariutti and Schuster.)
And once success does come, don’t be afraid to share that success… on social media. “Using social media to promote yourself as a brand is absolutely critical,” says Ariel Schuster, vice chairman with RKF.
LAS VEGAS—In a panel titled “The New Power Couple” at the recent ICSC RECon event, panelists addressed the need for retail destinations and retailers to work together more closely in order to deliver efficient, engaged, and successful retail communities. They noted the importance of communication between developers and retailers and discuss strategies and tools for building powerful and effective relationships.
According to moderator David Fuller, Group Digital Director at Toolbox Group, the landscape has changed. “Retail has changed. Developers can no longer just build malls with endless retailers filling them. The way it used to be was that the market was developer led. That isn’t the case any longer.”
Fuller pointed out that technology has changed the shopping journey. “We have become more connected through digital communication. Sharing intelligence is key,” he said.
Panelist Aaron Farmer, SVP of the Retail Coach, out of Dripping Spring, TX, explained that it is a changing retail world and you can just tell that by walking the halls of the ICSC RECon halls. “Retail is evolving. We are seeing online stores taking a big chunk of the market. National retailers that have brick and mortar stores are having to evolve.”
The four major trends he says is having an impact on the industry include: Trump; Millennials; the economy; and the encroachment of e-commerce.
According to Farmer, 91% of retail brands use two or more social media platforms. “The average American is checking their social media platforms about 17 times a day and honestly, I think that number might be a little low. There is a huge amount of opportunity there.”
He pointed out that the average millennial is spending about $2,000 online every year. “Figuring out a way to capture that is key,” he said. “We are seeing this affect many familiar brands. Staples, Walmart, Macys, Sears, Nordstrom…A lot of impact there as far as stores closing, but we are seeing these national retailer online sales go up but they are shrinking the size of their retail stores. We are seeing some retailers disappear, but most are just shrinking the size of their store.”
Jillian Mariutti, director at Mission Capital Advisors, recently chatted with GlobeSt.com and noted that while the rapid growth of online shopping has dominated the retail buzz for quite some time, but beyond that Millennials, which account for more than 88 million people, still don’t have the earning power as Boomers or Generation X. “As this massive demographic matures, they’re likely to have a large impact on the retail industry,” she says.
From a financing standpoint, Mariutti tells GlobeSt.com that the continued strong demand assures that well-located, new retail properties have a high likelihood of succeeding. “TJ Maxx, Marshalls, Ross, H&M and Burlington, which have mastered the impulse buy that has allowed them to flip merchandise very quickly, are a paradigm for retailers that show you can still succeed even as shopping habits evolve.”
GlobeSt.com also recently spoke with retail expert Michael Lefkowitz, Member, Rosenberg & Estis, P.C., who said that “Retail real estate is in flux nationally and in New York City, and the retail industry is currently working through a reset as bricks and mortar evolve to accommodate the online sales phenomenon. However, retail will remain a critical component of the real estate environment and our local economy,” he said. “Shopping as entertainment is a fundamental part of our culture, and the retail industry will adjust to provide consumers the experience they desire.”
May 31: Long Island Real Estate Group Night at The Ballpark: LIREG takes over an exclusive Porsche Party Suite at Citifield as the New York Mets host the Milwaukee Brewers. 7 p.m. start and includes open bar, hot dogs, hamburgers and an assortment of sandwiches and raffle for 4 Field Level seats to a future game. Seats limited. $150 for LIREG memberss. RSVP to Deena Galante 631-721-7400 or info@LIREG.org.
Leadership Dinner
June 1: Michael McGuinness, chief executive officer of the New Jersey Chapter of NAIOP, the Commercial Real Estate Development Association, will be honored at the 24th Annual Monmouth University Kislak Real Estate Institute Leadership Excellence Award Dinner. The event will take place at 5 p.m. at the university’s Woodrow Wilson Hall, 400 Cedar Avenue, in West Long Branch. McGuinness will receive the Service to the Industry Award, which is given occasionally to an individual or organization who has provided exceptional service and support in advocacy, education or other services to the real estate industry. For event information or to purchase tickets, visit www.monmouth.edu/business-school or contact Theresa Lowy at tlowy@monmouth.edu.
WhitmanNYC Breakfast
June 6: The 2nd Annual WhitmanNYC Real Estate Breakfast Series Panel Event will take place from 7:30a.m. to 9:30 a.m. at the offices of Mission Capital, 41 Madison Avenue. Harold Fetner ‘83, president at CEO of Fetner Properties; Mitchell L. Konsker ‘83, vice chairman at JLL; David Tobin ‘91, principal at Mission Capital, will discuss Current Trends in the Midtown South Market. For information, contact Justin Sutter, jlsutter@essexrep.com
B’Nai B’rith Luncheon
June 6: Barbara A. Blair, President, Garment District Alliance, will be the guest speaker at the luncheon beginning at noon at the Cornell Club, 6 East 44th Street, Ivy Room. Her topic will be “Transformation of The Garment District”. Admission is $70 up to two days in advance and $80 at the door. Registration can be made online at www.bbre-ny.org or by sending a check payable to B’nai B’rith Real Estate Unit to Aracelis Kuilan, BDO, 100 Park Avenue, 10th Floor, New York, NY 10017, email: akuilan@bdo.com, Tel: 212-885-7239.
NAIOP-NJ Retail Meeting
June 6: “The Rise of Experiential Retail – Opportunities for Investment” will be held at the Teaneck Marriott at Glenpointe, 100 Frank W Burr Boulevard, Teaneck. Clark Machemer (Rockefeller Group) will lead the interactive discussion with: Herbert Eilberg, Chief Investment Officer, Urban Edge Properties; Nancy Erickson, Executive Managing Director, Colliers International; Brian Whitmer, Senior Director Metropolitan Area Capital Markets Group, Cushman & Wakefield; Registration/Networking Cocktail Reception begins at 5:00 p.m. followed by dinner & the program.
BID Meeting
June 8: Flatiron/23rd Street Partnership Business Improvement District will celebrate 11th Anniversary by Exploring the Future of Flatiron at its Annual Meeting featuring remarks by New York City Council Member Corey Johnson and a panel of industry leaders surveying the future of the neighborhood. Moderated by Jon Steinberg, Founder and CEO of Cheddar, the panel will feature: Liz Simon, Vice President, Legal & External Affairs, General Assembly; Morris Levy, Co-Founder and CEO, The Yard; Faith Hope Consolo, Chairman, Retail Leasing, Marketing and Sales Division, Douglas Elliman Real Estate; Leanne Shear, Co-Founder and President, Uplift; and, Santiago Gomez, Managing Partner, Cosme. RSVP at 2017flatironbidannualmeeting.eventbrite.com
Chashama Gala
June 8: The 2017 Chashama Gala at 4 Times Square will honor Pentagram, the world’s largest design consultancy, Sir Shadow, a long time Chashama Artist, and Joe McMillan, Chairman and CEO of DDG. 2017 Gala Honorary Chair is Darcy Stacom of CBRE, and Co-Chairs, Carole Feuerman and Barbara Tober. For more information visit www.chashama.org.
NYBC Breakfast
June 9: The New York Building Congress will host a Construction Industry Breakfast with Ali Chaudhry, newly-appointed Deputy Secretary of Transportation to Governor Andrew M. Cuomo, who will discuss the Governor’s transportation and infrastructure priorities in New York. The discussion takes place at the New York Marriott at the Brooklyn Bridge, 333 Adams Street, Brooklyn. Reception and networking will begin at 8:00 AM, followed by breakfast and program at 8:30 AM. Fee: $125 for NYBC members; $175 for non-members; $1,150 for member table; $1,650 for non-member table; $4,500 to co-host. For more information on reservations or sponsorship opportunities, contact Alanna Draudt at adraudt@buildingcongress.com. To register online, visit www.buildingcongress.com.
AREPA Networking
June 13: The Asian Real Estate Professional Association (AREPA) will host a Summer networking event from 6:00 to 9:00 p.m. at The Cloud Social Rooftop Bar atop the New York Manhattan Hotel located at 6 West 32nd Street. Event is free for 2017 AREPA Members. There will be a $15 charge for entry to this event. $20 at the door. Please order early. For further information for this event and for membership information, please go to www.arepainc.org
REW Women’s Forum
June 14: Real Estate Weekly hosts its 6th Annual Women’s Forum at the New York City Bar Association, 42 West 44th St. New York, from 8 a.m. to 1 p.m. Deputy Mayor Alicia Glen will give a keynote address before the city’s top female real estate, finance and community leaders discuss the game-changing issues facing the market. Speakers include Lane Shea, managing director at Harbor Group; CetraRuddy founder Nancy Ruddy and JP Morgan Chase managing director Pricilla Almodovar. For more speaker details and ticket info, go ato www.nycwomensforum.com For sponsorship, email dana@rew-online.com
UNCF Newark Award
June 22: Miles Berger, Chairman of the Berger Organization, will be honored by UNCF Newark at its annual Masked Ball at the Robert Treat Hotel in Newark . The award is in recognition of Berger’s support of Newark residents and the future of the city and its youth. The UNCF Masked Ball raises funds to send deserving minority students to college. The event will beging at 6 p.m. in the Tri-State Ballroom of the Robert Treat Hotel, 50 Park Place in Newark. For tickets, event details, and information about sponsorship packages and ad journal opportunities, or to donate to the event, go to www.uncf.org
