ValueXpress Obtains $6.1 Million CMBS Conduit Loan for CCTG Grad for the Refinance of Grand Haven Villas Apartments II in Bowling Green, KY

ValueXpress has arranged a $6,100,000 CMBS conduit loan for the refinance of an 88-unit apartment development located in Bowling Green, Kentucky. The project is owned locally by Rodgers Real Estate Holdings and Rodney Rodgers, who constructed the project in 2015-2016. The project is 100% occupied. This is a follow-on transaction, as ValueXpress originally provided a $3,840,000 loan on Grand Haven Villas I in 2015. The loan was originated by Terry Luker, a CCTG graduate who has worked with ValueXpress on a number of CMBS conduit loans.

Grand Villa for 5 29 2015 blast

“The transaction was extremely beneficial to the sponsor, Mr. Rodgers,” explained Luker. “This CMBS conduit loan, just like the one we provided two years ago, repaid the existing construction lender, paving the way for more construction monies to continue to construct additional apartment buildings. In addition, it allowed Mr. Rodgers to lock in an attractive fixed-rate, non-recourse loan for ten years.”

The property consists of beautiful two-story, eight-unit buildings with four units on the ground floor and four units on top. The property is centrally located in Bowling Green in the Nashville road corridor, which is the fastest growing area of Bowling Green. The property is in close proximity to grocers, restaurants and banks.

“We are continuing to increase our business with CCTG graduates,” commented Michael D. Sneden, Executive Vice President at ValueXpress. “The graduates are on the ground in their markets locating deals, while ValueXpress acts as their back-office, getting loans processed and closed quickly. The result? Very happy repeat borrowers.”

Posted in CMBS, CMBS Conduit Loans, Commercial Lending, Commercial Real Estate Loans, Michael D. Sneden, News & Recent Closings, The Banker's Mortgage Conduit, Valuexpress | Tagged , , , , , , | Leave a comment

5.12.17: Meet ValueXpress at ICSC’s RECon in Las Vegas!

On May 21-24, 2017, Dennis Suh and Stan Siciliano will be representing ValueXpress at the International Council of Shopping Centers (ICSC) RECon convention at the Las Vegas Convention Center in Las Vegas, Nevada. RECon is the world’s largest retail real estate convention with more than 37,000 attendees representing 58 countries. Attendees gather for power deal making, endless networking and innovative education.

ValueXpress will be meeting with owners and operators of retail properties who may be seeking fixed-rate, non-recourse commercial real estate loans now or in the future. ValueXpress has completed hundreds of retail real estate loan transactions, including grocery-anchored centers, unanchored centers and free-standing properties such as drugstores. ValueXpress specializes in retail loans in the $5-$30 million range, but it has the capabilities to provide loans as small as $1 million. ValueXpress will provide unrestricted cash-out loan proceeds up to 75% Loan-to-Value and interest-only payments on lower leverage transactions.

Dennis and Stan will be available beginning Saturday night, May 20th through Tuesday evening May 23rd for a drink, quick bite, or quick chat. Contact Dennis at dsuh@valuexpress.com or call him at (347) 393-3208 to set up an appointment.

Posted in CMBS Conduit Loans, Commercial Lending, Commercial Real Estate Loans, Michael D. Sneden, News & Recent Closings, Non-Recourse Loans, The Banker's Mortgage Conduit, Valuexpress | Tagged , , , , | Leave a comment

5.9.17: CMBS Conduit Loan Volume Increasing

More borrowers are securing CMBS conduit loans as we progress in 2017, as evidenced by trends in the issuance of CMBS conduit securities. CMBS conduit issuance of $15.2 billion in the first quarter of 2017 fell short of the $19.2 billion for the same period in 2016. However, volume has picked up, and the market is on pace for $30 billion of issuance in the second quarter, according to projections from Trepp. This compares with $11.4 billion of issuance in the second quarter of 2016. Furthermore, industry professionals believe that last year’s total volume of roughly $75 billion is within reach, with many predicting volume in the $65-$70 billion range.

“We are seeing more CMBS conduit loan requests now than we’ve seen in quite a while,” commented Michael D. Sneden, Executive Vice President at ValueXpress. “The requests span a variety of asset classes and situations. For example, we continue to refinance CMBS conduit loans that are maturing, multifamily loans that don’t quite fit Fannie Mae and Freddie Mac criteria and transactions in which the sponsor completed a value-add and wants to take cash out of the property.”

The strength in new CMBS originations stems from a variety of factors. CMBS issuers are now comfortable with risk-retention rules having successfully sold CMBS using all three methods of risk retention — vertical, horizontal and L-shaped — without any method having much impact on bond prices. As a result, CMBS bond spreads have been stable, with senior AAA-rated CMBS market spreads holding steady below Swaps plus 100 basis points, and the Swap rate has also been relatively stable, resulting in attractive interest rates for borrowers below 5% for full-leverage transactions and in the 4.5% area for low-leverage deals.

 

Posted in CMBS Conduit Loans, Commercial Lending, Commercial Real Estate Loans, Michael D. Sneden, News & Recent Closings, The Banker's Mortgage Conduit, Valuexpress | Tagged , , | Leave a comment

5.3.17: A Lesson on Why Non-Recourse Is Important

One of the primary benefits of CMBS conduit loans is that they are non-recourse. As such, the borrower and guarantor (typically an individual who owns or controls the majority of the borrowing entity) are not personally liable for repayment of the loan in the event of default and foreclosure.

The non-recourse provision works well for partnerships of individuals in which no one partner cares to personally guarantee the loan. It also works well for institutional owners in which no individual employed by the institution is going to personally guarantee the loan. But from the individual owner I often get “I don’t need non-recourse, because I will never default, and if I did, I would just work out a payment plan with the lender.”

Well, defaults on loans with personal guarantees do often get worked out. Typically on a loan default the property is foreclosed and sold, a deficiency judgment is filed against the guarantor based on the difference between the loan amount and the property sale amount, and the deficiency is settled (perhaps by splitting the difference). The deficiency judgment is paid and released, and life goes on. But recently I saw a situation that scared me to death.

A sponsor defaulted on a personally guaranteed loan in the amount of $15 million. The lender foreclosed on the property and . . . did nothing. The lender refused to sell the property and refused to negotiate a settlement on the guaranty. The sponsor could not get a commercial real estate loan on his other performing properties. Why? The net worth of the sponsor was less than $15 million and he would be insolvent if the lender collected on the entire $15-million guarantee. Although this was unlikely, since the judgment on the guarantee could not be determined, lenders were unwilling to make a guess.

Needless to say, this sponsor said he will never provide a personal guarantee on a commercial loan again.

 

Posted in CMBS Conduit Loans, Commercial Lending, Commercial Real Estate Loans, Michael D. Sneden, News & Recent Closings, The Banker's Mortgage Conduit, Valuexpress | Tagged , , , | Leave a comment

ValueXpress Arranges $5.5-Million CMBS Conduit Loan for the Refinance of a 91-Room Best Western Hotel Located in Yuba City, CA

ValueXpress has arranged a $5,500,000 CMBS conduit loan for the refinance of a 91-room Best Western hotel located in Yuba City, California. The property is a two-story exterior-corridor hotel that was constructed in 1989. The loan provided for significant cash-out equity return to the owner.

The property is located in northern California, approximately 40 miles north of Sacramento. The hotel is situated in central Yuba City adjacent to Highway 99, near the Sutter Buttes mountain range. Yuba City provides for many leisure activities, including gold mining in nearby historic “gold-rush” communities as well as hiking and camping in Sutter Buttes. In addition, the property provides accommodation for business guests visiting local companies in proximity to the hotel, including Sunsweet Growers, Sierra Gold Nurseries, Orchard Machinery Corporation, Valley Truck and Tractor, John Deere and Beale Air Force Base.

The property provides guests with an extensive amenities package that includes an outdoor pool with hot tub, complimentary hot breakfast, fitness center, business center and high speed internet. Each room has a microwave/refrigerator, coffee/tea maker and a desk/work area.

“The transaction was challenging in that the CMBS market does not favor exterior-corridor hotels,” commented Gary Unkel, Senior Loan Originator at ValueXpress who handled the transaction. “In fact, I can count on one hand the amount of exterior corridor limited-service hotels in CMBS that are not located on a beach. Add a big cash-out to the mix and I really had my hands full, but the property performance is exceptional and I was able to push the project through the credit approval process.”

 

Posted in CMBS Conduit Loans, Commercial Lending, Commercial Real Estate Loans, Michael D. Sneden, News & Recent Closings, The Banker's Mortgage Conduit, Valuexpress | Tagged , , | Leave a comment

4.28.17: Raising Real Estate Capital in the Digital Age

In the past, raising outside equity for small- and mid-sized real estate operators to purchase commercial real estate was dominated by investment advisors who would pitch deals to their clients. The minimum investment amounts were fairly low, in the $25,000-$100,000 area, and investment advisors successfully sold deals to thousands of individuals seeking regular dividends and distributions that were higher than bonds or dividend stocks. The problem was that the fees to the advisors and related parties were eating up to $13 of every $100 invested, so investments made by individuals were only worth $87 when the deal closed. Worse, fees were not disclosed.

New disclosure rules effective in 2016 have halted this method of fundraising. Now, fees must be disclosed, and rather than have clients upset at the perceived high fees, advisors stopped pitching these deals altogether. This left small- and mid-sized real estate operators with limited alternatives to raise outside equity for real estate projects.

Luckily, new technology-based fundraising methods with very low fees are evolving rapidly to fill the void. The concept, known as crowdfunding, is a web-based platform on which real estate deals are posted and marketed directly to individual investors in $10,000-$50,000 amounts rather than through a fee-based middleman such as an advisor. As a result, roughly $97 of each $100 gets invested in the project. In addition, these web-based platforms have nationwide/worldwide reach, far superior to the largest U.S. advisor network. This exciting new method of fundraising has been made economic through the assistance of the Jumpstart Our Business Startups (JOBS) Act. JOBS simplified SEC regulations for selling securities for real estate projects, which has helped propel crowdfunding.

“I have a client who we are looking to take through the crowdfunding process,” commented Michael D. Sneden, Executive Vice President at ValueXpress. “We just completed a $28-million CMBS loan and will be looking to sell 49% of the equity position, which is allowed under the loan documents. We expect to raise $5 million to invest in new projects. I will let you know how it turns out.”

Posted in Commercial Lending, Commercial Real Estate Loans, Michael D. Sneden, News & Recent Closings, The Banker's Mortgage Conduit, Valuexpress | Tagged , | Leave a comment

4.25.17: CMBS Conduit Loan Rates Stable as CMBS Spreads Remain Steady

CMBS conduit loan borrowers are finding calm waters as spreads on CMBS securities have been stable for most of 2017 to date. In addition, the 10-year Swap rate, the benchmark index for setting interest rates on CMBS conduit loans, has remained in a relatively narrow range of roughly 2.30%-2.60%. CMBS conduit loans’ interest rates are set by adding the 10-year Swap rate and the loan spread, which is derived from CMBS securities prices. The two indexes are added together at loan closing to set the interest rate, which will remain fixed for the entire loan term.

On the CMBS securities side, long-term super-senior AAA-rated securities continue to trade at under 100 basis points (bp) over swaps, having broken the barrier in the beginning of February for the first time since mid-2015, with the exception of one very high-quality offering last August. The market for long-term super-senior AAA-rated CMBS highly correlates to borrower interest rates for CMBS conduit loans. The two most recent CMBS deals are currently being marketed with long-term super-senior AAA-rated securities at 94-95 bp over swaps, right in the middle of the range for CMBS deals that have priced since February.

Market professionals point to relatively low CMBS supply keeping a check on increases in CMBS spreads. As of the end of April, $18.5 billion of CMBS deals have priced compared with $22.4 billion for the same period in 2016. And 2016 levels were down from $33.6 billion in 2015. The forward pipeline does not indicate a spike in CMBS issuance, so bond buyers have few new CMBS issues in which to invest.

As a result of steady swap and CMBS securities prices, CMBS borrowers are seeing stable interest rates while loans are processed to closing and therefore are closing at rates close to levels indicated in their Term Sheets. Low-leverage CMBS loans are being closed in the 4.5% area and full-leverage loans are being closed in the 5% area. The rate is fixed for the entire loan term.

 

Posted in CMBS, CMBS Securities, Commercial Mortgage-Backed Securities, Michael D. Sneden, News & Recent Closings, The Banker's Mortgage Conduit, Valuexpress | Tagged , | Leave a comment