The London Interbank Offered Rate (LIBOR) is a benchmark interest rate that historically represented an average estimate of interest rates that the major global banks lent to one another on a short-term basis. Although originated in 1969 and currently one of the most frequently used interest rate benchmarks in lending, formal data collection did not occur until the mid 1980’s. It is estimated that approximately $250 trillion in LIBOR-benchmarked product is outstanding.
In 2012, financial regulators (currently the Financial Conduct Authority (FCA)) began requiring that reporting for LIBOR be based on actual transactions rather than estimates. Because of the new reporting requirement, several banks removed themselves from the process, resulting in declining participation. Additionally, the reporting requirement came at a time when unsecured borrowing was declining as banks began favoring overnight secured borrowing instead. With the decline in participation and in the reliability of the data being provided, experts began to question the validity of LIBOR as a benchmark. In fact, because of a growing sense of unreliability from market participants, the FCA decided that starting at the end of 2021 they would no longer require participating banks to continue to report nor would they publish the rate publicly, thus effectively ending LIBOR as a viable reference rate beyond 2021.
Following this announcement, consensus among lenders was that the lack of published rate could be problematic. Market participants are now contingency planning should LIBOR cease to exist. Appropriate plans should include the following: (i) a full review of loan portfolio to determine potential risk exposure (loans that mature after 2021), (ii) review of loan documentation, particularly interest-rate fall back language to determine potential risk exposure (unclear or inconsistent language, silent on fallback, etc.), (iii) after review, modify or sell loans that may have deficient fall back language, (iv) implement/review protocols to ensure they will be followed correctly, including the proper servicing of loans should fallback language be required to go into effect, (v) review preparedness of servicing systems to correctly capture modifications to affected loans in the event of a transition and (vi) consider originating new product using an alternative risk free rate.
When modifying existing loans or originate new ones, lenders should transition to alternative risk-free rates such as the Secured Overnight Financing Rate (SOFR), which is currently backed by the Alternative Reference Rate Committee (ARRC). SOFR, which was established in April 2018 and currently monitored by the Federal Reserve Bank of New York, is one of the most popular alternative rates. The biggest difference between SOFR and LIBOR is that SOFR is entirely based on actual secured transactions that have occurred. Because of this, it has predominantly been a slightly lower rate than LIBOR over their corresponding lifetimes as displayed in the table below:
While it’s impossible to predict where LIBOR rates will be relative to any alternative rates when a potential hard stoppage of the publication of LIBOR occurs, at various times LIBOR and SOFR have been the same, or SOFR has been higher than LIBOR. This uncertainty may make modifications with borrowers a challenging proposition. Therefore, as stated above, lenders should assess the viability of selling off loans with deficient fall back language (or loans to borrowers that may be unresponsive) to mitigate portfolio risk in advance of a transition. Strong secondary market pricing from financial institutions that are equipped to navigate deficient rate language may result in a less costly outcome than internal resolution.
This series profiles men and women in commercial real estate who have profoundly transformed our neighborhoods and reshaped our cities, businesses and lifestyles.
David Tobin, an entrepreneur and aviation lover who still gets irked by the deals he didn’t do, co-founded Mission Capital in 2002. The real estate capital markets company, which is HQ’d in New York and has offices in California, Texas and Florida, has advised financial institutions and investors on more than $75B of loan sale and financing transactions plus more than $14B of Fannie Mae and Freddie Mac transactions.
Tobin also founded EquityMultiple, worked in brokerage and did a stint with Dime Bancorp — while working in asset resolution there, he had a role in the liquidation of the $1.2B nonperforming single-family loan and REO portfolio.
Courtesy of David Tobin Mission Capital Advisors principal David Tobin and his son Lorenzo bookend Jean Jacques Peken Josue in Haiti. Lorenzo does a service project each year for Clean Hands for Haiti.
Outside of work, he is a lecturer on whole loan valuation and mortgage trading at New York University’s Real Estate School, is a member of the Real Estate Advisory Board of the Whitman School of Management at his alma mater, Syracuse University, and is a board member of the charity Clean Hands for Haiti. He keeps busy raising his two boys and, as an English major, feeling distress over grammatical errors he receives in emails.
Bisnow: How do you describe your job to people who are not in the industry?
David Tobin: In its most simple form, Mission brokers portfolios of debt, raises capital for commercial real estate projects and provides trade support for massive single-family loan portfolio transactions. Most people outside of the finance business don’t understand what we do, so I describe it in terms of my mother’s home mortgage. Every time she receives a notice from her mortgage company to send her mortgage payment somewhere else, that means that someone has sold or brokered her loan. I tell her that her home mortgage is just like a bond, which is a loan, and bonds are bought and sold.
Bisnow: If you weren’t in commercial real estate, what would you do?
Tobin: I have always been fascinated by the commercial aviation business and companies like Boeing, Airbus, Embraer, Bombardier and the like. One of my favorite authors when I was younger was Michael Crichton, and his book “Airframe” was a really interesting description of the business. It’s all in the wing design, apparently. I also find the energy business really interesting, from renewables to oil to the geopolitical issues. I have spent a lot of time reading about PDVSA, the national energy company of Venezuela, and the terrible value destruction of its franchise. Mission has brokered many debt trades of aviation-, equipment- or property-backed loans, and in a prior life, I sold hundreds of excess properties for Chevron, Exxon, Getty, Sunoco and Texaco.
Bisnow: What is the worst job you ever had?
Tobin: Aside from paper routes, my first job at 16 was working on the floor of the New York Stock Exchange as a runner during the summer of 1984. It was amazing. However the next summer, I worked for a town in Westchester as a laborer. I did a rotation, sort of like a rotation in a summer internship at Goldman … but not. We did sidewalk replacement, gardening work and garbage pickup … so for two or three weeks, I was, in fact, a garbage man. That was a tough and disgusting job. I always tell my son to be respectful to the NYC Sanitation folks because they don’t have it easy.
Courtesy of David Tobin Mission Capital Advisors principal David Tobin skiing in British Columbia
Bisnow: What was your first big deal?
Tobin: There were two first big deals. My first financing transaction was to refinance a discounted payoff of a $47M development bond secured by the Newark Airport Hilton. I met the owner in a real estate class at New York University taught by Phil Pilevsky. My first really large loan sale transaction was during the Russia Crisis in 1998 and I advised Daiwa on the sale of their entire bridge loan book of business. I think it was $250M and at the time, it seemed like a monster. In retrospect, those transactions were small but in the ’90s, $100M was a big deal.
Bisnow: What deal do you consider to be your biggest failure?
Tobin: There are several financing transactions that I have been involved in that died for one reason or another, and every time I drive by those properties, they irk me. The St. Moritz Hotel, which Ian Schrager was buying and for which I was working on the financing team, was one of them. Watching the creative process of Schrager was incredible and memorializing it in a financing package was a really interesting assignment. First Boston had provided a guaranteed take-out, and we were tasked with arranging a construction loan. We brought in a British bank who was ready to go and then First Boston’s lending platform fell apart in 1998 and so did our deal. I also went into contract on my loft building in SoHo right after 9/11 at a ridiculously low basis. I cut a deal to deed two apartments to artist-in-residence tenants living above and below me and then went out to arrange financing. It was a tiny amount in retrospect, but it simply was not available. I lost a portion of my deposit to get out of the transaction and it aggravates me to this day.
Bisnow: If you could change one thing about the commercial real estate industry, what would it be?
Tobin: I wouldn’t change a thing. It’s a perfectly imperfect illiquid business which has maintained its margins, opportunities and approachability through multiple technological booms. Each time a tech wave comes along, the nattering nabobs of negativity say they are going to make it perfectly liquid, tokenize space and buildings and trade it on a screen and it never happens.
Bisnow: What is your biggest pet peeve?
Tobin: People who write “principle balance” instead of “principal balance”, and in a broader context, as an English literature major, bad business writing and poorly written emails.
Bisnow: Who is your greatest mentor?
Tobin: My dad and then my wife. I used to go to the office with my dad on Saturdays when I was a kid. He was an attorney at Skadden and then for a reinsurance company. He taught me my work ethic. My wife was a very successful equity portfolio manager for many years and is the person whose business advice and acumen I most respect now. She is my biggest champion and motivator now (and a great mom).
Bisnow: What is the best and worst professional advice you’ve ever gotten?
Tobin: Best: Don’t focus on being right, focus on getting what you want. Second Best (I think it’s a Sam Walton quote): Some people spend 100% of their time dreaming and never get any work done. Some people spend 100% of their time working and never achieve any of their dreams. I spend 10% of my time dreaming and then 90% of my time working to achieve those dreams. Worst: Life is a marathon. I disagree … life is a series of sprints.
Courtesy of David Tobin Mission Capital co-founder David Tobin and his wife, Emily
Bisnow: What is your greatest extravagance?
Tobin: Our New York office is pretty deluxe, in a minimalist industrial sort of way. Its 35 floors above Madison Square Park with a 360-degree view. We found it, designed it and purpose built it. I find it motivating to work here. I think others do as well.
Bisnow: What is your favorite restaurant in the world?
Tobin: It’s a three-way tie. Odeon, Raoul’s and Balthazar. My wife and I took out Balthazar for an entire Saturday afternoon for our wedding reception. Angry Europeans were banging on the windows trying to get in.
Bisnow: If you could sit down with President Donald Trump, what would you say?
Tobin: I’m generally speechless on the “noise”, but as it relates to business, perhaps, “Continue to be the change agent you have been with corporate tax reform and necessary deregulation but don’t ignore those who better understand related economic issues, like trade and maintaining alliances. Good managers are good delegators.”
Bisnow: What’s the biggest risk you have ever taken?
Tobin: Starting Mission Capital … and going heli-skiing.
Bisnow: What is your favorite place to visit in your hometown?
Tobin: Edo Plaza Hibachi and Four Corners Pizza.
Bisnow: What keeps you up at night?
Tobin: Many things … finding our next opportunity, competitors, parenting, the uncertain state of the world.
Bisnow: Outside of your work, what are you most passionate about?
Tobin: My family, our time together and raising our two boys … and skiing … and occasionally sailing.
Mission Capital Advisors announced that it represented Entrada Partners in the sale and financing of a 484,369-square-foot industrial portfolio in San Antonio, Texas. The Mission Capital team of Will Sledge and Kyle Kaminski arranged the sale on behalf of both Entrada and the seller, a CMBS special servicer. The Mission Capital Debt and Equity Finance team of Alex Draganiuk and Lexington Henn arranged the non-recourse acquisition loan.
The portfolio comprises four properties, three of which are located just inside I-410 in the northwest of the city, and the fourth just minutes away in Leon Valley. The portfolio’s total occupancy is 88 percent. The properties include:
• 7402-7648 Reindeer Trail, a five-building, 251,125-square-foot distribution property
• 1700 Grandstand Drive, a three-building property, which features 59,863 square feet of light industrial / flex space
• 7042 Alamo Downs Parkway, a 27,987-square-foot light industrial / flex property
• 5405 Bandera Road, a 145,394-square-foot distribution center just over the San Antonio border in Leon Valley
“Entrada was purchasing this property from a CMBS special servicer, and we were presented with a very limited timeframe in which to close the acquisition financing,” said Draganiuk. “With four properties serving as collateral and a fair amount of required maintenance, this was a complex deal for lenders to underwrite, but we were able to close a non-recourse loan with a regional bank.”
Added Draganiuk: “By canvassing the capital markets for the best offers, we were able to secure very strong terms for Entrada. The mortgage was structured interest-only for the first several years, and also featured release prices for the different properties, giving Entrada significant flexibility to execute its business plan.”
For Entrada, the four properties were attractive because of their significant upside as well as their geographic location. Headquartered in Los Angeles, the firm has a regional office and significant holdings in San Antonio, and is ideally positioned to unlock the portfolio’s full value.
“The investment represented a fantastic opportunity to expand our presence in the San Antonio market,” said Reuben Berman, founder and partner of Entrada. “We believe San Antonio provides a great investment environment due to its job and population growth, diversified economy, abundant work force and affordable cost of living. San Antonio is the 24th largest MSA in the United States, but has the 3rd highest population growth rate (15.5% between 2010 and 2017). This growth is naturally creating more demand for real estate to live and work in.”
By Timea Matyas | Commercial Property Executive
Entrada Partners Acquires San Antonio Industrial Portfolio
The four properties have a combined 484,369 square feet and an 88 percent occupancy rate. All the assets are close to the Interstate 410 loop.
Entrada Partners has acquired a four-property, 484,369-square-foot industrial portfolio in San Antonio, Texas. Mission Capital Advisors arranged both the sale and the financing of the assets. The portfolio’s total occupancy is 88 percent.
Three of the four assets are located within the Interstate 410 loop, close to the interstate in the northwest area of the city, and all are within 4 miles of Ingram Park Mall. The properties are:
• 7402-7648 Reindeer Trail, a five-building, 251,125-square-foot distribution facility
• 1700 Grandstand Drive, a three-building property which includes 59,863 square feet of light industrial/flex space
• 7042 Alamo Downs Parkway, a 27,987-square-foot light industrial/flex property
• 5405 Bandera Road, a 145,394-square-foot distribution center
Mission Capital Advisors’ Will Sledge and Kyle Kaminski of the asset sales team arranged the transaction on behalf of the seller. Alex Draganiuk and Lexington Henn of the company’s capital debt and equity finance team arranged the non-recourse acquisition loan on behalf of the buyer. In late 2018, the company also arranged a $13 million floating-rate financing for a Chicago retail asset.
“The mortgage was structured interest-only for the first several years, and also featured release prices for the different properties, giving Entrada significant flexibility to execute its business plan,” Draganiuk said in a prepared statement.
Property is in the final stages of significant capital improvements campaign.
MIAMI (Jan. 27, 2019) — Mission Capital Advisors announced that its Debt and Equity Finance Group has arranged a $26-million, non-recourse bridge loan for 44 West Flagler Street, a 164,000-square-foot office building in downtown Miami, Florida. The Mission Capital team of Jeff Granowitz, Ari Hirt and Daniel Azizi represented property owner Brickman in securing the floating-rate financing from a mortgage REIT. The transaction closed on December 20. After acquiring the property in 2016, Brickman implemented significant capital improvements to the 26-story building, including large-scale renovations to the building’s entranceway, lobby and building systems, and the addition of tenant amenities, including a conference facility and a fitness center. With renovations now substantially complete, the building has been transformed into one of the most attractive commercial properties in its class.
“Brickman is well-regarded across the country as a strategic investor with the ability to add value to existing office assets,” said Hirt. “There is appetite in the capital markets for transitional assets with strong sponsorship, and Brickman’s stellar reputation across the industry was instrumental in our ability to attract lender interest.” With its location in downtown Miami, the property is conveniently located near various mass transit options, and is within walking distance of MBTA, Metromover and Brightline Railway stops. The property is also less than one mile from Miami World Center, an under-construction mega-development which will include 300,000 square feet of retail space, 500,000 square feet of office space, several acres of open space, and a Marriott Marquis World Convention Center Hotel with 1,800 rooms and 600,000 square foot of convention space.
“Brickman has done an incredible job of refashioning this office building into a best-in-class commercial facility, and the success of the capital improvements campaign was a key part of the successful execution of this deal,” added Azizi. “While we were dealing with a compressed timeframe to ensure that the deal closed by year-end, we cast our net to a wide range of lenders, and ultimately had both banks and non-bank lenders bidding on it. The interest we generated translated into several very strong offers, and we were able to lock in this floating-rate deal with strong leverage and extremely competitive pricing.” Brickman is a leading New York-based real investor and operator that has owned, operated, leased and asset-managed more than 8.6 million square feet of office property. The firm’s current office portfolio of 2.3 million square feet includes properties in eight markets across the United States.
Leading developer acquires 1.26-acre property with plans to develop
67-unit luxury condominium property
HOUSTON (Jan. 3, 2019) — Mission Capital Advisors announced that its Debt and Equity Finance Group has arranged a $7.3-million non-recourse land loan for the acquisition of 5656 San Felipe Street, a 1.26-acre development site in Houston. The borrower, Houston-based Pelican Builders, is working to finalize plans for an as-of-right, 17-story condominium project, which will include 67 luxury residences and 191 parking spaces. The Mission Capital team of Jason Parker, Steven Buchwald and Alex Draganiuk arranged the financing from a national real estate finance company.
Located at the nexus of the highly desirable Galleria/Uptown and Tanglewood neighborhoods, the 322,708-square-foot property will provide the area with much-needed luxury residential product. Current plans for the development call for 67 well-appointed residences with on-site amenities that include a pool deck, resident lounge, state-of-the-art fitness center and a dog park. The project is expected to break ground in October 2019.
“Pelican is one of most seasoned condo developers in the region, and we received a lot of interest from capital providers interested in providing them with the land loan that will pave the way for the condo development,” said Parker. “With the property’s strong location and the unmet demand for luxury condos in this prime area of Houston, we were able to structure favorable financing with a national real estate finance company.”
With its central location near leading commercial and residential neighborhoods, the development will offer residents easy access to a wide range of shopping and cultural / entertainment options, including Whole Foods, iPic Theater and the Houston Country Club. It is within 1.5 miles of The Galleria, the fourth largest retail complex in the country, with high-end tenants including Saks Fifth Avenue, Nordstrom and Neiman Marcus.
Houston-based Pelican Builders has been active in residential development for more than 40 years. Led by Robert F. Bland, Robert F. Bland, Jr. and Derek Darnell, the company’s portfolio includes more than 2,000 residences, spread across high-rise and mid-rise buildings, townhomes and apartment projects.
About Mission Capital Advisors
Founded in 2002, Mission Capital Advisors, LLC is a leading national, diversified real estate capital markets solutions firm with offices in New York City, Florida, Texas, California, and Alabama. The firm delivers value to its clients through an integrated platform of advisory and transaction management services across debt, mezzanine, and JV equity placement; commercial and residential loan sales; and loan portfolio due diligence and valuation. Mission Capital Advisors is extremely active in arranging financing for office, industrial, multifamily, retail and self-storage properties across the country. Since its inception, Mission Capital has advised a variety of leading financial institutions and real estate investors on more than $65 billion of financing and loan sale transactions, as well as in excess of $14 billion of Fannie Mae and Freddie Mac transactions, positioning the firm strongly to provide unmatched loan portfolio valuation services for both commercial and residential assets. Mission Capital’s seasoned team of industry-leading professionals is committed to achieving clients’ business objectives while maintaining the highest levels of integrity and trust. For more information, visit www.www.missioncap.com.
Well-situated within Amarillo, Texas, existing hotel will be converted into the first dual-branded Marriott and Starwood property
AMARILLO, Texas (Jan., 2019) — Mission Capital Advisors today announced that its Debt and Equity Finance group has arranged a non-recourse, floating-rate loan for the acquisition and renovation of a 229-key hospitality property at 1911 East I-40 in Amarillo, Texas. The existing property, which currently operates as an unflagged hotel, will receive extensive upgrades and be re-created as a dual-branded hospitality property comprising a 106-key Marriott Fairfield Inn & Suites and a 123-key Four Points by Sheraton.
The property renovations will convert the existing hotel into the market’s leading lodging facility, replete with amenities including an outdoor pool, patio deck with grills and a fire pit, and a 24-hour fitness center. Property improvements will include removing the existing atrium, giving a complete facelift to the property’s exterior and large-scale improvements to each guest room.
The Mission Capital team of Raymond Salameh, Ari Hirt, Steven Buchwald, Alex Draganiuk and Jamie Matheny represented Ram Hotels in securing the three-year loan from Stonehill Strategic Capital. In Stonehill, Mission Capital identified a hospitality lender specializing in value-add deals, which was also attracted to the sponsor’s local market expertise. With the lender drawn to the deal’s strong debt yield, Mission Capital was able to structure very strong terms, including 80-percent leverage.
The largest city in the Texas Panhandle, Amarillo is a major transportation hub with the lowest unemployment rate in Texas and a strong economy that is projected to grow in the years ahead. The city also features a significant amount of tourism, with visitors from Texas and beyond flocking to Amarillo for the Tri-State Fair & Rodeo and other cultural events.
The Project will be the first dual-brand conversion between Marriott- and Starwood-branded hotels. With the property’s strong location off of I-40, both hotels are poised to benefit from their proximity to Amarillo’s downtown business district and Amarillo International Airport.
Founded 34 years ago, Ram Hotels is an experienced hotel developer and operator. Since its inception, Ram Hotels has built eight hotels totaling 700 keys throughout Texas, including more than 500 keys in the Amarillo market. Ram currently owns and manages nine hotels totaling 1,500 hotel rooms.
About Mission Capital Advisors
Founded in 2002, Mission Capital Advisors, LLC is a leading national, diversified real estate capital markets solutions firm with offices in New York, Florida, Texas, California, and Alabama. The firm delivers value to its clients through an integrated platform of advisory and transaction management services across commercial and residential loan sales; debt, mezzanine and JV equity placement; and loan portfolio valuation. Since its inception, Mission Capital has advised a variety of leading financial institutions and real estate investors on more than $65 billion of loan sale and financing transactions, as well as in excess of $14 billion of Fannie Mae and Freddie Mac transactions, positioning the firm strongly to provide unmatched loan portfolio valuation services for both commercial and residential assets. Mission Capital’s seasoned team of industry-leading professionals is committed to achieving clients’ business objectives while maintaining the highest levels of integrity and trust. For more information, visit www.www.missioncap.com.
First-Ever Marriott, Sheraton Hotel Takes Shape in TX
January 14, 2019
The dual-branded hotel in Amarillo, Texas, will be converted from an existing 229-key property. Mission Capital arranged financing for the project on behalf of developer Ram Hotels.
Ram Hotels has secured acquisition and renovation financing to convert an existing hotel in Amarillo, Texas, into the first-ever dual-branded Marriott and Starwood property. The developer will transform the existing 229-key property into a 106-key Marriott Fairfield Inn & Suites and a 123-key Four Points by Sheraton.
Located at 1911 E. Interstate 40, the site is in close proximity to Amarillo’s downtown business district and Amarillo International Airport. The city is the largest in the Texas Panhandle and draws tourists for its events that include the Tri-State Fair & Rodeo.
Amenities at the converted property will feature a 24-hour fitness center, an outdoor pool, patio deck with grills and a fire pit. Additional improvements will include removing the existing atrium, large-scale upgrades to guestrooms and a complete facelift to the property’s facade.
Mission Capital Arranges Acquisition Financing for 229-Room Hotel in Amarillo
January 14, 2019
AMARILLO, TEXAS — Mission Capital Advisors has arranged an undisclosed amount of financing for the acquisition and renovation of a 229-room hotel in Amarillo. The new ownership will rebrand the property as a dual-branded asset consisting of a 106-room Marriot Fairfield Inn & Suites and a 123-room Four Points by Sheraton. Renovations will deliver upgraded amenity spaces, as well as a facelift to the property’s exterior and each guestroom. Raymond Salameh, Ari Hirt, Steven Buchwald, Alex Draganiuk and Jamie Matheny of Mission Capital arranged the financing through Stonehill Strategic Capital on behalf of the borrower, Ram Hotels.
Mission Capital Advisors’ debt and equity finance group has arranged $13 million of non-recourse, floating-rate financing on behalf of an affiliate of the Sterling Organization. The loan recapitalizes 110 E. Pearson St., a 9,000-square-foot vacant retail property in the heart of the Magnificent Mile.
Jonathan More, Alex Draganiuk, Lexington Henn and Justin Hunt of Mission Capital secured the loan from Thorofare Capital. The loan will be used to capitalize the property, lease up the available space and implement significant capital improvements.
Thorofare’s willingness to provide financing stemmed from the firm’s recognition of the sponsor’s strong track record in value-add retail and the property’s desirable location, said Felix Gutnikov, the firm’s head of origination.
“We were able to offer Sterling Organization a structured financing solution for a well-located retail asset within one of the most recognized shopping districts in the country,” he said. Mission and Thorofare have completed several deals together.
Sterling lands $13M refi for retail space at Near North Side tower
The Thorofare Capital loan will help Sterling renovate and lease the former Bar Toma space
November 9, 2018
The Sterling Organization landed a $13 million refinancing on the retail space in a tower just off Michigan Avenue on the Near North Side.
The Palm Beach-based equity fund earlier this year bought the 9,000-square-foot retail portion at the base of the 57-story tower at 110 East Pearson Street for $15.2 million. The space is best known as the former home of Bar Toma, a restaurant that opened in 2011 and shuttered in January 2017.
Thorofare Capital supplied the non-recourse, floating-rate loan, which was arranged by Mission Capital Advisors’ Jonathan More, Alex Draganiuk, Lexington Henn, and Justin Hunt. Part of the proceeds will be used to find tenants and make “significant” capital improvements.
Now vacant, the property consists of 7,300 square feet on the ground floor and 1,800 square feet on the mezzanine level.
Sterling paid $1,616 per square foot for the space at the base of the tower, which was built in the 1970s.
It was the company’s second Downtown retail deal in a few months, following April’s $8.1 million purchase of the 87,100-square-foot office building at 219 South State Street, which also includes street retail currently occupied by three Foot Locker-brand shoe stores. It took out an $18.3 million loan from Los Angeles-based Karlin Real Estate to finance that purchase and planned renovations of the building.
In September, Sterling paid $20 million to acquire Hillside Town Center, a nearly 165,000-square-foot retail park in west suburban Hillside. It also bought the 101,000-square-foot Prairie Market shopping center in far west suburban Oswego, but would not disclose the purchase price.
Mission Capital Arranges $13M Loan for ‘Magnificent Mile’ Retail Property
November 14, 2018
CHICAGO, IL — Mission Capital Advisors‘ Debt and Equity Finance Group has arranged $13 million of non-recourse, floating-rate financing on behalf of an affiliate of the Sterling Organization to recapitalize 110 East Pearson Street, a 9,000-square-foot vacant retail property in the heart of the Magnificent Mile section of Chicago.
Jonathan More, Alex Draganiuk, Lexington Henn, and Justin Hunt of the Mission Capital team secured the loan from Thorofare Capital, a Los Angeles-based national commercial real estate loan origination and servicing company. The loan features a competitive leverage level with flexibility for future capital expense funding and leasing terms and will be used to capitalize the property, lease up the available space and implement significant capital improvements.
Currently vacant, the property consists of 7,303 square feet of ground-floor retail space and 1,789 square feet of retail space on the mezzanine level. For Mission Capital Advisors, the transaction reflects the firm’s ability to find appropriate capital providers for innovative developers across the country.
Thorofare’s willingness to provide financing stemmed from the firm’s recognition of the sponsor’s strong track record in value-add retail, as well the property’s desirable location, according to Felix Gutnikov, Thorofare’s head of origination.
“As a trusted lender, Thorofare has enjoyed a very positive relationship with Mission Capital Advisors and has completed several transactions with the firm and its clients,” Gutnikov says. “We were able to offer Sterling Organization a structured financing solution for a well-located retail asset within one of the most recognized shopping districts in the country.”
The property is ideally situated in the heart of Chicago’s Magnificent Mile, the city’s largest and most vibrant shopping district, which has approximately $1.9 billion of annual retail sales. Over the past year, the district has seen retail vacancies decline, while rents have grown by nearly seven percent, further underscoring the property’s latent potential.
Mission Capital Arranges $13M Loan for Chicago Retail Asset
The owner, an affiliate of the Sterling Organization, will use the financing to recapitalize the vacant property, which is part of the Magnificent Mile.
November 16, 2018
Mission Capital Advisors has arranged a $13 million floating-rate financing for a retail property is part of the Magnificent Mile, Chicago’s most vibrant shopping district. The owner, an affiliate of the Sterling Organization, will use the loan to recapitalize the vacant asset. Jonathan More, Alex Draganiuk, Lexington Henn and Justin Hunt of Mission Capital secured the floating-rate financing from Thorofare Capital.
The property is located at 110 E. Pearson St. and used to host the Bar Toma, which closed in 2017. It consists of 7,303 square feet of retail space on the ground floor and 1,789 square feet on the mezzanine level. According to Crain’s Chicago, the Sterling Organization fund bought the asset in the spring of 2018 for $15.1 million.
According to Mission Capital, vacancies in the Magnificent Mile have decreased during the last quarters, while rents have grown by approximately 7 percent, which highlights the property’s potential.
Cross Collateralization of Two Properties Situated Across the Street from Each Other Exemplifies Firm’s Ability to Complete Unique Deals
WINSTON-SALEM, N.C. — Mission Capital Advisors announced that its Debt and Equity Finance Group has arranged $19.25 in non-recourse, floating-rate financing for the acquisition of a portfolio of extended-stay hotels in Winston-Salem, North Carolina.
The Mission Capital team of Beau Williams, Steven Buchwald, and Lexington Henn represented the sponsor, a partnership of Milestone Companies and Woodmont Lodging, in arranging acquisition financing for the two properties that comprise the portfolio – a 91-key Home2 Suites by Hilton and a 95-key SpringHill Suites by Marriott. The properties are located at 1010 Marriott Crossing Way and 1015 Marriott Crossing Way, respectively.
“Despite the fact that the Home2 Suites just recently opened and had limited operating history, we were able to create significant competition among our network of lenders, who were attracted to the strength of the sponsor and the projected debt yield,” said Williams. “The hotels’ close proximity to one another will enable the sponsor to limit operating expenses, while the two properties will benefit from being part of the Marriott and Hilton reservations systems. With these factors at play, we received strong interest from capital providers and closed a very strong deal for the borrower.”
The hotels are situated just off of I-40, seven miles from downtown Winston-Salem and Wake Forest University, and under 30 miles from the Piedmont Triad International Airport. The SpringHill Suites Winston-Salem, which opened in 2009, underwent substantial property improvements in 2017, including a full renovation of its guestrooms, lobby, furniture and fixtures, and a build-out of its ground-floor breakfast area.
Completed in February 2018, the Home2 Suites Winston-Salem is among the newest hotels from Hilton Worldwide, the second-largest hospitality company in the world. As a result, it will require few capital expenditures, while providing significant upside during its ramp up. The financing is the second loan that Mission Capital has secured on a Home2 Suites branded property this year. In August, the firm arranged a $19 million CMBS loan for the refinance of the Home2 Suites by Hilton in downtown Greenville, South Carolina.
“If the performance of the Home2 Suites in Greeneville and other locales is any indication of the success that the brand will experience in Winston-Salem, we anticipate a quick stabilization and high NOI margin. The resultant additional cash flow will be added to the already-robust net operating income that’s currently being generated by SpringHill Suites,” Williams said.
The portfolio will be managed by Milestone Hospitality Management, LLC, which is controlled by the principals of Milestone, a fully integrated hospitality investment and development firm headquartered in Baltimore, Maryland. Milestone’s executive leadership team has invested in, managed, and developed over 90 hotels across 25 states over the course of their respective careers. Asset management services will be provided by Woodmont Lodging, which has vast experience across the lodging industry.
About Mission Capital Advisors
Founded in 2002, Mission Capital Advisors, LLC is a leading national, diversified real estate capital markets solutions firm with offices in New York, Florida, Texas, California and Alabama. The firm delivers value to its clients through an integrated platform of advisory and transaction management services across commercial and residential loan sales; debt, mezzanine and JV equity placement; and loan portfolio valuation. Since its inception, Mission Capital has advised a variety of leading financial institutions and real estate investors on more than $65 billion of loan sale and financing transactions, as well as in excess of $14 billion of Fannie Mae and Freddie Mac transactions, positioning the firm strongly to provide unmatched loan portfolio valuation services for both commercial and residential assets. Mission Capital’s seasoned team of industry-leading professionals is committed to achieving clients’ business objectives while maintaining the highest levels of integrity and trust. For more information, visit www.www.missioncap.com.
Developer retires construction loan, inks creative interim financing at attractive rate
TAMPA, Fla. – Mission Capital Advisors announced that its Debt and Equity Finance team has structured a creative $53-million non-recourse ramp loan for The Godfrey Hotel and Cabanas Tampa, a newly renovated, 276-key, waterfront hotel located at 7700 West Courtney Campbell Causeway in Tampa, Florida.
The Mission Capital team of Jordan Ray, Ari Hirt, Alex Draganiuk and Justin Hunt represented an affiliate of Oxford Capital Group in securing the loan from Marathon Asset Management. The financing will be used to repay the property’s construction loan and return additional capital to the sponsor.
The waterfront property is a Tampa icon that was once owned by the New York Yankees, and served as the club’s Spring Training home for several decades. In 2015, Oxford acquired the hotel with plans for a comprehensive redevelopment that would include creating Tampa’s premier lifestyle hospitality property, replete with top-of-the-line amenities and the recently opened WTR Pool & Grill. An upscale pool, cabana club, bar and corporate event space, WTR provides guests with an unmatched experience of luxury in a modern tropical setting, featuring handcrafted cocktails, exquisite dining and entertainment in a poolside area overlooking Tampa Bay.
“Oxford bought this property with the vision to create a unique hotel that has the best poolside venue in the Tampa market,” said Ray. “Just a month after the WTR Pool & Grill opened, there is a lot of action at the hotel and the pool, and we were able to repay the construction financing and replace it with a ramp loan with earn-outs at very attractive terms.”
In addition to the pool and cabanas, Oxford’s comprehensive repositioning campaign included the addition of 15 guest rooms; complete renovations of existing guestrooms, with hardwood flooring, marble countertops and other top-of-the-line amenities; and a complete renovation of the lobby, including the addition of a café and wine bar.
“Ramp loans are based in large part on projecting the property’s path to stability, and that adds a wrinkle of complexity that not all lenders can underwrite,” said Hirt. “However, Oxford’s long standing track record, as well as the incredible product they’ve created at the property, gave capital providers extreme confidence in the sponsor’s business plan. We produced a healthy market with several lenders vying for the deal, and we ultimately closed this floating-rate loan with very strong proceeds.”
Added Hirt: “The loan we ultimately closed is structured with an immediate return on equity as well as an additional earn-out once certain benchmarks are reached, which will bring the total proceeds to the full $53 million.”
Oxford Capital Group, LLC is a national hospitality focused real estate investment, development and management firm. Oxford Hotels and Resorts, LLC is its wholly owned hotel operating and branding affiliate. Oxford, its affiliates, and principals have been involved in approximately $3 billion of real estate and private equity investments, including approximately 13,000 hotel rooms and over 2,000 senior housing units. Among the firm’s most impressive recent developments is Essex on the Park in Chicago, which includes the expansion and comprehensive redevelopment of the historic Essex Inn on Michigan Avenue in Chicago and the ground-up construction of an adjacent 479-unit luxury apartment building. The property, whose $170-million construction loan was also arranged by Mission Capital, is slated to open in spring of 2019. For information, visit www.oxford-capital.com or www.ohrllc.com.
About Mission Capital Advisors
Founded in 2002, Mission Capital Advisors, LLC is a leading national, diversified real estate capital markets solutions firm with offices in New York, Florida, Texas, California and Alabama. The firm delivers value to its clients through an integrated platform of advisory and transaction management services across commercial and residential loan sales; debt, mezzanine and JV equity placement; and loan portfolio valuation. Since its inception, Mission Capital has advised a variety of leading financial institutions and real estate investors on more than $65 billion of loan sale and financing transactions, as well as in excess of $14 billion of Fannie Mae and Freddie Mac transactions, positioning the firm strongly to provide unmatched loan portfolio valuation services for both commercial and residential assets. Mission Capital’s seasoned team of industry-leading professionals is committed to achieving clients’ business objectives while maintaining the highest levels of integrity and trust. For more information, visit www.www.missioncap.com.
Mission Capital’s Jordan Ray discusses our joint venture with UK-based firm, Brotherton. Jordan is a principal on the Debt & Equity Finance desk at Mission Capital.
Jordan Ray is the Principal of The Debt & Equity Finance Group at Mission, which he founded in 2009. Jordan has been honored with such industry awards as the 2016 Real Estate Finance and Investment Magazine – Mortgage Broker of the Year Award, the 2013 and 2012 Observer Top 20 under 35 and the 2017 NYU Schack Institute Financing Deal of the Year. Jordan sits on the board and co founded EquityMultiple – an online marketplace real estate finance company – in 2015. Jordan is also actively involved in UK/European real estate financing.
ABOUT BROTHERTON:
Mission Brotherton is an alliance between Mission Capital and Brotherton Real Estate. Combining Mission’s institutional reach with Brotherton’s deep knowledge of the UK and European markets, allows us to provide real estate capital solutions to our clients, globally.
Endeavor Real Estate Group has provided PSW Real Estate with a $29.4 million construction loan to erect a mixed-use condominium project in Austin, Texas, Commercial Observer has learned.
Endeavor’s senior loan is non-recourse, sources told CO, although additional details on the terms of the financing were not disclosed. A Mission Capital Advisors trio of Jason Parker, Steven Buchwald and Jamie Matheny arranged the senior debt for PSW.
“Austin’s recent growth has been well-documented, and the area around this property has seen its population increase by a staggering 27 percent since 2010,” Parker said in a statement. He stressed the challenges of securing construction financing at this stage in the cycle, adding that the area’s insatiable demand as well as the strong sponsorship in PSW ultimately closed the construction debt.
The planned four-story, 86,700-square-foot development—located at 1600 South 1st Street —will include 59 condominiums and 22,800 square feet of ground-floor commercial space as well as a 321-space subterranean parking garage.
Of the 59 units, there will be six studios, 26 one-bedroom and 24 two-bedroom condos and three three-bedroom units. The property will also feature a private roof deck and a courtyard on the second floor.
While apartment yield spreads in the Austin market have been compressing slowly over the last few years, investment activity has remained robust, buoyed by strong fundamentals. Vacancies in the southern portion of Austin fell 70 basis points on the year to 5.7 percent in the second quarter while roughly 1,900 units came online, adding to the highest level of annual completions in the market in more than five years, as per data from Marcus & Millichap.
An official at Endeavor declined to comment on the transaction. An official at PSW did not immediately respond to an inquiry.
Mission Capital’s Jordan Ray discusses recruiting. Jordan is a principal on the Debt & Equity Finance desk at Mission Capital.
ABOUT JORDAN RAY
Jordan Ray is the Principal of The Debt & Equity Finance Group at Mission, which he founded in 2009. Jordan has been honored with such industry awards as the 2016 Real Estate Finance and Investment Magazine – Mortgage Broker of the Year Award, the 2013 and 2012 Observer Top 20 under 35 and the 2017 NYU Schack Institute Financing Deal of the Year. Jordan sits on the board and co founded EquityMultiple – an online marketplace real estate finance company – in 2015. Jordan is also actively involved in UK/European real estate financing.
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