National Retail Properties, COPT, Equity One, Rouse Among Several Raising Capital
A number of lenders see more capital coming back into
commercial real estate in 2012 in much greater volumes and across multiple lending sources.
All of the 20 institutional lenders with whom Jones Lang LaSalle met with during last week’s Mortgage Bankers Association conference in Atlanta indicated a stronger appetite or allocation for placing commercial real estate mortgages in 2012.
Jones Lang LaSalle also partnered with Penton Media Research on a proprietary survey that compiled feedback from 186 borrowers and 136 lenders that together comprise a total median $73.3 million in commercial real estate asset value.
In the survey, lenders reported positive expectations for 2012 funding aims including a 12% uptick in expected capital placement this year.
"We expected to hear bold predictions from all of the lending sources along the capital stack and they didn't disappoint with strong inclinations to place commercial real estate debt," said Tom Fish, co-head and executive managing director of Jones Lang LaSalle's real estate investment banking business. "We were pleasantly surprised with lenders' acceptance of risk as more indicated they had cash flow for the secondary markets and property types, indicative of lenders moving up the risk curve."
"While absolute borrowing rates are at historic lows, lenders view commercial real estate mortgages as attractive investment opportunities versus alternative bonds or other fixed-rate alternatives. That should result in larger allocations to commercial real estate this year from life companies, commercial banks and CMBS originators," added Mike Melody, the other co-head and executive managing director.
The lenders Jones Lang LaSalle surveyed agreed, indicating an increasing trend that has been on the move the past two years. Lender financing in 2011 increased an average 11% over 2010. Lender respondents expect 2012 financing to increase even more with a 12% improvement over 2011.
2012 lender expectations highlights were as follows:
- Financing in 2011 increased an average 11% from 2010. Respondents expect 2012 financing availability to increase 12% over 2011.
- Apartments represent the best investment opportunities as 76% chose the product type. Another 48% of lenders worry the most about hotel loans.
- Lenders indicated that 62% of loans closed are for long-term and 38% are for short-term loans. Those percentages aren't expected to move much with 2012 long-term expectations at 64% and short-term at 36%.
- Following a volatile 2011, CMBS originators are back in the market in a big way in 2012, as volumes are expected to rise as high as $50 billion this year.
Capital Raisings & Property Financings
National Retail Properties Inc.
in Orlando is raising $287.5 million through the sale of 6.625% Series D Cumulative Redeemable Preferred Stock. The company intends to use the net proceeds to redeem its outstanding preferred securities and repay debt.
Corporate Office Properties Trust
in Columbia, MD, entered into a $250 million term loan agreement with the option to expand the amount by $150 million, for a maximum loan of $400 million. The loan has a 5-year term and a variable interest rate of LIBOR plus 1.65% to 2.4%. The company is using proceeds to repay debt.
Equity One Inc.
in North Miami, FL, closed a $200 million unsecured, 7-year term loan. The loan can be increased to $250 million through an accordion feature and bears interest at the annual rate of LIBOR plus 190 basis points subject to a pricing grid for changes in the company's credit ratings. The company also entered into interest rate swaps to convert the term loan's LIBOR rate to a fixed interest rate of 3.46%. Proceeds from the financing are being used to pay down outstanding amounts on the company's $575 million revolving credit facility and for acquisitions.
Rouse Properties Inc.
in New York launched a rights offering of common stock. An affiliate of Brookfield Asset Management Inc., which together with its consortium partners, beneficially owns approximately 37.53% of the company's common stock, has committed to purchase all of the unsubscribed shares such that the gross proceeds to Rouse will be $200 million.
Franklin Street Properties Corp.
entered into a loan of up to $106.2 million with its FSP 50 South Tenth Street Corp. subsidiary. The loan includes a term component in the amount of $76.2 million, which was used to repay a loan from Bank of America. The loan also includes a revolving line of credit of up to $30 million. The proceeds are to be used for lender-approved tenant improvement costs, leasing commissions and other incentives necessary to lease space at the 12-story, 486,000-square-foot office building in Minneapolis. The loan matures Dec. 31, 2013.
Brookdale Senior Living Inc.
in Nashville secured $77.9 million of first mortgage acquisition financing and $15 million of seller-financing. The $77.9 million first mortgage facility has a 10-year term; 75% of the facility bears interest at a fixed rate of 4.21% and the remaining 25% at a variable rate of 30 day LIBOR plus a margin of 276 basis points. The $15 million mortgage loan has a two year term and bears interest at a fixed rate of 7%. Brookdale used the proceeds to acquire nine communities with a total of 1,295 units for $121.3 million. The communities had previously been operated by the company under long-term leases that were accounted for as operating leases. In addition, the company obtained a $63 million first mortgage loan secured by one of the company's communities. The loan has a 5-year term and bears interest at a variable rate of 30 day LIBOR plus 300 basis points. The company repaid a $62.8 million first mortgage loan that was scheduled to mature in 2013.
Pebblebrook Hotel Trust
in Bethesda, MD, executed a $47 million non-recourse, secured loan with PNC Bank at a fixed annual interest rate of 4.25%. The loan has a term of five years and is secured by a first mortgage on the company's 252-room Argonaut Hotel in San Francisco. Proceeds from the loan will be used to pay down debt.
KBS Legacy Partners Apartment REIT Inc.
entered into an early-rate loan lock application with CBRE Capital Markets Inc. and secured an interest rate of 3.93% on a seven-year $32.5 million mortgage loan. It submitted a good faith deposit of $650,000, which amount will be refundable upon closing of the loan. Payments under the loan will be interest-only for the first two years of the loan followed by payments of interest and principal with principal calculated using an amortization schedule of 30 years for the balance of the loan. The loan will be secured by a 504-unit Class A apartment complex in the Valley Ranch community of Irving, TX.
Hudson Realty Capital LLC and RXR Realty LLC
both in New York have launched a commercial real estate lending platform to originate and/or purchase commercial real estate debt assets. They will focus on first-mortgage bridge loans as well as B-Notes, mezzanine and preferred equity opportunities in the New York Tri-State region. The joint venture will generally target loans or make investments in amounts between $10 million and $50 million throughout the capital stack.
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