Despite the loan’s quirks, the borrower found a large life insurance company delighted to take on the risk. Mission Capital’s Alex Draganiuk discusses with Globe Street.

View the full article here: [PDF Download]

A Borrower Funds A Small, Self-Liquidating Loan Outside Of CMBS

JUNE 19, 2017 | BY ERIKA MORPHY

WASHINGTON, DC – A few years ago Ashley Capital, a New York City-based real estate firm, purchased a building called the Interchange Business Center. A 792,000- square foot industrial property located on a 55-acre site in La Vergne, TN, it was a former Whirlpool manufacturing site about 16% occupied by the time Ashley Capital acquired it.

Ashley did a gut renovation on the property and then, recently, went looking to place permanent financing on it. The size of the loan it wanted was not very large but some of the demands by the borrower made the transaction less than vanilla. Still, eventually it found what it was looking for, despite the tightening capital market. Or perhaps that should be it found what it was looking for because of the tightening market. Ultimately Ashley Capital realized all of its demands because its lender recognized what a great sponsor it is and the building itself is a good investment, Alex Draganiuk, director of the Debt and Equity Finance Group for Mission Capital Advisors tells GlobeSt.com.

Briefly, the building’s repositioning, along with its convenient access to the area’s major freeways, brought it to full occupancy. Today the Interchange Business Center is tenanted by Penske Logistics, Amer Sports Company, Singer Sewing Company, and Fulfillment Supply Innovation.

This story should be a shot in the arm for borrowers with smaller-sized loans, especially as the CMBS market — where most such financing get done — remains uncertain and the policy environment for CRE not as clear as one might hope.

What Ashley Capital Wanted

As Mission Capital took the Ashley Capital loan to market there were some constraints the borrower had put in place. It didn’t want to take all of the equity out of the project although there was a cash out, Draganiuk says. It also wanted a 15-year or 20-year term. Most permanent loans, of course, are ten-year fixed with a 25-year amortization, per the CMBS market. There were other elements as well that made the deal a bit unusual.

One was the size itself, which was $18 million.

“Eighteen million dollars is a tricky size,” Draganiuk says. “It is a tweener.” He explains that some life insurance companies — one obvious lending source — top out at $15 million per loan, while others don’t start until $20 million to $25 million. And of course at the higher end there is a broader array of lenders.

The other was that Mission Capital was placing it directly. Oftentimes insurance companies will not look at deals offered directly from brokers, Draganiuk says. Deals typically must go through a correspondent network of brokers that screen the transactions for insurance companies, he says.
Mission Capital only reps owners or borrowers on an exclusive basis, which means the lenders know the deal has been fully vetted and they can rely on the information Mission Capital provides about the borrower, Draganiuk says.

The third oddity about this loan is that it is self-liquidating — that is, the borrower wants it paid off by the end of the term. This in itself may not be uncommon but it is less common to get a broker to arrange it.

Many Offers

In the end none of that matter to lenders. Mission Capital received a number of competitive offers from lenders, and structured “a very favorable long-term deal with fantastic terms,” Draganiuk says.

A major life insurance company won the deal, which is not a surprise as the life insurance market is usually the beneficiary of volatility or uncertainty in the CMBS market. But then, life companies also come with their own set of constraints. Yet, “we were even able to negotiate the ability to upsize the loan on multiple occasions down the road, if desired,” Draganiuk said — yet another off-the-beaten track aspect to this loan.

PDF File Download

Commercial

Consulting

Deal

Debt & Equity

Finance

Loan Sales

Press

MissionCapital View more articles

Hoteliers who procure a ramp loan after renovating and prior to securing permanent financing are essentially cutting the effective interest rates by hundreds of basis points, Mission Capital’s Alex Draganiuk tells GlobeSt.com.

View the full article here: [Link] [PDF Download]

Why Post-Renovation Ramp Loans Are A Smart Move

JUNE 13, 2017 | BY CARRIE ROSSENFELD

SAN DIEGO—Hoteliers who procure a ramp loan after renovating and prior to securing permanent financing are essentially cutting the effective interest rates by hundreds of basis points, Mission Capital’s Alex Draganiuk tells GlobeSt.com.

Draganiuk: “Lenders need comfort with a hotel and confidence that the recent renovations are something guests will be attracted to, and which will yield improved property cash flow.”

SAN DIEGO—Hoteliers who procure a ramp loan after renovating and prior to securing permanent financing are essentially cutting the effective interest rates by hundreds of basis points, Alex Draganiuk, director in the debt and equity finance group at Mission Capital Advisors, tells GlobeSt.com. The firm’s team of Draganiuk, Gregg Applefield and Lexington Henn recently represented property owner SD Carmel Hotel Partners LLC in securing a three-year loan from a private- equity fund as a $20.75-million ramp loan for the Hotel Karlan, a 174-key, soft- branded DoubleTree by Hilton located in northern San Diego. The first-mortgage financing will replace the property’s renovation loan and a preferred-equity loan.

After acquiring the property in 2014, the sponsor implemented comprehensive renovations to the property, enhancing guestrooms, common areas, food-and-beverage outlets and meeting and spa facilities.

According to Applefield, “In today’s market, it’s not uncommon for hoteliers to procure a ramp loan post-renovation prior to securing permanent financing, and the sponsor turned to us because of our extensive experience in this arena. Through a strong marketing effort, we were able to provide the sponsor with numerous competitive offers, including fixed-rate and floating-rate options with very high leverage for a hotel.”

The multimillion-dollar renovation includes remodeled guestrooms, a new dining concept, completely upgraded state-of-the-art spa with fitness center and two upgraded pools with outdoor cabanas. Hotel Karlan also features six distinct meeting spaces, totaling more than 14,000 square feet, as well as a pre-function space and an event lawn for weddings, musical performances, and other social events. Additionally, the hotel features a 4,000-square-foot ballroom.

We spoke with Draganiuk about the ramp loan and any obstacles to getting one.

GlobeSt.com: Why is it a smart move for hoteliers to procure a ramp loan post- renovation prior to securing permanent financing?

Draganiuk: Most of the ramp loans we have arranged are taking out higher-cost-of- capital non-recourse construction or renovation loans, so we are effectively cutting the effective interest rates by hundreds of basis points for our clients. In recent years, many hotel deals have included renovation components as buyers have attempted to improve or rebrand their assets. When financing an acquisition with a renovation, lenders are typically underwriting a combination of a lower in-place net operating income, as well as a potential disruption in cash flow, which can constrain the amount of debt lenders are willing lend, while yielding a higher interest rate. After the renovation is complete, the cash flow rarely stabilizes immediately, as it takes some time to reap the benefits of the renovation, and the owner is usually not yet able to secure a permanent loan, which typically requires a good nine to 12 months of stabilized operating history. At this stage, a ramp loan becomes appropriate, as refinancing the property can allow you to obtain additional loan proceeds, a reduction in rate, and/or eliminate any contingent liabilities related to a renovation or construction loan.

Hotel Karlan has undergone a multimillion-dollar renovation that includes remodeled guestrooms, a new dining concept, completely upgraded state-of-the-art spa with fitness center and two upgraded pools with outdoor cabanas.

GlobeSt.com: What are the obstacles, if any, to getting this type of loan?

Draganiuk: The primary obstacles with obtaining a ramp loan immediately post-renovation include proof of concept, limited in-place cash flow, and the potential recapture of equity invested in a property. Lenders need comfort with a hotel and confidence that the recent renovations are something guests will be attracted to, and which will yield improved property cash flow. To convince lenders that a sponsor is going to be able to increase performance, we work closely with our clients to study the market extensively. We then compare the property to competing hotels and explain how the reinvestment will enable it to outperform competition or at least sufficiently penetrate its new competitive set. We also use quantitative metrics to build a story showing that, while cash flow is not fully stabilized, there are a variety of strategies the owner can implement to achieve his business plan and meet projected performance levels.

GlobeSt.com: What else should our readers know about ramp loans in these situations?

Draganiuk: In addition to traditional lenders, there are a number of new entrants in the space. Many lenders prefer the opportunity to lend on assets that have already successfully completed the initial component of their business plan, because they have limited uncertainty compared with a construction/renovation project. Additionally, lenders are often looking to underwrite hotels at today’s room rates, at market-level operating margins, without assuming a hotel is significantly outperforming competitors. To the extent the underwritten metrics work at these levels, lenders are more willing to take out a construction or renovation loan with a new ramp loan.

PDF File Download

MissionCapital View more articles

Retail and office development pre-leased to tenants, including Target and Marshalls

NEW YORK (May 23, 2017) — Mission Capital Advisors announced that its Debt and Equity Finance Group has arranged $41.6 million in financing for the construction of Kingswood Plaza II, a 106,000-square-foot office and retail development located at 1715 East 13th Street in the Midwood section of Brooklyn, New York. The Mission Capital team of Jason Cohen, Ari Hirt, Steven Buchwald, Justin Hunt and David Behmoaras arranged the loan with a foreign bank on behalf of a joint venture between Infinity Real Estate and The Nightingale Group.

Located on the bustling Kings Highway retail corridor, Kingswood Plaza is ideally situated in the heart of Midwood, one of Brooklyn’s most populous and busiest neighborhoods. The development, which is 56-percent pre-leased to Target and Marshalls, will include three floors of professional/medical office space, in addition to its retail component.

“It is more challenging to get construction financing at this stage of the cycle, but lenders still have appetite for well-conceived projects in strong locations, and we generated multiple quotes on this deal from a wide range of lenders,” said Hirt. “We ultimately closed a very strong loan with a foreign bank, with high leverage and a low interest rate, attesting to the breadth of our lender contacts and the quality of the sponsor’s business plan.”

The property, a former two-story parking garage, is fully approved for the development and undergoing demolition. Located approximately a block from the subway station, the property provides convenient access to the B and Q trains, as well as several buses.

“The sponsors also own Kingswood Plaza I, a neighboring mixed-use property, and they have a keen understanding of the local market and the unmet demand for quality retail and office space. We had worked with Infinity in the past to secure acquisition financing for a property in Sheepshead Bay, and they recognized our unique ability to drum up lender interest – even at this stage of the cycle. With the retail pre-leased to investment-grade tenants, we were able to communicate the quality of the development to lenders, which enabled us to close a very favorable deal.” added Steven Buchwald.

Infinity Real Estate is a developer and operator of mixed-use real estate with more than 60 properties comprised of urban retail, boutique office, hospitality and over 1,000 rental apartments. The Nightingale Group is a privately held, vertically-integrated commercial real estate investment firm, whose portfolio spans over 11 million square feet of office and retail space across 22 states.

Mission Capital Advisors is extremely active at arranging construction financing, acquisition financing and refinancing for office, retail, hotel, multifamily, industrial and self-storage properties in markets across the country. In recent months, the firm has closed construction financing for hospitality and mixed-use properties in Illinois, Texas and Washington.

MissionCapital View more articles

A slower than expected condo sales market, an abundance of bridge capital, and a belief in a fundamental value level in the market has made condo inventory financing available again. Financing is available from a variety of capital sources. Loans can be non-recourse. Leverage and rate largely depend on the size and location of the project.

Pricing for non-recourse condo inventory loans greater than $25 million can be as low to mid-single digits at lower leverage levels
Pricing for loans less than $25 million will yield high single digit interest rates in major markets.
Loan term may vary but is usually in the 12-24 month range with extension options.
Varying levels of prepayment penalty.

Leverage is generally capped at 60%-70% of bulk sellout value. The lender will establish value based on a combination of an appraisal, the sponsor’s estimated sellout value, broker conversations, and, most importantly, other condo sales within the building and competitive properties.

The lender will establish minimum release prices on an individual unit or $/SF basis to make sure that sufficient value remains in the unsold condos as each condo is sold off. Cash flow leakage from sales can be negotiated and allows some portion of the net sales proceeds from individual unit sales to be returned to the borrower leaving a portion of the inventory loan outstanding. That structure is a win-win situation for the lender and borrower. It allows the lender to keep capital out longer and increases the borrower’s leveraged IRR by having equity returned earlier. Lenders care about the use of proceeds for the loan. They are more favorable to taking out an existing loan versus a pure repatriation of sponsor equity late in the sales process when the remaining collateral will usually consist of the least desirable units at the property.

Offers vary greatly from lender to lender so it is important to broadly survey the capital markets to create competition and get the best loan for the sponsor.

Click here to learn more about Mission Capital’s Debt & Equity team

MissionCapital View more articles

Jordan Ray, principal of The Debt & Equity Finance Group at Mission Capital, discusses listening to the market to help hoteliers make the best use of investment dollars.

View the full article here: [Link] [PDF Download]

5/19/2017 Lodging Magazine May 2017

Where And What To Invest

Ellen Meyer

Listening to the market helps hoteliers make the best use of investment dollars.

For the past several years, the hotel industry has enjoyed solid economics and record-setting growth following the diﬃcult era of the Great Recession. Now, the tides are turning once more, and the industry is starting to show slower—but still steady—growth. While hoteliers are aiming to capitalize on a still-strong market, lenders are starting to tighten up and there is less available debt for the taking. This is making many investors move cautiously, looking to make the most of their dollars.

But what is the best way to invest?

Where should people be funneling their dollars? To gain a current perspective on the ever-changing hotel investment scene, LODGING recently spoke to representatives from both the financing and sales transaction sides of the equation. Among the topics they discussed were the current state of the market, the impact of tighter money, a stronger dollar, and changing consumer preferences on their respective businesses.

On the financing side is Jordan Ray, principal of The Debt & Equity Finance Group at Mission Capital Advisors, where he oversees business development, strategy, placement, and execution of real estate capital on behalf of major owners, investors, and developers nationwide.

Ray is quick to say that he rarely advises clients specifically on where they should invest, preferring instead to focus on the deals that are being done currently. He also makes clear that his comments are based on the deals being done at his own ﬁrm, which he says has no designated hotel group but likely handles more of those types of transactions than those that do. “Mission Capital represents a lot of really different and interesting hotels, developers, owners and operators, and projects,” Ray explains. “And we aim to do what’s best for our clients at any given part of the cycle.” Most of his deals, he says, involve raising debt, though his ﬁrm handles a few equity deals each year. He also adds that when his ﬁrm believes especially strongly in a particular deal, they may invest along with the client. “This is mainly because we believe in what we’re selling.”

Steve Kirby is managing principal of Mumford Company, a hotel brokerage and advisory services ﬁrm, where in addition to being an active broker, he manages the marketing and administration operations of the company’s five oﬃces. Kirby says right now is a good time both for buyers and sellers, but maintains that it’s diﬃcult to generalize what constitutes a “good investment” due to regional taste diﬀerences. “Lodging is a street-corner business; what works in Atlanta may not work in N.Y.” However, he maintains, the most popular type of hotel investments continue to be limited-service projects with a mid-market focus. “Most of those types of properties, which have been developed over the past 20 years, have been very successful.” Yet, noting what he calls “amenity creep,” Kirby says the lines are becoming blurred between upper-scale and mid-market properties. “It is often diﬃcult to tell the diﬀerence other than in the meeting space. The rooms are just as nice. They have slightly more amenities at the full-service hotels, but in general, the product oﬀerings in the guest rooms and in the public areas are very similar.”

CHANGING CONSUMER PREFERENCES

Perhaps in line with Kirby’s observation about “amenity creep,” Ray discussed how the rise of a new kind of consumer has driven investment in properties that would have been tough sells in the past. “Consumers’ preferences and what they actually want out of the lodging experience is changing. There is more demand for less traditional, more experiential hotel stays.”

Ray observes that the reasons for going to one hotel over another are changing. “While in the past, people might choose a hotel because it was a ﬂagship, near a particular attraction or business location, or due to a loyalty program, an increasing number of people want to be able to work, eat, hang out, and do things in places where they are comfortable.” This, he says, can have a very desirable snowball eﬀect. “When people enjoy spending time in the hotel as well as the location’s attractions, they are more likely to become loyal and spend their money as well as time there, and to generate buzz through social media and digital marketing, encouraging their friends to check out those places, too, when they come to those major markets.”

Ray notes also that in many of these major markets, an increasing number of hotels have become hubs for gathering. “Many people still want to hang out in the lobby of the Ace Hotel in Midtown Manhattan when visiting New York, but there are about 12 diﬀerent places like that right now, where everyone wants to hang out in the lobby. The experiential part of that makes us want to stay there. So, there are a lot of other draws versus loyalty programs.”

Given his belief in these types of properties, it should come as no surprise that these are the ones his ﬁrm gets increasingly behind, to the extent that Mission Capital has developed a niche of sorts, ﬁnancing less conventional, distinctive hospitality spaces; they include Graduate Hotels—which are in “dynamic university towns,” such as Ann Arbor, Michigan—and also what might be considered lifestyle or boutique hotels.

Ray says selling lenders on boutique properties isn’t that diﬀerent than selling guests on booking a hotel stay. “It used to be challenging to ﬁnance these unique properties, but a market for these assets has developed, so there is now an appetite among lenders for these types of properties, which have become easier to sell,” says Ray. Being able to explain the appeal of an asset that provides an alternative experience, he says, is essential in order to sell a client on buying or developing it. “It all comes down to people. Just like other human beings, those making decisions about investments often need to do more than just hear or read about them. They often need to experience them for themselves to understand their appeal.”

DEMAND GENERATORS

Ray believes that properties that will stand the test of time are best located in environments where there are demand generators—e.g., state universities, capitals, and growth—and “a great sense of place.” He maintains, “Even though preferences change, a lot of really great assets are being created without the help of big brand names, and these assets are becoming synonymous with the place.”

Both Ray and Kirby noted the trend toward incorporating hotels into larger mixed- use developments, including those with residences. “The way that we look at that, is, obviously, there are shared elements between residence and hotels, but when you have condos, you end up dollar cost averaging down your basis in your hotel room,” says Ray. “I think nearly everywhere a developer has done some retail, restaurants, and living space, they try to incorporate a lodging product of some kind,” says Kirby.

CHANGING INVESTMENT ENVIRONMENT

Ray and Kirby also weighed in on the impact of a stronger dollar—which has made investment by foreigners more expensive—and the challenges posed by either the reality or perception of tighter money.

Although Kirby says he believes obtaining loans is becoming more diﬃcult for both construction and purchase, he considers it “doable but more diﬃcult” for new construction. “The lenders are tightening on the new construction front without a doubt. We had our ﬁrst rate increase in 10 years, and fully expect a couple more, but I think that the developers and operators are pricing that into their oﬀers these days.”

Ray agrees that there are challenges, but says it’s his job to identify and overcome obstacles and make smart decisions.

“Of course, we would rather ﬁnance cash-ﬂowing assets at this point in the cycle, but we earn our stripes by getting deals done in a certain environment, and we are getting them done.” Whether or not it is due to less purchasing power by foreign investors and tourists or by perceived problems with hotel room supply in New York, Ray says, the reality is that more deals with his ﬁrm are currently happening in markets like Austin, Chicago, Seattle, L.A., and Miami.

As far as foreign investment goes, Kirby, who maintains that “the U.S. is probably the safest investment market in the world now,” ﬁnds it hard to tell if the strong dollar has hindered it. “Chinese investors seem to be hampered more by restrictions their own government is placing on the allowable number of large acquisitions than by the strong dollar’s impact on the cost of these acquisitions. I don’t know if they limited it, but they have restricted it to further review before they allow the large acquisitions that they once did.”

LOOKING AHEAD

While Kirby says there are opportunities for both buyers and sellers now, he believes prices are maintaining high levels despite the spate of new construction—a pipeline that includes 4,960 projects and 598,688 rooms as of the end of 2016, according to Lodging Econometrics.

Kirby also says, “We think now is a good time for a lot of people to get out, not necessarily to get out of the market, but to reallocate their capital.” However, buyers who can operate a property more eﬃciently than the previous owner, he says, can proﬁt by driving more money to the bottom line, if the top line stays the same. “I think we are going to see a lot of transactions this year, but now is a good time to take some proﬁts if you can.” He reassures that this will change, as always, and there will be a buy and building opportunity over the next few years again.

“Labor costs will deﬁnitely rise over the next few years. The top line should be okay, the bottom line is probably going to be weaker going forward for the near term,” he explains.

BACKING A BRAND

Keeping investor interests in mind when developing Tru by Hilton Though the current lodging cycle is thought to be winding down, it hasn’t stopped the deluge of new hotel brands joining the market. However, it has aﬀected the way that the big hotel companies are developing them. As these companies choose to invest in launching new brands, there is careful consideration given to developers’ return on investment.

An example of this phenomenon is the new midscale brand Tru By Hilton.

Launched just last January at the 2016 Americas Lodging Investment Summit, Tru is already seeing massive investment from the lodging community at large. As of February of this year, the brand has accumulated more than 170 signed deals in the U.S. and Canada and has more than 400 more in various phases of negotiation. This level of interest from the hotel community was not entirely unexpected— Tru was conceived and developed to be a smart investment for hoteliers. The hotels can be built on as little as an acre and a half of land, giving it a market ﬂexibility that other ﬂags might not oﬀer. Additionally, Tru properties require less capital upfront, which makes ﬁnancing easier.

Hilton also saw opportunities in the midscale segment, an area of the market that the company has not really explored in the past. “It’s always a good time to invest or buy in the midscale segment,” says Alexandra Jaritz, global head of the Tru by Hilton brand. “I don’t want to say that the segment is recession proof, but it’s deﬁnitely safer,” she adds. The ﬁrst Tru property is due to open May 25 in Oklahoma City, Okla., and eight more will follow this year. Sixty more properties are set to open in 2018. As it stands, Tru is the fastest growing brand in Hilton’s history.

1: NEW YORK

BIG HOTEL OPPORTUNITIES IN THE BIG APPLE

With a pipeline of 192 properties and 30,541 rooms, New York City has the largest hotel development pipeline in the United States. The Big Apple is also the most populated city in the country, home to more than 8 million residents and hundreds of major corporations including Morgan Stanley, Citigroup, and ABC.

Comprised of ﬁve boroughs, the iconic city is full-to-the-brim with tourism hot spots such as the Empire State Building, Central Park, and Times Square. With a positively booming year-round tourism industry, New York City brought in more than 58 million visitors in 2015, around 12 million of which were international travelers, according to NYC and Company, a destination and marketing organization focused on New York’s ﬁve boroughs. Also in 2015, tourists spent more than $42 billion, which has a huge impact on the city’s overall economy.

As far as hotels are concerned, in 2016, NYC had an average occupancy of 85.8 percent and an average ADR of $258.89. Even though the statistics are impressive, hotel competition in the Big Apple is quite ﬁerce, especially with all the new supply entering the market. That’s why many of the hotels opening over the next few years have a hook, helping them stand out to travelers. One such hotel will be the Graduate Roosevelt Island, due to open on the narrow island in the city’s East River in 2019.

As a brand, Graduate Hotels is focused on development in college towns. The Roosevelt Island property is located in the center of Cornell Tech and is the ﬁrst and only hotel on Roosevelt Island.

David Rochefort, vice president of investments and asset management at AJ Capital Partners, the company behind the Graduate brand, believes it important for hotels to emphasize their uniqueness, especially in NYC. “There is an extreme draw to be a part of this city and to design something extremely unique within our portfolio,” he says. “It’s the best hotel market in the world.”

2: HOUSTON

DIVERSE DRIVERS AND A BUSINESS-FRIENDLY ENVIRONMENT PRIME THE HOUSTON HOTEL MARKET FOR CONTINUED GROWTH

Following the January 2016 crash in oil prices, it wouldn’t be too much of a stretch to think that the economy in Houston, Texas—a city internationally recognized for its energy market—would be suﬀering. But that is very much not the case. Houston’s economy has an ever-diversifying set set of drivers, from renewable energy sources like wind and solar, to healthcare and biomedical research, and even aeronautics.

According to Chris Green, COO of Greenbelt, Md.-based hotel management company Chesapeake Hospitality, Houston’s economy succeeds because the city is very business-friendly. “It’s a great place to do business. There aren’t a lot of barriers to entry and people are building new businesses there all the time.” Chesapeake manages two properties in the Houston market, including The Whitehall Houston, which is located in the city’s downtown.

The hotel pipeline in Houston is the second largest in the United States, totaling 169 properties and 18,373 rooms. Even with all the new supply coming in, Green isn’t particularly concerned about the longterm viability of Chesapeake’s Houston properties.

“You’ve got a really large marketplace with lots of amazing submarkets. You’ve got a whole bunch of city centers within one marketplace that all have their own unique business drivers,” he explains. “There’s something for everyone.”

3: DALLAS

INFRASTRUCTURE IMPROVEMENTS AND AN EXPANDING URBAN CENTER MAKE THIS TEXAS CITY A DEVELOPMENT HOTSPOT

With a pipeline of 140 properties and 17,291 new rooms, the city of Dallas, Texas has the third largest hotel development pipeline in the United States. For those familiar with the area, these numbers are no surprise— in 2016, the city had the highest year-over-year population growth in the country and it boasts the ﬁfth largest metropolitan economy. It’s also home to a number of major corporations, including State Farm, Toyota, and JP Morgan.

With such a strong business environment and so much hotel competition coming to the Dallas market, many of the city’s existing properties are upping their game, investing in renovations to draw a bigger share of travelers. One of these hotels is the Sheraton Dallas Hotel by the Galleria. Purchased by North Palm Beach, Fla.- based Driftwood Hospitality Management in late 2016, the hotel is currently in the midst of major guestroom renovations. Steve Johnson, executive vice president of Driftwood, says that the renovations were a necessary move, especially considering the hotel’s location, which is surrounded by major oﬃce buildings and high-end residences. “We needed to have a product that would allow us to improve occupancy and RevPAR,” he describes. The hotel also sits right next to the city’s freeway, which was recently widened and updated during a $2 billion improvement project—just one example of the steps the city is taking to continue its growth and invest in its own infrastructure.

“Dallas has been growing well for as long as I can remember, and certain sectors— like ours—are growing faster than others. We feel really good about our investment in the Sheraton, and we expect it to remain strong for the foreseeable future,” says Johnson.

4: NASHVILLE

THE CAPITAL OF TENNESSEE’S BOOMING TOURISM SECTOR IS MUSIC TO THE HOTEL INDUSTRY’S EARS

For the past several years, the city of Nashville, Tenn., has enjoyed signiﬁcant economic growth. The city is also experiencing increased wages and a tighter labor market. It’s currently a major music recording and production hub for both major and independent labels, earning it the moniker “The Music City.” Nashville is also a major healthcare hotspot—more than 300 health care companies call the area home. And in 2015, Nashville was named Business Facilities’ number one city for economic growth potential.

With so many ties to the music industry, Nashville tourism is booming. More than 670,000, tourists ﬂock to the “Music City” annually to experience what it has to oﬀer, including Music Row—an area dedicated to country, gospel, and Christian music—the Country Music Association, Country Music Television, and Universal Music headquarters.

With so many travelers and businesses coming to Nashville, it is a great time to be a hotelier developing in the area. There are 121 hotels and 14,873 rooms in the Music City’s hotel development pipeline. Projected RevPAR for this year is up 3.9 percent from 2016, and demand growth has climbed 4.4 percent.

Virgin Hotels started looking into the Nashville market immediately after launching their brand in 2010. “When we ﬁrst visited the city, there was a lot of energy and an overall good vibe. We could feel the underlying culture that made the city tick. That culture was a perfect ﬁt with what we were looking to oﬀer Virgin customers,” says Allie Hope, head of development and acquisitions at Virgin Hotels. In December 2015, the company acquired a site on Music Row. The planning stage has been extensive, but Virgin will break ground on the property this summer and open the hotel in 2019. “We cannot wait,” says Hope. The 260-room property will have a rooftop pool and food and beverage options that reﬂect the Nashville culture.

5: LOS ANGELES

EVEN WITH HIGH BARRIERS TO ENTRY, THE HOTEL MARKET IN THE CITY OF ANGELS IS VERY IN-DEMAND

Home to one of the largest populations in the United States—3.8 million—and a strong economy where one in every six people works in a creative industry, Los Angeles, Calif., is a prime location for hotel development. However, getting a project oﬀ the ground in L.A. can be a major feat. The market is already very saturated and inﬂation and construction costs are steadily increasing. Southern California has also made it consistently diﬃcult to build with complex zoning laws and height limits. However, this hasn’t really stopped people from trying—and succeeding—to bring new hotels to this market.

Even with numerous barriers to entry, Los Angeles boasts the ﬁfth largest hotel construction pipeline in the United States—111 hotels and 18,723 rooms. According to Eric Jacobs, chief development oﬃcer at Marriott International, a lot of this supply can be traced back to 2009, when the recession oﬀered developers a major opportunity to enter the L.A. market. “The southern California hotel market got very soft. Developers who otherwise wouldn’t have been able to open a hotel in this area could. Things in L.A. move very slowly. A lot of the hotels that are opening in the next couple of years have actually been in process since 2009.”

Right now, Marriott has many Los Angeles-based projects in the works. “When developing in L.A., hoteliers should keep in mind that the due to the city’s size, there are many diﬀerent submarkets worth pursuing. There is no reason to limit yourself to downtown,” Jacobs notes.

PDF File Download

MissionCapital View more articles

MissionCapital View more articles

Written by Dwight Bostic:

December’s Mission Monthly keynote article – ‘Importance of Due Diligence for Secondary Market Asset Sales’: reviewed the robust capabilities of the Secondary Market Surveillance (“SMS”) platform in providing permission-based portal access for all stakeholders in the loan evaluation process, streamlining due diligence by serving as a single repository for data management.

However, as with most technology based solutions/ platforms, the human element is critical to the success. Systems, in a singular capacity, are insufficient to address the tactical requirements of a successful engagement.To expand our capabilities, Mission Capital, in the 4th quarter of 2015, combined our services business with the due diligence firm Global Financial Review. The new entity, Mission Global, provides a comprehensive portfolio of due diligence and risk management services for institutions buying, selling, securitizing or managing mortgage, consumer and commercial loans. Mission Capital and Mission Global align human capital (with over 300 fulltime professionals) and advanced technology with a secondary market approach to meet your specific and demanding requirements.

Mission Capital and Mission Global support a broad range of business processes: Loan Syndication, Portfolio Acquisition and Disposition, Securitization, Warehouse Lending, Asset and Portfolio Management and Surveillance, Mergers and Acquisitions and Regulatory Reviews. This depth of experience along with the breadth of services offered allows Mission to deliver solutions to 7 of the top 10 banks along with engagements with the FDIC, various FHLBs and GSEs as well as numerous whole loan investors.

The following engagements demonstrate our extensive portfolio of services:

Top Five Major Global Bank: Mission is engaged by the Bank for both residential and commercial due diligence services. In support of the Bank’s multiyear, programmatic asset liquidation strategy for their residential portfolio, Mission acts as the Bank’s back office for all components of transaction management. Mission successfully imbedded over 100 full time professionals within the bank’s servicing operation conducting collateral file review and curative, vault management, title and lien curative along with managing post-closing contract management. In support of the Bank’s commercial group, Mission delivered due diligence and credit underwriting services for the acquisition of a credit facility secured by approximately $3bn of loans secured by more than 650 properties in Mexico. Due diligence included review of loan and credit files as well as third party work ordered in conjunction with the acquisition. Our deliverables, including market summaries for major cities and collateral types and individual asset summaries for all relationships, loans and collateral, were utilized by the Bank’s credit team in underwriting and approving the transaction.

Top Five US Bank: Engagement A supports the Bank’s warehouse lending group’s counterparty risk management through i) conducting loan level re-underwriting and compliance testing and ii) auditing servicing procedures for adherence to Bank and regulatory standards. Engagement B supports the capital markets programmatic RMBS Cleanup Calls and resulting whole loan liquidation. Services delivered are collateral exceptions curative along with preparation of a new assignment of mortgage from Bank. The transaction timeline is generally very compressed which require Mission to cure 1,500 to 3,000 executions within three to four weeks.

Leading Private Equity Firm: Mission supports the PE’s, one of the most active buyers of distressed residential whole loans over the past several years, whole loan acquisition and sales group delivering products for title and lien curative, compliance documentation cure and collateral documentation risk grading. Mission established a separate team of professionals dedicated to the specific and demanding needs of our client. Loan Originators – multiple asset classes: In support of new origination loan acquisitions by Conduit Originators, Mission performs loan level re-underwriting and applicable compliance testing for the following asset classes: Commercial Loans; Student Loans; QM and NonQM Residential Loans; and Community Reinvestment Act Loans. Mission Global and Mission Capital are uniquely positioned to partner with you on a variety of services to meet the complex challenges faced by all market participants. Mission Global is Rating Agency approved by S&P, Fitch, DBRS, and Kroll and both Mission Capital and Mission Global meet the demanding standards for vendor approval.

Click here to learn more about Mission Capital’s loan due diligence and consulting services.

FINANCIAL INSTITUTION CONSULTING DUE DILIGENCE, VALUATION, DATA, DOCUMENTATION

In addition to our leading asset sale and capital raising expertise, Mission Capital delivers custom solutions to our clients by leveraging our deep transactional experience, proprietary technology, subject matter expertise and best-in-class talent.

Residential/Consumer Expertise:

DUE DILIGENCE
Seasoned Loan Risk Analysis
Non-QM Reunderwriting
Agency Loan Reunderwriting
Forensic Reunderwriting
Compliance Testing/Risk Assessment
Data Review/Validation/Auditing
Robust Data Tape Construction
TRID/ATR Reviews
Valuation (Collateral/Loan/Portfolio)
Single Family Rental Re-Underwriting

AGENCY DELIVERY
Seasoned Loan Eligibility Analysis
Data Tape Creation and Validation
Bid Tape Submission (DF1, ULDD)
Agency Loan Reunderwriting
Collateral Delivery Management

COLLATERAL AND TITLE/LIEN SERVICES
Collateral File Review
Collateral Inventory / Exceptions Reporting
Collateral Risk Assessment
Cure Missing/Defective Docs
Lien/Title Risk Assessment
Title Policy Inventory Review
Cure Missing TP’s or Obtain New TP
Title Claims Management

Mission supports a range of business processes:
• Loan Syndication
• Portfolio Acquisition & Disposition
• Securitization
• Warehouse Lending
• Asset & Portfolio Management / Surveillance
• Mergers & Acquisitions
• Regulatory Review

WHOLE LOAN & MSR TRADE SUPPORT
Data Integrity Review and Data Cure
Pre-bid Risk Analysis
Portfolio Modeling/Valuation
Project Management/Planning
Project Manage Third-Party Vendors
Settlement Management/Reconciliation
Rep and Warrant Risk Management
Data Preparation and Mapping
Transfer Execution
Interim Servicing Reconciliation
Trailing/Missing Document Management
Corporate Advance Audit/Reconciliation

LOAN AND SERVICER SURVEILLANCE
Counter-party Risk Review
Workflow Analysis
Loss Mitigation Review
Policy and Procedure Review
Pay History Review
Validation of Servicing Efforts

Commercial Mortgage Loan/Lease Expertise:

DUE DILIGENCE
Market Analysis
Underwriting
Syndication Packages
Lease Abstracting
Asset Summary Generation
Data Tape Generation
CCAR Reviews
ARGUS Analysis
FDIC Loss Share Valuation/Terminations
Valuation (Collateral/Loan/Portfolio)
Market Analysis
Third Party Report Review/Auditing
Relationship, Loan, Collateral & Borrower Data Mapping

DOCUMENT MANAGEMENT
Collateral Inventory and Exception Reporting
Document Imaging and Indexing
Virtual Data Room Hosting

REGULATORY SUPPORT
Regulation Analysis
Process Assessments & Implementation
Data Review, Monitoring & Reporting
TRID, HMDA, DFA, ATR

EQUIPMENT LOAN AND LEASE ANALYSIS
Document Inventory
Portfolio Analysis
Credit Underwriting
Cash Flow Auditing
Spreading Financials
Warehouse Loan Facility Underwrite

THIRD PARTY OUTSOURCING / STAFFING SERVICES
Covenant Checks
Letter and Call Campaign for Financials
Multi-Lingual Capabilities

SMALL BALANCE BUSINESS / REAL ESTATE
One Loan/Multiple Collateral Analysis
Multi-Loan/Multi-Collateral Analysis
Robust Data Tape Generation

$55 Billion – Closed Asset Sale Volume

$495 Billion – Valuations Volume

$197 Billion – Closed Trade Support/Consulting Volume

MISSION’S KNOWLEDGE BASE SPANS THE LOAN AND REAL ESTATE CAPITAL MARKET LANDSCAPE:

ASSET TYPE – Debt, Mezzanine, Equity, Real Estate Portfolios, Collateralized Debt Obligations, Collateralized Loan/Lease Obligations

PERFORMANCE PROFILE – Performing, Sub-Performing, Non-Performing, Re-Performing, Bankruptcy, Seasoned RPL

COLLATERAL/TRANSACTION TYPE – Hospitality, Retail, Office, Industrial, Multifamily, Senior Living, Self-Storage, Student Housing, Manufactured Housing, Mixed-Use, Agriculture, Land, Equipment, Aviation/Marine, Single Family, SF Rental, Consumer, Unsecured, MSR, Student Loan, Non-QM

LESS-TRADITIONAL ASSETS – Quarries, Mineral Rights, Developmental Rights, Golf Courses

MISSION DELIVERS SOLUTIONS TO:

Banks – Community, Regional, Commercial, Investment

Funds – Private Equity, Credit, Debt, Opportunity

Credit Unions

Specialty Lenders – Bridge, Hard Money, Mortgage Reit

Insurance Companies

Special Servicers

Government – Regulators, FHLBs, GSEs, Federal Reserve

PDF File Download

Consulting

Mission Monthly

MissionCapital View more articles

Written by Mission Capital Asset Sales:

Secondary Market Asset Sales Environment
Liquidity in the secondary market increased substantially following the global financial crisis. High-yield debt funds attempted to raise a record $66.7 billion of equity to invest in high-yield commercial real estate debt in 2016. The $66.7 billion represents 21.5% of all attempted equity raises for investment vehicles in 2016 that invest in commercial properties, debt, or both. That figure represents the highest percentage of total equity raise devoted to high-yield funds since the statistic was first tracked by Real Estate Alert in 2003.This increased liquidity has further legitimized the whole loan trading business. What was once perceived as an avenue for distressed or special situations trading has evolved into a market for transactions occurring in the normal course of business. Motives for divesting assets now stem not only from risk management related to “problem assets,” but also from M&A activity, compliance with internal or regulatory concentration limits, along with a host of other routine portfolio management practices. Price expectations in this ever more liquid market, in conjunction with opportunity-cost for investors evaluating increased product volume, necessitates quality data to bridge the bid-ask gap.

Value-Add of Due Diligence
As the secondary market for whole loans continues to mature, the role data plays in facilitating timely transactions at market-clearing prices has become increasingly important. Banks, funds, servicers, and other lenders exploring the sale of assets may be penalized for incomplete data by investors making conservative assumptions to protect against downside. Servicing systems, designed primarily to manage loan administration rather than facilitate asset management, are inherently limited in their ability to supply the robust data needed to effectuate a loan sale. These systems often fail to memorialize collateral release and / or addition, relevant borrower and guarantor detail, along with other pertinent information for underwriting a loan. Additionally, over the life of a loan data may be “lost” due to servicing conversions, loan modifications, or hosting on legacy systems. Data pitfalls don’t end with the servicing system; further compounding data inadequacies are factors including regulatory changes requiring increased disclosures for compliance, document exceptions, and the dilemma of covenant checks where lenders are often dis-incentivized from confirming compliance (non-compliance necessitates a downgrade, whereas no action is required otherwise). Sellers are often tempted to market assets without first packaging diligence under the rationale that reducing time to market will increase interest and minimize externalities. This is often done at the risk of impacting pricing and actual transaction timing. Responding to investor data requests during the course of a transaction diverts resources that are better focused on the marketing effort. Surprises, such as missing documents and lien issues, may be more difficult to cure during the course of a transaction and could even result in pricing adjustment or closing delays. Conversely, getting in front of diligence issues typically leads to stronger execution from a time and price perspective.

Mission Capital’s Answer: Secondary Market Surveillance
Providing a succinct diligence package can seem like an arduous task, but doing so in advance of a transaction invariably pays off in the long term. Aggregating data from various systems and obtaining documents from numerous sources, including custodians, file vaults, asset managers, and outside counsel, in itself can be a challenge. Once data and files have been gathered from disparate sources, organizing this information into a succinct diligence package often appears a monumental undertaking. Mission Capital has solved for this challenge through our proprietary due diligence platform, Secondary Market Surveillance (“SMS”). The SMS platform provides permission-based portal access for all stakeholders in the loan evaluation process, streamlining due diligence by serving as a single repository for data management. SMS is constructed on relational database technology, which allows seamless underwriting and analysis of multi-loan asset relationships as well as loans with numerous collateral items and borrower / guarantors. Real time reporting is available through customized dashboards and data extracts. Banks, servicers, and funds that have leveraged SMS to perform due diligence in advance of a loan sale have uncovered real value through the process. By utilizing SMS, Mission Capital was able to determine that a significant portion of a client’s non-performing loan portfolio slated for sale was nearing the statute of limitations for initiating legal action. Asset managers and third party counsel accessed SMS reports to determine which loans were in question, and either initiated legal proceedings or structured a sale such that closing would occur prior to the end of the statutory period. SMS is equally useful for uncovering value with performing loans. When underwriting a re-performing loan pool in SMS it was discovered that the lender frequently took additional collateral as part of loan restructuring. Robust data tapes extracted from SMS reflected nearly 20% more collateral than had been reported in the client’s initial servicing tape. Another due diligence project involving a portfolio of seasoned performing loans revealed that the risk profile of the portfolio had declined since origination, allowing the lender to present a data tape featuring improved property occupancy and NOI relative to that which had been reflected in the servicing tape. Increasingly competitive markets favor good data and rapid transactions. Robust data tapes allow investors to quickly and accurately price portfolios, while arming sellers with rebuttals to potential concerns that arise during the course of investor due diligence. Utilizing a diligence platform could mean the difference between a smooth transaction which meets deadlines and achieves strong bids, and a drawn out, resource intensive trade or dreaded “no-trade”.

To learn more about Mission Capital’s Due Diligence services and SMS platform please click here.

Commercial

Consulting

Mission Monthly

MissionCapital View more articles

Source: New York Real Estate Journal

Shown (from left) are: Joe Runk, Mission Capital; Dwight Bostic, Mission Capital; Dennis Zenhle, Mission Global; and Trenton Stanley, Mission Global

Mission Capital Advisors, a national, diversified advisory and brokerage firm that specializes in arranging real estate capital, held its annual holiday bash at the Top of the Standard. Read the full story here. [Download PDF of story]

IN PICTURES: Mission Capital holds its holiday party

BY REW • DECEMBER 21, 2016

PDF File Download

Visit External Link

MissionCapital View more articles

Source: Commercial Observer

Mission Capital’s Steven Buchwald is named one of Commercial Observer’s 25 Debt Brokers Under 35.

MissionCapital View more articles

Source: American Banker

Mission Capital’s David Tobin comments for how analytics are to be most effective, banks need a plan on how to use them.

Why Small Banks Need Big Data

By Bryan Yurcan

September 6, 2016

Attention community bankers: it is time to dip your toes in the sea of data if you're not doing so already.
More than ever, banking is as much an information business as it is a financial business. With the vast amount of data banks have on customers and transactions and spending habits, those that aren't effectively mining this data risk falling into irrelevance.
For some small banks, investing in data analytics remains a tough call. Margins are already thin from the operating
environment. Tech budgets are consumed with bridging the gap between running legacy technology and offering digital products. Perhaps rightly so, they are afraid to sink money into a solution without fully understanding the problem they are trying to solve.
But it is a jump they must take in order to maintain their edge with customers.
"The reason [small banks] need to budget for this is because bigger banks are absolutely budgeting for this," said Karan Bhalla, managing director at IQR Consulting, which provides analytics and statistical modeling consulting services. "The rate of data being gathered now is huge and knowing things like how often customers log in to mobile banking … is redefining what loyalty is. If you don't understand that, then some other institution will and will take away customers.

Impactful Insights

Data analytics has become the Swiss Army knife of banking.
From customer marketing to regulatory compliance, from fraud detection to cybersecurity, data plays an integral role in banks' daily operations.
Take, for instance, compliance functions. In the past, banks typically had one group of people working on anti-money-laundering compliance and other groups working on different other types
of fraud. But banks now are seeking an enterprise-wide view of risk, and investing in analytics to get it.
"If you can pull all the data together, and use things like predictive analytics or machine learning to identify hotspots and where there might be potential trouble, you can fight fraud more effectively" said David Wallace, global financial services marketing manager at analytics technology provider SAS.
Indeed, analytics tools for compliance purposes, risk management and fraud prevention are among the most popular, Wallace said.
"When it comes to fighting fraud and financial crimes, and risk management, ultimately they are regulatory compliance activities, so it's all tied together," Wallace said. "All these things are prescribed by regulators, but banks need to do them to protect customers."
Wallace added that analytics can help banks identify and combat breaches and strengthen cybersecurity. Often, if there is a data breach it might take an institution "many months to figure out what's going on," he said. Deployed in a real-time streaming environment, advanced analytics can look inside a bank's network and find anomalies that previously may have gone undetected for lengthy periods of time, Wallace claim ed. For example, such analytics could spot systems interacting in atypical ways, such as a customer service system accessing a function that supervises the general ledger, he said.

Putting the 'Big' in Big Data

It is perhaps difficult for community bank executives to see how they can effectively use data analytics when they see what some of the larger banks are doing.
Consider the $251 billion-asset State Street's Global Exchange, a unit the bank created in 2010 dedicated to data and analytics. It has 700 employees.
As a custodian bank, State Street's clients are constantly asking for access to more data to help them operate more effectively, said Jessica Donohue, chief innovation officer of the division. Especially for regulatory compliance, and things like anti-money laundering and know-your- customer efforts, data analytics are essential.
"Analytics helps us provide our clients with a clean and clear view of risk across a complex portfolio," Donohue said. "A large asset owner, or a client with a complex banking book, needs to be able to look at risk holistically across their entire portfolio or book of business."
Those are services the bank wouldn't be able to provide effectively without analytics.
"Data does not start out being easy to use; it comes from a lot of different sources and the amount of it is very large. You need good analytics tools to bring that all together and serve up usable data."
Community banks might find comfort in knowing that Donohue thinks the industry has only scratched the surface of how it can improve through analytics tools designed to make sense of a seemingly infinite amount of data.
"I feel we are still at the beginning of this space," she said. "You're seeing a lot of the attention focus now on machine learning. The technologies that are being developed allow you to work with much larger databases in much less time. That wasn't possible even five years ago."
And the proliferation of analytics technology in recent years makes it easier for even small banks to start down this path, said Bhalla,
"Analytics tools are constantly being refined to mine more and more data in a more effective manner," he said. "For smaller institutions, it's much easier now to take that first step and invest in something that will give you basic intelligence. Then you can go from there and look at ROI and decide if you want to invest more, or hire quants or whatever. But there are many tools that run the gamut of varying cost, so it has to be a part of your budget, even a small part."

Don't Forget the Human Touch

Analytics tools need to be combined with expert human analysis to be most effective, said Todd
Hammond, head of commercial underwriting at Cleveland-based KeyBank.
When making credit decisions, generally the complexity and size of the loan will dictate how much the bank will rely on analytics.
"Analytics definitely plays a huge role, but reliance on it depends on the complexity of the deal," Hammond said. "Certain small-business loans can be largely data-driven. When you move up in the commitment spectrum, we'll still use analytics but there's also a human element, such as our interactions with the client and understanding of their standing in the market."
Human reasoning is also needed to make sure Key doesn't get in trouble for who it lends to. "We definitely have people looking at reputational risk, of who we can and can't lend to," such
as legal marijuana businesses, he said.
Still, Hammond said financial institutions will continue to do more with analytics as data becomes more large and complex.
"We want to know as much about our clients so we can sell them the right products," he said. "And it's also effective for not only helping us make credit decisions, but for monitoring the effectiveness of our lending strategy."

High Stakes

For analytics to be the most effective, banks need a plan for how to use them, said David Tobin, principal of Mission Capital Advisors.
"There's a huge amount of data that can be mined. You have to decide what you are mining for," he said. "The first thing banks really need to do is to need to establish a plan of action. Such as, 'what data from a regulatory requirement perspective do we need? What data could we mine for marketing purposes?' Then you go from there and rank all the opportunities and figure out how much you can do and how much it will cost for the right analytics tools."
This is particularly important for smaller banks that likely do not have large technology budgets. But even if the bank determines it can only spend a small amount, that's better than doing nothing.
"The pitfalls of not investing in your future as a bank far outweigh any benefits you might get in money saved from not investing," Tobin said.

PDF File 145.18 KB Download

MissionCapital View more articles

Source: Globe Street

Mission Capital’s David Tobin comments on the use of big data in the industry.

Big Data Alone Is Not Enough

AUGUST 19, 2016 | BY CARRIE ROSSENFELD

IRVINE, CA—Big data is not, by itself, inherently useful; information is only as valuable as its fusion with industry experience, Ten-X’s Sheridan Hitchens tells GlobeSt.com in this EXCLUSIVE roundtable about big data and the real estate industry.

IRVINE, CA—Big data is not, by itself, inherently useful; information is only as valuable as its fusion with industry experience, Ten-X’s VP of data products Sheridan Hitchens tells GlobeSt.com. We spoke
exclusively with Hitchens, along with Morgan Stewart, an attorney with Manly, Stewart &

Finaldi; Elliot Vermes, CEO of ResiModel; Joe Derhake, CEO of Partner Engineering & Science; Norm Miller, Hahn Chair of real estate finance at

the Burnham-Moores Center for

Real Estate, within the School of Business at the University of San Diego; and David Tobin,

founder of Mission Capital Advisors, about their overall assessment of big data in the real estate industry. Stay tuned for a more in-depth feature on the subject in the July/August issue of Real Estate Forum.

GlobeSt.com: What should our readers know about big data and real estate?

Hitchens: Big data is not, by itself, inherently useful. Information is only as valuable as its fusion

with industry experience. It’s not the data itself that provides value, but the application of that
data. In order to find actionable statistics, you need to analyze and curate specific insights from oftentimes oversized data sets.
At Ten-X, as an online marketplace, we’ve been able to utilize data to provide global-marketing reach, allowing for more tailored and targeted marketing on specific assets. The ability to appeal to a subset of buyers and sellers that, according to the data, may be more interested in a
specific asset helps us to create a more efficient marketplace for both buyers and sellers. In conjunction with a local investment broker, we ensure that potential buyers who are around the corner and around the world are covered.
Due to our position at point-of-sale, as well as our partnership with Google and leading industry data providers, we will be able to provide customers with real-time, actionable data. The value
of any data changes with time—a lease comp from three years ago probably isn’t very helpful
today. So if we can provide relevant, verified data at the exact moment someone is looking to transact, we will remove risk and add liquidity to the market.
Stewart: The attack on Essex serves as a warning to all real estate companies that collect and store information on behalf of renters, tenants, vendors, consultants and buyers. Multifamily property owners, management firms and related interests, however, are at particular risk due to the high-level of personal information, including banking, social security, driver’s license numbers and employment, collected on consumers during the rental process.
Property managers should also be aware that they fall under both FTC rules. Since property
managers provide a financial service for landlords they fall into the category of financial institution under the Safeguard Rule, and because they use credit reports to screen tenants, they are also subject to the Disposal Rule.

Vermes: One thing that goes hand-in-hand with big data is data visualization—charts and other graphic tools that make it much easier to grasp where things stand and when trends are in motion. Whether you’re analyzing rent revenues at your multifamily property or energy

expenses at a commercial building, the human mind is much more effective at understanding
information in a visual format rather than solely comprising a list of numbers.
In order to be able to analyze and visualize data, it first has to be in a usable format. While you may be bombarded by massive amounts of data, it is often useless without an enormous amount of time-consuming manual conversion from a yellow pad (or other non-digital
equivalents) into a standardized format. As compared with most sophisticated trillion-dollar industries, real estate has a surprisingly high number of “yellow pads.” In the multifamily space, people frequently receive rent-roll data in PDF or other difficult-to-analyze and database
formats. As a result, the data is often not analyzed as comprehensively as it could be, and those
who do analyze it face the arduous task of first getting the data in their own Excel templates prior to being able to analyze it. One of ResiModel’s most popular features is our data-capturing capability, which extracts the data out of the property management reports that you receive in PDF and Excel formats and converts it to a format that can instantly be analyzed and mined. Digitizing and standardizing information is the prerequisite to big data.

Derhake: It’s important to realize that big data creates a competitive advantage not only in terms of CRE investment and lending, but also for better-managed and -operated—and therefore more valuable–assets. Collecting data from smart building systems, tenant smart- phone usage, tenant management systems, etc., to gain a better understanding of how buildings are used allows property owners and operators to improve facility

management and capital planning. For example, building energy efficiency can be improved by adjusting building systems to more efficiently meet user demand. Better-operated buildings yield better returns, and in in this way big data has the potential to increase significantly the marketability and value of commercial real estate assets.

Miller: Technological innovation and the use of new data sources is not as easy as monitoring Google searches for your office building or other social media, although those can help manage branding. It is an experimental and labor-intensive process, which is why it will take some time

to fully implement and utilize all the new data exploding from connecting everything. The result, however, will be safer, more-efficient and better-managed real estate; faster and more efficient valuation; and speedier due diligence. Don’t expect this to happen tomorrow, yet it is very exciting to see what is possible, and that is what we are learning now.

Tobin: Extensive property-level information is readily available online today, particularly in the real estate sector. While there are many benefits to this “open-source” information, some find it disconcerting that their mortgage documents and personal information relating to their home are available online. This proliferation of data has a distinctly positive impact on real estate, bringing more lenders and capital and lower interest rates to the space, because open information

mitigates risk for lenders. I am personally a big advocate of technology and information and truly believe that the benefits of big data outweigh many, but not all, concerns.

PDF File 229.37 KB Download

MissionCapital View more articles