Private Buyers Vie with Institutions
LOS ANGELES—Private investors are entering the institutional multi-family arena, according to Greg Harris, executive director at
Institutional Property Advisors, a division of Marcus & Millchap.
He has seen more bids from private investors and family offices on
his last several large multifamily deals, including the Waterstone
Apartment Homes in Chatsworth, CA. The property changed
hands between institutional investors for $72 million, but there
was significant interest—and bids—from private investors as well.
“What we’re seeing across a lot of our more recent large apart-
ment marketing efforts is a cross section of both institutional and
private investors looking at the deal,” Harris says. “That’s espe-
cially been consistent across nearly everything we’ve sold over the
past 12 months in the $70-million to $100-million price range.”
Private investors are also trading up the assets they’re cur-
rently holding to get into institutional-quality product. “We’ve
been seeing a deep well of large private families that own mul-
tifamily properties in L.A. County and the surrounding metro
trade out of some assets and into higher-grade properties in an
effort to upgrade their portfolios,” adds Harris. “It has created
a perfect storm.”—Kelsi Maree Borland ◆
There is a wonderful scene in Tom Wolfe’s Bonfire of the Vanities,
in which the protagonist’s wife explains to their young daughter
that bonds are like slices of cake, and the cake crumbs that bond
trader daddy collects from each deal add up to a gigantic cake.
Crumbs of time in loan closings can add up to gigantic legal bills.
Below are tips for keeping those crumbs on the borrower’s plate.
Experienced counsel is critical, particularly in deals with specialized requirements such as CMBS or construction. Lender’s counsel can educate the borrower’s lawyer, but borrowers don’t want to
pay for that. Before engaging counsel, have a
After hiring competent counsel, let them
do their jobs. Avoid the temptation to do your
own legal work. Legal information and documents provided by borrowers are often insufficient, resulting in
more work for lender’s counsel.
Request lender requirements for single purpose entities, title
insurance and survey early, and follow those requirements
unless there is a really good reason to vary. This approach
makes lender review more efficient.
Provide correct entity names, signature blocks and notice
addresses for loan document preparation. The need for subsequent corrections to multiple loan documents adds costs that
borrowers can avoid by being careful.
Bad news does not get better with time. Disclose lender heartache issues (e.g., title, environmental, parking, etc.) early and
completely. The sooner thorny issues are addressed, the better
for all parties.
You do not pick up the telephone or walk into someone’s
office every time a thought pops into your head, but the equiva-
lent of that routinely happens with email. Information provided
in bits and pieces must be pieced together, with things getting
lost in translation or simply lost. Accumulate complete information
before sending, and deliver it in an organized fashion. This makes
the review process simpler and gives confidence in the quality of
the information. Change email subject lines to correspond to the
information provided, making later location easier.
Items are on the closing checklist because they really are impor-
tant. Regularly review the checklist, and respond to the open items.
Don’t wait until the last minute. Everything requires review. If
deliverables turn out to be incorrect or incomplete, no one will
have time to react and correct the problem if delivered at the last
minute. This can result in
delayed closing or the dreaded
post-closing letter, all of which
Loan documents must
reflect the business deal.
Moreover, because the parties
will live with the documents
for the entire loan term, it is
critical that their terms work
for all parties. Too often
there is much attention paid
to the wedding (i.e., the loan
closing) and not enough
given to the marriage (i.e.,
the loan term). However, borrowers and their counsel
should focus on what is truly important. Voluminous comments
can cause truly important things to be missed in the first round.
If the relationship between borrower and borrower’s counsel is
new, discuss your philosophy and goals with respect to comments before submitting them.
Follow instructions regarding signing documents, where to initial,
where to notarize and where to deliver documents—it matters.
Ignoring instructions causes delay and requires costly follow-up.
Paralegal time, although generally at lower rates, adds up too.
This is all simple stuff, but the crumbs add up.
Stephen P. Lieske is a partner in the San Francisco office of Allen
Matkins. He may be contacted at firstname.lastname@example.org. The views
expressed here are the author’s own.
By Stephen P. Lieske
Avoiding the Crumbs: Tips from a Lender’s Lawyer
Too often there is
much attention paid
to the wedding
(the loan closing)
and not enough
to the marriage
(the loan term).