WASHINGTON, DC—It’s no coincidence that the same week in which
the CRE Finance Council released its 2017 Market Outlook
Survey, the new CMBS issue market welcomed the first conduit
of 2017, which also doubled as the first risk retention deal
designed with the hybrid L-shaped structure.
Citi and Deutsche Bank will collectively retain a vertical slice
amounting to 1.9% of the face value of each class in the $1.3 billion conduit, says Trepp, while KKR has signed on to be the
B-piece buyer and will take on the horizontal portion comprised
of sub-investment grade bonds.
This transaction follows the few conduits come to market conforming to the rule, which went into effect on the last day of
2016. With each deal, fears ease just a little more that risk retention won’t be the liquidity challenge that many had feared.
Which, in a broader sense, was also the message from CREFC’s
survey of participants attending the its January Conference in
Miami Beach. Essentially, 2017 will be a continuation of 2016, with
the industry, as it typically does, adapting to the challenges of the
market and the many layers of government oversight.
“The dynamism of the commercial real estate finance market
continues to be impressive, with CMBS issuers adjusting to new
risk-retention requirements that took effect on December 24,
2016 and portfolio lenders, private equity and a new generation
of other lenders stepping in to fill gaps and enable opportunity
in the investment marketplace,” says CRE Finance Council exec-
utive director Lisa Pendergast.
As always, it is important to note there are headwinds and
perhaps even disquieting signs of upcoming upheaval. For
instance, the Federal Reserve has voiced concerned about a pos-
sible asset price bubble for commercial real estate. So, inciden-
tally, did President Trump during his campaign.
Separately, private closed-end real estate funds have been
returning record levels of capital to their investors over the last few
years—per the 2017 Preqin Global Real Estate Report—outpacing
the level of capital being raised and deployed. One obvious inter-
pretation of this trend is that good assets for investors are becom-
ing more scarce, or at least properly-priced good assets are.
CREFC’s survey highlighted other concerns. For instance,
72% of respondents believe that only 50% to 75% of CMBS loans
maturing in 2017 will pay off or be refinanced in full and on
schedule. And slightly more than one-third of respondents
expect to see less liquidity this year compared to last (however
CREFC: Industry Will Adapt to 2017’s Challenges
SAN ANTONIO—Joint venture equity investment has been secured for the development of Frost Tower, a 460,000-square-foot
class-A office tower to be built in downtown. Situated on a 2.8-acre site at the
corner of West Houston and North Flores
Streets, the project flanks the Houston
Street corridor, fronts San Pedro Creek,
and is within walking distance of numerous restaurants, cafes, bars and housing.
“Just like Frost Bank, Frost Tower is
without peer in San Antonio,” says Randy
Smith, president of Weston Urban. “On
the banks of San Pedro Creek and sitting
along tree-lined Houston Street, it repre-
sents the most striking visual representa-
tion of downtown’s renaissance. Many,
many people have worked hard to bring
this to fruition and we are very proud to
be a part of the team.”
HFF worked exclusively on behalf of
the developers, San Antonio-based
Weston Urban and Dallas-based KDC,
for partnership funding. Dallas-based
TRT Holdings Inc. provided
joint venture equity for the
development, the first of its
kindfor the city in 27 years.
“We tasked HFF with not
only arranging joint venture
equity for the first speculative
office tower in downtown San
Antonio in three decades, but
also with helping us identify a
partner with the characteristics that mean the most to us:
character, integrity, and an
alignment of mission and
purpose,” said Smith.
Due for completion in 2019, Frost
Tower will serve as the corporate headquarters for Cullen/Frost Bankers Inc.,
the parent company of Frost Bank.
Frost will lease more than 60% of the
building on a long-term lease continuing the company’s commitment to
downtown San Antonio, which has
spanned 150 years. Additionally, Frost
will operate a financial center on the
At 23 stories, this project will offer
approximately 430,000 square feet of
office space, 20,000 square feet of ground
floor retail and 10,000 square feet of tenant amenity space including a fitness
center and tenant lounge. Hike-and-bike
trails and pedestrian walkways constructed with the San Pedro Creek
Improvements Project are scheduled to
deliver in May 2018.
The HFF team representing the developers was led by director Campbell
Roche, along with executive managing
director Mark Gibson, senior managing
director Trey Morsbach and managing
director John Taylor.—Lisa Brown
JV Equity Builds City’s First Skyscraper in 27 Years
BEHIND THE DEAL
UP Front A comprehensive look at what’s trending in the world of commercial real estate
Frost Bank Tower