Tag Archives: Don Garner

Lending the way: A good buy is hard to find

In 2013, NorthMarq Capital arranged $10.1B in loans. In 2014, that number rose 20 percent to $12.6B, reports Managing Director James Dumars.

James Dumars Managing director NorthMarq Capital

That doesn’t mean the market isn’t competitive, notes DuMars, who locked in a low-leverage $25M loan at 3.64 percent for 10 years. He is also financing a $56M class-A shopping center purchase at a rate around 4 percent with full-term interest only and 75 percent loan-to-purchase price.

“Lenders are seeking good, quality real estate with quality sponsors,” says DuMars. “They will get aggressive on rate and terms to win the business. I doubt any lender would say 2015 will be any less competitive than 2014 has been.”

Andrew Van Tuyle Chief of aquisitions BH Properties

Andrew Van Tuyle
Chief of aquisitions
BH Properties

A good buy exists, but is hard to find, says BH Properties Chief of Acquisitions.

“I’m very curious to see the business plan that buyers have when buying some of these apartment deals at record numbers and incorporating gimmicks into their debt like high leverage and long-term interest only,” he says. BH Properties pays cash for its assets, which he calls an advantage as it is not reliant on debt markets and timing, and wants to leverage more than $100M in acquisitions in 2015.

CMBS lenders are on track to originate $100B, notes DuMars.

“My banker friends tell me that they are losing many loans in their portfolios to CMBS,” he says. “I expect this to continue in 2015. There is high demand for the paper and delinquency rates are low.”

Don Garner                Executive vice president Alliance Bank of Arizona

More banks are re-entering the real estate sector, says Alliance Bank of Arizona Executive Vice President Don Garner.

“The liquid lending market benefits borrowers and brings about short-term memories as to the last real estate cycle,” adds Garner. “Banks tend to be like lemmings and follow one another, to the extent that often times structure and margins are the No. 1 things that suffer.”

The 10-year treasury yield dropped, despite an overwhelming sentiment of rates reaching 4 percent in 2014. Instead, they’re hovering around 2 percent as of press time. NorthMarq’s DuMars is reluctant to offer a forecast on treasury rate, but suggests the risk-adverse investor refinance.

“Spread movements typically adversely correspond to the change in the UST,” says DuMars. “Historically, I’ve seen spreads compress due to competition between lenders. There is room for spreads to compress and there is a lot of competition to get money out. My guess is that spreads may narrow.”

Van Tuyle says lenders are not pricing the appropriate risk into today’s deals.

“I believe there is a real refinance risk for many of the loans that are being made because we could see a real rise in interest rates without a correlative inflationary pressure on rents,” he says. “Without amortization or a long-term fixed rate, many of those deals could be difficult to refinance.”

In October, DuMars observes, when the 10-year note’s yield plummeted by 1.8 percent (180 basis points), “many lenders retreated to the sidelines.”

“Lenders like stable and calm,” says DuMars. “Volatility shakes them up. During these few days, some life companies instituted rate floors and many CMBS lenders refused to quote spreads. As soon as the 10-year stabilized, everything went back to normal.”

Alliance’s Garner predicts the Federal Reserve’s tapering of its quantitative easing process (which was announced in late 2013) will lead to an increase in rates. BH Properties’ Van Tuyle agrees.

“My instincts say [rates] have to rise, to the point where I think we will see a 3+ percent 10-year Treasury in 2015. This has to be quantified to say that if there is a major market correction in the Dow Jones, there likely will be a flight to bonds, which actually could bring the yield lower in the short term and delay the inevitable, which I believe is an increase in 10-year treasuries to 3.25 percent.”

The Phoenix Metro market’s hot spots are predictable with class-A and -B multifamily properties topping Van Tuyle’s list. Industrial is stable, he adds, noting that Phoenix’s retail situation has a unique challenge to overcome.

“Retail is still tricky because Phoenix was so overbuilt,” says Van Tuyle. “Often, there are two shopping centers at the same intersection and it is a case of the haves and have nots. Once center will be stabilized at 95 percent occupancy, and the other will have under 30 percent occupancy. Location, access and parking are keys to making a retail deal work, and making sure you’re properly represented in the brokerage community is also critical.”

“Everyone is gearing up,” says DuMars. “All sectors look good for Phoenix. We have lenders seeking all of the major property types.”

Land Advisors, WEB

Metro Phoenix Land and Housing Forecast examines ‘refined opportunity’

While the industry has experienced sub-par housing activity over the past 11 months, the anticipated pace of growth going forward depends on a few factors, not the least of which is credit and qualification conditions, household formation, employment growth, the cost of new construction and outsiders’ perceptions of the local market. What are the expectations for growth in the nation’s economy, real estate capital markets, and residential real estate? Will these perceptions of a “refined opportunity” in real estate change how you operate your business now and in the future?

On Wednesday, December 10, 2014 the Land Advisors Organization will bring together a distinguished group of industry experts including Tim Sullivan (Meyers LLC), Nick Taratsas (DMB), Joel Shine (Woodside Homes), Mike Orr (Arizona State University, W. P. Carey School of Business), Don Garner (Alliance Bank of Arizona) and Matt Cody (Cachet Homes), to provide their considerable insight. Greg Vogel, CEO of Land Advisors Organization will moderate the panel.

Event Information:
DATE:        Wednesday, December 10, 2014
TIME:        2:30 Registration, 3:00 Program, 5:00 Networking Reception
LOCATION:    Sheraton Downtown Phoenix
COST:        $100 per person; $75 for public agencies and officials ($25 increase after Dec. 3)
REGISTER:    www.landadvisorsevents.com

All net proceeds benefit New Pathways for Youth and Arizona State University Real Estate Programs.

Since 1989, New Pathways for Youth has transformed the lives of more than 2,600 at-risk youth through mentoring. Their programs are designed to build self-esteem and leadership skills, increase school attendance and performance, end gang activity and violence and decrease substance abuse.

The Division of Real Estate at the W. P. Carey School of Business at Arizona State University provides the research and experience-based expertise necessary to address challenges in the contemporary real estate industry. Real estate faculty members bring real-world expertise into the classroom. Their collaboration and vision have contributed to an international real estate projects emphasizing ethical and responsible development that enhances community value and vibrancy and is sustainable and financially successful.

For companies interested in supporting this event and its chosen charity, they can review the sponsorship opportunities.

Garner

Leadership spotlight: Don Garner

Don Garner
Executive vice president
Alliance Bank of Arizona
alliancebankofarizona.com

Garner is executive vice president and statewide real estate manager for Alliance Bank of Arizona’s commercial real estate group. Garner has more than 25 years of experience in commercial and residential lending in Arizona and has been with Alliance Bank since its inception in 2003. He  is an active member of both the Phoenix and Tucson communities. He currently serves on the Board of Directors of the American Heart Association and Special Olympics Arizona. Prior to relocating to Phoenix in 2005, Garner resided in Tucson for 15 years. He is the Past President of the Tucson Conquistadores and former Chairman of La Paloma Family Services in Tucson.  He is also a member of the National Association of Industrial & Office Properties (NAIOP) and the Urban Land Institute.

Best advice received: “I’ve been lucky to have had some great mentors throughout my career who gave me a lot of great advice. But the one that comes to mind most is from my dad who said if your work is of great quality and quantity that deserves a promotion, you’ll never need to ask about it, it will come on its own.”

Surprising fact: “I used to race stock cars and I caddied on Tour.”