Heartland Real Estate Business

FEB 2018

Heartland Real Estate Business magazine covers the multifamily, retail, office, healthcare, industrial and hospitality sectors in the Midwest.

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Where do you see the biggest opportunity for your company in 2018? As Red Mortgage Capital looks at 2018 and beyond, we anticipate continued strength in the multifamily space characterized by stable or growing loan and investment volume. We see an opportunity to raise our market share by expanding Red's lending platform to serve additional markets across the country and diversifying its menu of financing solutions. Red will offer a broader array of custom solutions targeted toward investors and owners, including recapitalizations and renovation/preservation loans. We also plan to elevate our new construction, energy efficiency and small balance lending programs to leverage our existing expertise in these areas. What is your company's lending strategy for 2018? Are there any new lines of business or opportunities that you are pursuing? We will continue to be a true full-service capital provider for multifamily owners by providing attractive debt and equity options for the entire capital stack for market rate, workforce and affordable housing. We will seek new opportunities to employ our competitively priced balance sheet lending programs for the benefit of our clients. Our balance sheet capability offers considerable flexibility for situations that require bridge financing, particularly pre-stabilized and renovation transactions. These proprietary loan programs serve interim financing needs from six months to five years in duration. What advice are you giving your borrowers to help them maximize their lending strategy in 2018? We counsel clients to make sure their debt and equity structures are fully aligned with the parameters of their investment models. This relates to term (both debt and equity), leverage and repayment type (fixed or floating rate). For owners of older multifamily assets, we model and finance various renovation/preservation scenarios to extend the economic life of these properties and increase revenues associated with these assets. The combination of our various balance sheet and permanent debt programs enables us to structure and deliver the most cost-effective strategies to enhance and preserve this critical segment of the multifamily inventory that forms the foundation of the nation's workforce housing stock. Trent D. Brooks President and National Head of Production ADVERTORIAL We see an opportunity to raise our market share by expanding Red's lending platform to serve additional markets across the country and diversifying its menu of financing solutions. " " What is the biggest challenge you anticipate in 2018 as a direct lender or financial intermediary in commercial real estate? When lending in a particular market it is important to ensure that the lending parameters are met with respect to key metrics such as basis, tenant availability for that particular commercial property type, and understanding the sponsors' exit strategy (that would synchronize with a lender's assurance of exiting a loan with debt metrics such as debt yield) in that particular market. The strength of our value-add lending program lies in providing a sponsor with a loan structure that matches up well with its business plan. Where do you see the biggest opportunity for your company in 2018? As a national value-add lender, our ability to bring multiple products to the table and provide bridge loans that offer a floating rate, fixed rate or hybrid rate (a part fixed and part floating rate loan in a single note) alternatives to match a sponsor's optimal loan structure. Combined with the ability to offer creative loan structures to accommodate a sponsor's business plan, this will be a key differentiator for us versus our competition. Furthermore, our approach to conducting the diligence process upfront will not only protect our clients, but also provide them with a certainty of execution. What is your company's lending strategy for 2018? Are there any new lines of business or opportunities that you are pursuing? Our strategy is to continue on the path of prudently increasing loan volume and deepening our market share, while lending with loan structures that mitigate risk but also provide the sponsor with a solid structure to execute their business plan. We will be increasing our presence in the bridge-to-agency market, note financing (note-on-note) market and subordinate debt areas with the use of our internal funding sources. What property sector of commercial real estate will experience the most activity in 2018, and why? The industrial sector is growing rapidly given the growth of e-commerce. Municipal infrastructure development is expected to also drive demand for space. We think there is healthy demand for warehouse/ distribution facilities near major urban areas. The office sector will continue to be redefined by creative office environments and rapid growth of co-working office companies. The growth in renter households should continue to define multifamily opportunities in the near term. What advice are you giving your borrowers to help them maximize their lending strategy in 2018? Sponsors should continue to be involved with a commercial property type in their realm of expertise. Deep familiarity with the property type and all the aspects of that market are crucial (basis, regulations, leasing velocity, etc). An example may include an office property with an adaptive reuse to creative office (from another property type i.e. industrial) in not only the general market (i.e. Miami) but also in a defined submarket of the general market (i.e. Wynwood). David A. Cohen Managing Director ADVERTORIAL The strength of our value-add lending program lies in providing a sponsor with a loan structure that matches up well with its business plan. " "

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