Our YE 2018 Texas Market Update has been released. Inside, you will find an overall market outlook, a breakdown of market highlights for Houston, Dallas-Fort Worth, San Antonio, and Austin, as well as graph data.
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Q10 KDH Vice President Travis Fite arranged a $4 million loan for the acquisition of a 55,000-square foot, single-tenant retail property in Allen, TX. Travis worked on behalf of the borrower to obtain a ten-year, fixed-rate loan with correspondent life insurance company, StanCorp Mortgage Investors.
“We were able to secure a ten-year, fixed-rate loan for the buyer of a single tenant gym property in Allen, Texas,” Travis said. “Our correspondent lender, StanCorp was able to get comfortable with the gym tenant based upon a large number of members at this location, not to mention a positive history with this repeat borrower.”
Q10 KDH Vice President Matt Franke arranged $2.35M in debt for the acquisition of a Starbucks-anchored shopping center in metro Atlanta, GA. The Class A retail property featured over 8,300 SF of leasable space and was built in 2006. Matt secured a 5-year loan with a national bank lender.
“Through a referral from an existing client, we were engaged by our New Jersey-based borrower to provide acquisition financing for this Class A Starbucks-anchored retail center in suburban Atlanta,” Matt said. “As part of their estate planning, the borrower required non-recourse financing with prepayment flexibility. These requirements were met by our national bank lender who also provided a 30-year amortization and total lender closing costs of less than $10K, including the appraisal, Phase I and lender legal. We received multiple financing offers for this high quality property, with many interested lenders attracted to the recently renewed Starbucks lease and the strong neighborhood demographics.”
Q10 KDH Vice President Matt Franke and Associate Michael Borden arranged acquisition financing for a 145,000-square foot industrial/manufacturing property located in Columbus, TX. Matt worked on behalf of the borrower to obtain a 20-year loan from a regional portfolio lender. The 15-acre property included multiple manufacturing and distribution buildings and a separate 7,400 square foot office.
“We were able to obtain financing for this sale-leaseback transaction for our repeat borrower, despite the subject’s tertiary location in Columbus, TX,” Matt said. “The property is ideally positioned for the tenant at a central location, allowing access to their San Antonio, Austin and West Texas customers, while also benefiting from its proximity to their Houston headquarters. For our borrower, non-recourse fixed-rate financing was their primary objective, and we were able to leverage an existing bank relationship to provide the needed financing. In a rising interest environment, the fixed-rate loan locks in the borrower’s returns during their projected hold period.”
The team of Larry Peters and Adam Unger of Q10 KDH had a busy 2018, with 2019 off to a similar start and expected to be a solid year as well. Various property types and numerous capital sources were accessed using Q10KDH’s national platform and long-term lender relationships.
The transaction below highlights one of the more challenging requests of 2018 when considering the cumulative borrower demands, but an example of KDH’s ability.
Team closes $5M user industrial acquisition loan Unique transaction needs met with help from Q10 KDH
Q10 KDH Vice President Larry Peters and Senior Associate Adam Unger arranged $5 million for the acquisition of a 75,000 SF industrial property in west Houston. The Class A warehouse includes 2,000 SF of office space. Peters and Unger worked on behalf of the borrower to identify a capital source that could meet all of the borrower’s requirements. The transaction closed with a ten-year term, fixed rate loan with a regional bank.
“Traditionally our firm is thought of as a life company correspondent when investor real estate is desired to be financed,” Peters said. “What made this situation a challenge was the combined demands of the borrower. First, the owner was a user and entity, with no individual as the sponsor. A high percentage of the purchase price (85%) was requested along with a long-term loan (10 years), a fixed rate, no guarantee of the debt, and with no lender fee.”
Q10 KDH is a founding member of Q10 Capital, LLC. In 2018, the Q10 Capital members cumulatively closed loans with 113 different capital sources.
“Our knowledge of working with numerous national and local debt sources proved to be the difference of successfully meeting all sponsor needs or just a few. A debt source was secured who saw past the typical underwriting ratios and lending parameters. They understood the value of starting a relationship with the borrower and continuing a relationship with KDH,” Peters said.
The borrower was referred to Peters through a mutual client who has also worked with Q10 KDH on past transactions. Peters said that he considers referrals to be the greatest honor and a mark of trust, both professionally and personally.
“KDH’s market knowledge and experience to secure the lender able to meet every request was the difference between success and failure,” Peters said. “I believe that relationships still count.”
The January 2019 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 length of the current U.S. expansion (114 months) has led some economists to question if the U.S. is overdue for a recession. Following comments from Federal Reserve Chairman Jerome Powell and forecasters at the National Association for Business Economics (NABE) in December, this has shifted to an outlook for slower growth instead of “no” growth.
Houston leads the country in tech hiring plans for 2019, according to a Robert Half Technology survey of 2,800 tech decision-makers across 28 U.S. cities. Eighty percent of the Houston respondents said that they plan to expand their teams this year.
Harris County has the nation’s third-largest economy, according to data from the U.S. Bureau of Economic Analysis. Adjusting for inflation, the county economy grew 10.9% ($41.3B) from 2012 to 2015.
Growth in the Houston Business-Cycle Index was 6.8% during the three months ending in September 2018, continuing its healthy expansion from the first half of the year.
The spot closing price of West Texas Intermediate (WTI), the U.S. benchmark for light, sweet crude, averaged $66.34 per barrel through the first 11 months of 2018, a 32% increase from the $50.25 average price for the same period in 2017.
The drilling rig count held steady at 1,075 drilling rigs working in the U.S. during the first week of January (up 151 rigs, or 16.3%, from the same week in 2018), according to Baker Hughes.
Q10 KDH Vice President Larry Peters and Senior Associate Adam Unger arranged long-term debt for the refinance of a 288-unit storage facility located in a secondary market in Texas. On behalf of the borrower, Larry and Adam obtained a 10-year, fixed-rate loan at 4.96% interest with an exclusive correspondent life company lender.
“The repeat borrowers of KDH were looking to return costs to the partner,” Larry Peters said. “This non-recourse debt gave them back the cash they were looking for. The interest rate was locked at loan application, which proved to be key in saving the borrowers 25 basis points in the interest rate during an increasing interest rate environment.”
Q10 KDH Vice President Larry Peters and Senior Associate Adam Unger arranged permanent debt for the refinance of a 102-unit apartment complex in Brazoria County, TX. Larry and Adam worked on behalf of the borrower to secure a 20-year, fixed-rate loan with 5-year rate adjustments through a correspondent life insurance company.
“The borrower plans a major addition to the asset and the beauty of this loan is that the lender required no escrow, no future approval, and funded the entire loan without a holdback,” Larry Peters said.
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.”