Mission Capital and Marcus & Millichap’s Q2 Joint Marketing Efforts

Austin Parisi, Associate

The joint marketing effort between Mission Capital and Marcus & Millichap contributed to the recent successful auction of a $26,000,000 Non-Performing Loan secured by a largely vacant mixed-use building in the Nomad neighborhood of Manhattan.

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Mission Capital, a subsidiary of Marcus and Millichap, now leverages a platform of nearly 2,000 investment sales and financing professionals in 80 offices.  These boots on the ground have made Marcus the top investment sales broker in the United States based on transaction count over the last 15 years.  The proprietary comparable sale data and market research provided by Marcus increases Mission Capital’s valuation accuracy and execution success.

The joint marketing effort contributed to the recent successful auction of a $26,000,000 Non-Performing Loan secured by a largely vacant mixed-use building in the Nomad neighborhood of Manhattan. Mission Capital collaborated with the Anton team at Marcus & Millichap, who helped to accurately value the troubled collateral by understanding COVID-19 impacted lease up timelines, rental assumptions and the lengthy judicial foreclosure process in New York.  Of course, the combination of Mission Capital’s comprehensive investor data base of institutional note buyers and the alternative capital sources that typically transact with the Anton group was powerful rocket fuel for the aggressively bid live auction conducted on Real Insight Marketplace.

The benefits of the Mission Capital Marcus & the Millichap team extends well beyond traditional core asset classes. Our team is in the process of selling a Single Room Occupancy, or Co-Living asset in the Mission District of San Francisco. The persistence of COVID-19 variants has led to prolonged elevated vacancies in the SRO rental market since March of 2020 as remote workers migrated to cities with a cheaper cost of living. As people begin to transition to a post-COVID-19 world, employees are returning to gateway cities, which is evident by the rebound in urban multi-family rental rates as well as increased demand for SRO assets. In developing our valuation thesis and marketing plan, Mission Capital drew on its own expertise in arranging financing for co-living assets in the San Francisco – San Jose market and Marcus & Millichap’s Taylor Flynn.  Taylor is the leading investment sales broker of Co-Living and SRO properties assets in San Francisco.

The culture of sharing market intelligence and sales expertise throughout Marcus & Millichap’s various lines of business continues to be imperative to effectively advising our clients and generating positive outcomes.

joint marketing effort Mission Capital Marcus & Millichap

Gateway Cities

David Tobin, Senior Managing Director

In our latest video, David Tobin, Senior Managing Director, discusses expectations and trends he’s spotted in Gateway City loans (that’s New York, Los Angeles and San Francisco, in particular), and what this means for Loan Sales in 2022.

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Gateway city loans will continue to struggle in 2022 with low rates, extensions and restructures necessary to support portfolio performance. We see ongoing structural issues in the office, retail and hospitality sectors in New York, San Francisco and Los Angeles.

“According to Green Street, 70% of office workers will work remotely at least part-time within the next five to ten years…reducing demand for office space by about 15% and accelerating an ongoing deurbanization trend.”

Kastle Systems’ back-to-work barometer measures key card and fob system activity and shows a 40.6% physical occupancy of office across 10 top US cities with NYC and LA the bottom dwellers at between 36% and 37%.

Negative pre-COVID retail and banking trends were accelerated by the pandemic, particularly in urban locales.

CVS recently announced a 10% reduction in its 9900 store chain as grocery offerings and prescription sales continue to migrate on-line and over saturated infill locations right size.

Of 85,000 total bank branches today, nearly 3,400 closed in 2020. Urban located bank branch closures far outpace all other areas across all demographics because of competitive over-expansion pre-pandemic and continued digital disruption.

Manhattan sublease office space exploded during the pandemic peaking at 21.3mm sf in June 2021 compared to 8.2mm sf in 2016 and 11.6mm sf on the eve of the pandemic.

Finally, business travel continues to struggle with the biggest group oriented large format full service hotels, particularly in urban locations and less competitive select service hotels everywhere with PIP and cap ex issues.

What does this mean for loan portfolios? Persistently low interest rates have subsidized asset prices and gateway city loan portfolio collateral value for years. The specter of real inflation for the first time in a generation combined with real regulatory enforcement of asset quality and a real need for actual debt service payments will drive de-risking of bank balance sheets in 2022. We expect loan sale activity to continue to be muted but priced aggressively as liquidity rules. Hospitality loan sale offerings have been and will continue to be a robust bright spot in an otherwise anemic trading market. The wildcard? Inflated equity markets rapidly deflating and liquidity disappearing.