3.1.19: ValueXpress Launches Updated Website

ValueXpress has launched its newly designed website. The new website provides a “learning center” where clients can read more about the types of commercial real estate loans offered by ValueXpress and see which loan product is the right fit for them. The new website allows clients to download loan application forms and checklists, making it even easier for borrowers and their advisors to apply for a commercial real estate loan. The homepage shows real-time loan indexes, which means borrowers can calculate their expected interest rate for their loan. A loan rate sheet will be posted weekly to show current interest rates for CMBS conduit loans.

In addition, the website features photographs and descriptions of closed transactions and provides a link to our 5-Star Google client reviews and testimonials. Biographies of ValueXpress professionals have been updated, and viewers can download Outlook vcards to their computers. The “Market News” blog that is currently sent to clients every two weeks will be incorporated into the website.

“We are happy to finally launch our newly-designed website and hope our clients find it an excellent resource. We encourage feedback from our users so we can make the site even better,” commented Michael Sneden, Executive Vice President of ValueXpress.

If you have any questions regarding the website, contact one of our Team members by clicking here.

2.26.19: CBRE Reports on Cap Rates at Yearend 2018

CBRE notes that capitalization rates (cap rates) were little changed in the second half of 2018 in its recently published survey for income producing commercial real estate (retail, office, industrial, multifamily and hotel) as of December 31, 2018. The industrial sector registered small declines in cap rates, while office, multifamily and hotel cap rates were generally stable. This pattern is similar to the first half of 2018, when cap rates were little changed with slight increases or decreases in pricing depending on asset type. The multifamily and industrial sectors registered small declines in cap rates, while the office and hotel sectors were stable in the first half of 2018.

Retail cap rates increased in the second half of 2018 across all retail segments. Recent store closures are negatively impacting retail sentiment, compounded by the effects of Amazon.

CBRE says the general outlook for cap rates and returns on cost in the first half of 2019 are for stable pricing. However, the sentiment of survey participants varied by property type, segment and metro-tier grouping. Retail sentiment remains slightly negative and historically low cap rates for multifamily concern participants.

Summary of Cap Rates – 12/31/18 vs 6/30/18

Property Type	Sector	Cap Rate 12/31/18	Cap Rate 6/30/18
Office	CBD	6.71%	6.63%
	Suburban	7.91%	7.91%
Industrial	All	6.34%	6.41%
Retail	Neighborhood	7.50%	7.40%
	Power	8.42%	8.29%
	High Street	4.83%	4.77%
Multifamily	Infill	5.26%	5.21%
	Suburban	5.56%	5.53%
Hotel	CBD	7.97%	7.94%
	Suburban	8.49%	8.48%

 

2.20.19: Texas Man Retires at a Holiday Inn Express – It’s Cheaper Than the Alternative!

ValueXpress has a keen interest in hotel loans and we have provided a lot of hotel loans — over 400 — since inception. This new hotel trend? It’s a beauty!

A Texas man on the brink of retirement wants to spend his golden years relaxing at a Holiday Inn instead of in a retirement home. Spring, Texas resident Terry Robison, 64, worked out a detailed comparison between the two options – a retirement home or a Holiday Inn — and the mid-priced hotel chain appeared to win by a landslide. Robison wrote on Facebook that the average cost of nursing home care is about $188 per day. A long-term stay with a senior discount at Holiday Inn, on the other hand, is $59.23 per day, including breakfast!

“That leaves $128.77 a day for lunch and dinner in any restaurant we want, or room service, laundry, gratuities and special TV movies,” he wrote. “Plus, Holiday Inn provides a spa, swimming pool, workout room, lounge, washer-dryer, and more.”

The benefits of Holiday Inn, Robison added, include free toothpaste, razors, shampoo and soap. An additional $5 a day in tips will “have the entire staff scrambling to help you” as well, he wrote.

“They treat you like a customer, not a patient,” he said.

In addition to the spa, swimming pool, gym, lounge and washer-dryers, the location where Robison checked out reservations has a city bus stop right in front, and seniors ride free!

ValueXpress Arranges $2,475,000 Commercial Loan for the Purchase of 12,400-Square-Foot Mixed-Use Building in Bronx, NY

ValueXpress has arranged a $2,475,000 commercial real estate loan through its affiliated bank, Country Bank, for the purchase of two connected, one-story, mixed-use commercial buildings located at 315 Jackson Avenue, Bronx, New York. The buildings were formerly occupied by a plumbing contractor.

315 Jackson Avenue – $2,475,000 Commercial Bank Loan

The property will be renovated and utilized as one of ten vintage clothing stores with ancillary warehouse space owned by the borrower.

The company deals in the sale of previously used clothing, footwear and toys. These items are purchased by the pound, and items in good condition are resold in the owner’s vintage clothing stores in the N.Y. metro area, including the store that will be constructed at the subject property. The balance is exported, primarily to Guatemala. The loan was structured with a five-year term deal with one renewal option for an additional five-year period. ValueXpress recently arranged a loan for this borrower for an industrial property in Texas.

The loan was originated by Gary Unkel, a senior loan originator at ValueXpress. The borrower, a long-time client of Unkel’s, has completed roughly 12 transactions over the past 10 years. Unkel commented, “The company needed additional warehouse and retail space based on its rapidly expanding business, and we have supplied the financing in each instance.”

This transaction was another example of problem-solving. It was determined that two underground gasoline storage tanks were located at the southeast corner of the site. Without any information on their status, ValueXpress arranged and supervised an Environmental Phase II investigation to test the soil surrounding the tanks. No contamination was detected in the soil samples, which allowed the loan to close.

2.15.19: Lenders Roll Out “CMBS-Like” Loan Programs

ValueXpress has been originating CMBS conduit loans for over 25 years. In that time, we have been a leader in originating loans for newly launched CMBS programs that offer a better value proposition for our clients than existing options. Whenever new programs are developed, we are typically the first to know as ValueXpress is sought out for the quality of loans we deliver to the CMBS and general lending markets.

A number of lenders at the Mortgage Bankers Commercial Real Estate Finance Conference (MBA/CREF) conference this week announced new programs to improve some of the elements that deter CMBS conduit borrowers from pursuing a CMBS conduit loan. While the non-recourse and unrestricted cash-out elements of CMBS conduit loans are very compelling, sometimes these features cannot trump the most mentioned negatives — stiff prepayment penalties with no options, poor servicing with no flexibility to modify loan terms, high transaction costs and burdensome loan structure (such as cash management provisions).

The newly announced programs will include all the benefits of a CMBS conduit loan, including non-recourse and unrestricted cash-out provisions, but will offer step-down prepayment, in-house servicing and lower/fixed transaction costs. Borrowers will essentially have the best of both worlds.

“I have a $3-million loan with a typical CMBS term sheet, but the sponsor refuses to accept yield maintenance or Treasury Defeasance,” commented Michael Sneden, Executive Vice President at ValueXpress. “So we are going to close it in one of the new programs with CMBS terms and a step-down prepay, with a 25-basis-point rate premium that is acceptable to our borrower.”

For more information on these new programs, contact Michael Sneden at ValueXpress.

2.12.19: More Takeaways from the MBA/CREF Conference

Capital for investment in real estate debt and equity is anticipated to be plentiful in 2019, according to panelists at the MBA CREF/Multifamily Housing Convention & Expo held in San Diego this week. But the abundance of capital is creating intense competition.

CMBS lenders will likely continue to struggle competitively as community/regional banks and life companies continue to take market share. CMBS has already lost its multifamily edge to Fannie Mae and Freddie Mac multifamily offerings. All three competitors are encroaching on Class B properties and tertiary markets, traditionally bread-and-butter areas for CMBS.

CMBS can fight back by offering higher leverage, but CMBS lenders are being squeezed by the buyers of the subordinate CMBS securities (b-buyers). The b-buyers do not want to see leverage increased. However, if CMBS continues to lose market share, the b-buyers will have fewer offerings to invest in, and they will eventually capitulate to some level of higher leverage. In the meantime, CMBS can hold its ground by being one of the few avenues that offers partial-term and full-term interest-only payment structures.

 

2.6.19: Amazon Changes Course – So What About One Court Square?

Citing opposition from some political leaders, Amazon has withdrawn its plans to bring its second headquarters to Long Island City, Queens. Investors who made real estate commitments based on the anticipation of Amazon’s investment in Queens are in for a big disappointment.

One disappointed property owner is likely to be the owners of One Court Square. The property is owned by New York fund operator Savanna and J.P. Morgan’s Junius Real Estate unit. Amazon was slated to take 1 million square feet in the 1.4-million-square-foot tower. The lease was anticipated to be a bonanza in terms of increased building value for the owners while filling a leasing hole in the building as the current tenant, Citibank, is expected to substantially reduce its presence in the building.

The property is encumbered by a CMBS conduit loan that was originated in 2005. The financing totaled $315 million and was structured with interest-only payments for its entire 10-year term based on a 4.90% interest rate. When the loan matured in 2015, it was refinanced with a 5-year interest-only CMBS conduit loan at 3.89% that would mature in the same year as the Citibank lease expiration, creating substantial vacancy risk should Citibank leave the building in 2020. That risk would have been mitigated by the Amazon lease, but for now, the vacancy risk remains.

ValueXpress Arranges $5,000,000 CMBS Conduit Loan for the Refinance of an 83-Room Independent Hotel in Syracuse, NY

ValueXpress has arranged a $5-million CMBS conduit loan for the refinance of an 83-unit independent extended-stay hotel located in East Syracuse, New York. The property, CrestHill Suites, was constructed in 2000 and recently completed significant renovations, resulting in a top 5 ranking of 23 hotels located within the East Syracuse market, according to TripAdvisor.

CrestHill Suites – East Syracuse, N.Y.

The property features large, apartment-style suites, full kitchens, sleeper sofas, complimentary Wi-Fi and flat-screen TVs. The property offers complimentary breakfast daily and a beautiful outdoor pool in a park-like setting.

“This was a particularly challenging transaction as the CMBS market does not like independent hotels,” commented Dennis Suh, Senior Vice President at ValueXpress who orchestrated the transaction. “However, I strategized with the sponsor to bring the credit decision makers to the property because it shows so well. Once the credit office saw the property, it sealed the deal approval.”

“It was very important that I perform for this client,” said Dennis. “The existing loan was an SBA 7(a) loan that had a current floating interest rate of 7.5%, and I wanted to bring the rate down into the low 5% area and fix it for 10 years. This goal was accomplished and the client is very pleased with the result.”

To obtain a no-obligation loan quote for a hotel or any other asset type, contact Dennis Suh at ValueXpress.

2.1.19: First CMBS Issues for 2019 See Strong Demand

ValueXpress tracks the pricing of CMBS securities because it directly correlates to the interest rate borrowers receive for a CMBS conduit loan. Our insight into the CMBS market ensures that our borrowers receive the lowest possible interest rate on their loan. ValueXpress has been tracking CMBS securities pricing since 2007.

In particular, the market for long-term, super-senior AAA-rated CMBS highly correlates to borrower interest rates for CMBS conduit loans, so we focus on price trends for that tranche of CMBS. New AAA-rated CMBS trade based on a spread over the 10-year Swap rate. For 2018, the range of pricing was 66 basis points (bp) over the Swap rate (S+66) recorded in January 2018 to a high of 112 bp (S+112) in December 2018. From March until September 2018, the range varied from roughly S+80 to S+90.

It’s important to understand that lower AAA-rated CMBS pricing is better for CMBS borrowers. Although not exact, borrowers can expect the loan spread in new CMBS loan applications to decline one basis point for each point of decline in AAA-rated CMBS prices.

As noted, AAA-rated CMBS pricing hit a 2018 high in December 2018 of S+112. Today, Morgan Stanley priced the first CMBS conduit issue in 2019, pricing the AAA-rated CMBS at S+94. This is great news for borrowers in that loan spreads on new applications should fall roughly 18 bp (112 minus 94) for new CMBS loan applications.

1.29.19: New ValueXpress Website to Launch Soon

ValueXpress is making final changes to its new website, which it expects to launch in February. The current website has won awards for its graphics, and we have updated it piecemeal over time, but it was time for a complete overhaul.

The new website provides a “learning center” where clients can read more about the commercial real estate loans offered by ValueXpress and see which loan product is the right fit for them. The new website will allow clients to download loan application forms and checklists, making it even easier for borrowers and their advisors to apply for a commercial real estate loan. The homepage will show real-time loan indexes so borrowers can calculate their expected interest rate for their loan. A loan rate sheet will be posted weekly to show current interest rates for CMBS conduit loans.

In addition, the website will feature photographs and descriptions of closed transactions and provide a link to client reviews and testimonials. Biographies of ValueXpress professionals have been updated and viewers can download Outlook vcards to their computers. The “Market News” blog that is currently sent to clients every two weeks will be incorporated into the website.

“We look forward to the release and encourage any feedback from our users to make the site even better,” commented Michael Sneden, Executive Vice President of ValueXpress.