Houston Economy at a Glance – January 2019

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.

This document can be viewed here: Houston Economy at a Glance – January 19

Please contact us if you have any questions about the information provided.

Closed: Refinance of 288-Unit Storage Facility

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.”

Closed: Cash-out Refinance of a Multifamily Property

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.

$26.1M Financed for Texas Office Portfolio

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.”

Shopping Center Deal Closes at 69% of Purchase Price

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.”

CLOSED: Post Oak Square

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.”

CLOSED: The Market at Crenshaw

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.

CLOSED: West Houston Apartments

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.

CLOSED: Town Center Plaza

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.”

Fannie Mae Green Loan

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.”