Texas Real Estate Business

FEB 2018

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

Issue link: https://texasrealestatebusiness.epubxp.com/i/935994

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What is the biggest challenge you anticipate in 2018 as a direct lender or financial intermediary in commercial real estate? Due to increases in land values and construction costs, it is becoming more difficult to underwrite loans. This has resulted in lenders opting to decrease the amount of capital placed. However, given the development and market expertise that exists at Trez Capital Texas, we are well-positioned to effectively underwrite proposals and continue to lend competitively in this changing environment. Where do you see the biggest opportunity for your company in 2018? Trez Capital Texas sees immense growth potential in construction financing. This sector already generates strong returns for our investors, and we expect to further grow our business and market leadership in this segment in 2018. What property sector of commercial real estate will experience the most activity in 2018, and why? Multifamily developments in certain geographic areas are of particular interest to Trez Capital Texas in 2018. We see strong fundamentals for sustained growth in this segment and expect to increase our investment correspondingly in the year ahead. What advice are you giving your borrowers to help them maximize their lending strategy in 2018? At Trez Capital Texas, we encourage borrowers to come to us with a clear business plan that is well articulated and researched. Providing us with complete and relevant information at the application phase allows us to efficiently review the request and, in turn, provide borrowers with a timely response. John Hutchinson President ADVERTORIAL Construction financing already generates strong returns for our investors, and we expect to further grow our business and market leadership in this segment in 2018. " " 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? Any new lines of business or opportunities 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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