By Ian Ritter, Custom Content Manager
FINANCIAL STRATEGY
THOUGHT LEADER
ENVIRONMENTAL ENGINEERING
THOUGHT LEADER
CAPITAL MARKETS
THOUGHT LEADER
WILLIAM E. HUGHES
Senior Vice President
and Managing Director
Marcus & Millichap Capital Corp.
What are some alternative
sources of financing you’re
seeing right now?
A broad array of debt capital sources,
including alternative and conventional
lenders, are providing financing today.
While these sources have been available
over the years, their roles and activity levels fluctuate depending on market conditions. Eighteen months ago, alternative
capital sources were overpowered by
their mainstream counterparts but have
re-emerged as CRE fundamentals
improved markedly in 2010. They
include credit unions, private funds, private REITs, hedge funds and hard money
lenders. These provide an assortment of
structures that serve investors in financing CRE perceived as having riskier components. Today’s “alternative” sources
include a wide variety of capital providers. We might even include CMBS lenders that have been relegated to lender of
last resort due to perceived risks stemming from a secondary investor market
that has become uncertain and volatile.
Read “StreetSmart,” by Marcus & Millichap’s
Hessam Nadji, at globest.com/blogs/streetsmart
SUMMER GELL
National Client Manager
Partner Engineering
and Science, Inc.
What challenges do you expect
in getting financing from
Fannie, Freddie and HUD?
Multifamily is still hot and sometimes it
seems like the GSEs are the only game in
town. Yet financing through these agencies is not without challenges, particularly
in due diligence. For example, low
replacement reserves in a Property
Condition Assessment can raise a red
flag—the replacement reserve figure is
often the number most understated in
preliminary underwriting. High vacancy
is also an issue. Agency lenders are also
taking seismic risk seriously. Fannie Mae
is demanding consistent transparent
Probable Maximum Loss Reports from
the engineering community. With the
Phase I Environmental Assessment, there
is often insufficient sampling—Fannie
and Freddie Mac have very specific guidelines on radon, asbestos, and lead-based
paint. But keep in mind that new programs, like the Green Refinance Plus,
give investors more options if they get the
proper assessments.
Read Partner’s blog, “The Science of Real
Estate,” at globest.com/blogs/buildingsciences
STEVE DUFFY
Managing Director,
Real Estate
Moss Adams Capital
What assets get financing for
acquisitions, and what aren’t
as attractive to investors?
Apartment investment is the darling asset
class and that won’t change anytime
soon. What we’re seeing at Moss Adams
Capital are investors who are willing to
look closer at the next tier of opportunities, outside of the feeding frenzy for
rental. And there are some investment
plays going on now that look smart in
preparation for an upturn. Apartments
aren’t the only game in town. Every other
product type is in demand too—for core,
class A properties in the right markets. B
and C properties have challenges. Our
Capital Markets Group has been working
with investors buying apartments and
higher-end commercial property, and for
B and C properties we’re helping owners
maximize their current position while
preparing properties for improving markets. This is an important time for owners and developers who understand that
a strategic review can make a dramatic
impact later on.
For more insights into the current market,
visit mossadamscapital.com
The REM Thought Leadership Program extends across our entire media platform (Real Estate Forum, GlobeSt.com and the RealShare Conference Series), providing
expert commentary and business advice from a variety of industry thought leaders. To learn more, visit: www.ALMRealEstateMediaGroup.com/ ThoughtLeadership
