On Wednesday, May 5th, Kiser Group hosted a virtual Finance discussion to kick off the Virtual Mid-Market Summit series. Advisor Rick Ofman moderated a panel with Clarity Strategic Opportunities’ Matt Beary, Becovic Management Group’s Sal Becovic, Walker & Dunlop’s Dean Huber, Jarrell, Inc.’s Michele Jarrell and A2 Real Estate Group’s Allison Richman.
Watch the Panel
Top Takeaways from the Multifamily Finance Discussion
1. COVID Lending Constraints Remain
Dean Huber: Life companies and banks are seeing no covid reserves while Frannie and Freddie have them in place. High leverage deals and debt coverage seeing 9-12 months P&I and low leverage is seeing none. Some max leverage is getting waived but seeing challenges with anything at max leverage, especially in the retail and non-essential spaces. Some lenders at non-recourse, other lenders do both.
Michele Jarrell: Loan to value is most important to any deal. Finding it tough to get any deal financed 100%, especially in the commercial real estate space. Investors are finding it really difficult to refinance single family homes right now.
Allison Richman: Recently acquired a building at 75% at loan to cost & value, rate 4% – haven’t seen a ton of change in product type year over year. A bit more work now, explaining to do, eviction moratorium, policies & practices you have in place – need to be transparent.
2. Recourse vs. Non Recourse
Matt Beary: I do not use financing that has recourse. Currently refinancing a property with a local bank at 3.5% which are better rates than Freddie currently and has no P&I reserves.
Sal Becovic: Recourse – when you own 100% of everything, it’s not as important. In refinancing deals, non recourse is great. If you don’t have recourse on your balance sheet – it looks better.
Michelle Jarrel: Never had an experience where there was a no recourse option.
Allison Richman: The size of the deal is the important factor to the lender when negotiating recourse vs. non recourse
3. Importance of Lender Relationships
Dean Huber:It’s important for lenders to know you well and understand why you are able to operate at such a low expense ratio or why turnover is low in your buildings, for instance. Recommends doing deals with multiple lenders. Don’t do all deals with one lender, but don’t do each deal with a different lender either. Make sure you’re always getting a competitive bid. Fight for your important terms. Relationships are important and help in this regard. Repeat sponsor deals are usually easier to get done, too.
Matt Beary: Having a good relationship with local banks is key – a local bank just matched Freddie with no P&I reserves.
Allison Richman: Seeing buyers with good bank relationships getting deals done in today’s market. Trust and relationships are everything. Relationships get you in the door, grey area in rates/terms depending on clients and track records. Sponsorship strength & execution is everything.
Michele Jarrell: Banker and lender relationships are critical. How to get a loan on first commercial units – find someone who will walk you through it and explain the difference between single family real estate vs. commercial. Personal integrity and moral compass is important – think of a banker as a partnership and work through things together. Everything is relationship driven “Don’t send me nobody nobody sent” – her father’s saying. You want to know the people you’re doing business with. Talk to people!
4. Lessons Learned from Past Deals
Matt Beary: Had a loan that was supposed to close during COVID in March last year, banker called past business hours and said they weren’t funding. Lender even had us buy rate protection ahead of time. Look to your real estate broker to help provide lending resource introductions and steer you away from lenders that might not be a good fit for you.
Sal Becovic: Deals that blow up force you to get out of your comfort zone. Getting to know more banks and talk to different sources makes you a lot more sophisticated.
Allison Richman: Relationships from a lender to a new lender – instead of just cold calling. Use your relationships to your advantage.
Michele Jarrell: Nothing is guaranteed. Any deal can always fall through no matter the circumstance. Just because a bank says no, doesn’t mean it’s a bad deal. It just doesn’t fit their mold. Keep looking for opportunities – there’s money out there.
5. Advice for Large Portfolios
Dean Huber: Manage your recourse as best as you can. Use it sparingly. If you need guarantees, try to get several. Have REO in electronic form and update every six months, evaluate sub performers and defend action plan. If you have a solid REO, it will facilitate good planning. Stagger maturity. Don’t want to refinance a bunch of assets at once. Small and large owners: stay in the know, economically speaking. Join weekly emails and newsletters that give you insights.
Connect with the Panel:
- Matt Beary, Clarity Strategic Opportunities, Matt@csopp.net
- Sal Becovic, Becovic Management Group Inc, firstname.lastname@example.org
- Dean Huber, Walker & Dunlop, DHuber@walkerdunlop.com
- Michele Jarrell, Jarrell, Inc. email@example.com
- Allison Richman, A2 Real Estate Group, firstname.lastname@example.org
- Rick Ofman, Kiser Group, email@example.com
Join us for a multifamily technology discussion on Wednesday, May 12 at 12:00 p.m. Central.
mid-market summit finance panel mid-market summit finance panel