The December 2018 issue of the Houston Economy at a Glance courtesy of the Greater Houston Partnership has been released. Highlights of this month’s update include:
- The Metro Houston area should end 2018 at 3.2 million jobs, an increase of over 600,000 over the past 10 years. Only New York, Los Angeles, and Dallas created more jobs over the same period. The Metro Houston area is forecasted to add 71,000 jobs in 2019; health care, construction, and administrative services are projected to experience the most growth.
- Over 4.7 million square feet of retail space is under construction in Houston, with 75% of that preleased.
- Leasing of office space is picking up. The strongest commercial sector is the industrial market. Developers continue to add apartments to the market.
- West Texas Intermediate (WTI), the U.S. benchmark for light, sweet crude, hit $51.70 in early December. Several factors have contributed to the falling oil prices, including sanctions on Iran, OPEC production cuts, and concerns about the pace of oil demand growth.
- The EIA expects that supply and demand will be balanced in 2019. EIA forecasts WTI to average $54 per barrel in 2019, down sharply from $65 in the November update.
- The drilling rig count continued trending upward, with 1,075 drilling rigs working in the U.S. during the first week of December (up 144 rigs or 15.5% from the same week in 2017).
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Emily Zarcaro, Vice President at Q10 KDH, arranged $26.1 million in non-recourse financing with Silverpeak Argentic for a portfolio of single-tenant office buildings located across Texas. Emily worked on behalf of the borrower to secure a 10-year, fixed-rate loan with 5 years of interest only payments.
“This loan was interesting because of so many unique components and moving parts,” Emily said. “Our borrower sponsor is a foreign national with extensive experience overseas in commercial real estate. In conjunction with a local partner, our borrower team is building an investment portfolio in the U.S. We were happy to secure debt that financed the acquisition of several State of Texas-occupied buildings while simultaneously refinancing three other properties that were previously owned in cash. Silverpeak Argentic closed in a timely manner, and I look forward to working with both sides of this transaction again.”
Q10 KDH Vice President Ryan Watson provided acquisition financing for a 100,000-square foot, grocery-anchored retail center in Houston, TX. Ryan worked on behalf of the buyer to obtain a 10-year, fixed-rate loan from one of Q10 KDH’s life company lenders. The loan closed at 69% of acquisition cost and featured three years of interest-only payments followed by a 30-year amortization on a non-recourse basis.
“The property is well located on Interstate 10 on the east side of Houston and has upside potential with the existing tenant base,” Ryan said. “The buyer wanted non-recourse financing through a life company execution. We were able to offer many options through our vast number of life company relationships and ultimately ended up at a 69% of purchase price loan.”
Q10 KDH Vice President Matt Franke and Associate Michael Borden provided acquisition financing with a regional bank for a retail property in College Station, TX. The transaction closed with a 5 year term. Michael Borden stated, “With the cooperation of the bank, we were able to get from signed application to closing in 37 days to meet the borrower’s deadline.”
Q10 KDH Vice President Ryan Watson was able to secure a 75% leverage acquisition loan for a retail property in Pasadena, TX with multiple “Big Box” tenants. The transaction closed with a 10-year term and a 5.08% interest rate through a CMBS lender. Given the caution in the retail lending environment, especially for big box tenants, Ryan was able to identify a lender who could understand the strong momentum of the market coupled with strong tenant sales to obtain a 75% of purchase price non-recourse CMBS loan.
Q10 KDH Vice President Ryan Watson provided financing with a small-balance Freddie Mac loan for a multifamily property located in Houston, TX. The transaction closed with a 7-year term and a 4.68% interest rate. The Sponsor purchased a property less than two years ago, and through a planned rehab project and better property management, was able to increase the value of the property. Ryan Watson was able to pull equity from the project and provide non-recourse financing with flexible pre-payment options.
Q10 KDH Vice President Emily Zarcaro provided refinancing in the amount of $7,500,000 with Silverpeak Argentic for a Class A office building located in The Woodlands, TX. The transaction closed with a 10-year term, 30-year amortization, and a 4.92% interest rate.
Emily Zarcaro stated, “Our borrower was seeking to refinance a maturing life company loan as well as pull over $3,500,000 out of the property in order to pursue other investments. Additionally, the property is currently 82% occupied due to vacant space being held for a potential expansion by the anchor tenant. We were able to achieve the cash out request through CMBS execution with minimal reserves and limited cash management provisions. Without previous CMBS borrowing experience, leasing and cash flow restrictions were among the clients’ biggest concerns. Silverpeak Argentic did an outstanding job of making the structure look like a life company loan as much as possible.”
Q10 KDH Vice President Larry Peters and Senior Associate Adam Unger provided a cash-out refinance for a multifamily property in a secondary market of Texas. The borrower was looking to continue to hold their asset for at least 15 years and they received a 15-year term, full interest only and returned cash to the partners.
Larry Peters stated, “The borrower received an approximate discount of 33 basis points in their interest rate for agreeing to implement water saving devices. That will save $1 million in interest over the life of the loan. Coupled with the interest only component over 15 years and the water saving cost, the borrower reduced their loan payment while putting $3 million in their pocket and still own the asset.”
HOUSTON — Q10 Kinghorn, Driver, Hough & Co. (Q10 KDH) has arranged two refinancings totaling $44.5 million in the Houston area. In the first transaction, Larry Peters of Q10 KDH arranged $29 million for two undisclosed multifamily assets totaling 642 units. These deals included a 15-year interest-only loan for the first property and a floating-rate loan for the second property. In the second transaction, Buddy Hopson of Q10 KDH placed a $15.5 million loan through a regional bank for the refinancing of Ravenswood Village Shopping Center, a 121,694-square-foot retail center in Huntsville. Additional terms of the transactions were not disclosed.
Q10 KDH Vice President Dave Holland arranged a cash-out refinance with a correspondent life insurance company lender for a self-storage property in Houston, TX. The non-recourse loan provided 70% loan to value and had a 15-year term. Dave Holland stated, “The borrower had almost paid off a fully amortizing 15-year note and wanted to recapitalize so he could buy out a partner. This non-recourse small loan program was a perfect fit for this long term owner since he was able to lock the interest rate for 15 years near 5%.