All Forum Posts by: Chris Winterhalter

@Ben Bakhshi Are you referring to a "corporate credit tenant", someone with a national presence either public or large private?  In this area you definitely have a lot of trends.  

From a macro level you could look at what industries are performing well however real estate & the economy are still so local especially with small business.  I think bars and restaurants in urban cores will continue performing well over the next 3-5 years as food culture & family structure continues to progress (however these are generally high risk businesses).  I think even more than picking the right industry (from the small business level) properly underwriting your tenant can provide the most success.  Beyond that making sure that the tenant and your building are a good fit (now & 5+ years down the road) is extremely important.  I'm not really sure if that answers your question but I took a stab.  

@Chris Stabile 

Welcome to BP! You could partner with an experienced developer that specializes in the property type you are going after. I would imagine you need to find distressed product to make the upgrades pencil. Are you going after historic? There's obviously a lot redevelopment in urban cores (warehouses etc) that are perfect mixed use developments. Depending on what price point you are talking about just bringing the sustainability rebate/grant/credits etc experience might not make sense for the developer (they would generally contract with a consultant to handle this). However if you are also bringing capital to the table then I think you could find a solid JV partner. Also like recommended I would explore the site, learn as much as you can about the basics & continually build on that base. Good Luck!

@Reginald Currie 

I would look for a local bank with a construction appetite in the area.  That's probably going to be your best bet.  Beyond that you could find a niche bridge lender for the A&D loan but that will come with higher rates.  Either way you'll probably need to bring 25-30% to the table (or more) as most of these lenders don't want to go above 75% LTC (with experienced developer). 

What's your end game on the site?  

I have a 120' long and 6-8' high concrete retaining wall that needs to be demoed & replaced (low chance of being repaired).  It sits between two complexes and is leaning into my building.  

Looking for a few solid recommendations for retaining wall/foundation contractors in St Louis.  The property is located in the city.  I am fine going back with block or a more cost effective option than poured concrete as long as an engineer signs off on it.  

Thanks,

Chris 

We've handled in-unit updates for good, long standing tenants however that's generally came with a rent increase.  

Recently we've thought of offering move-in baskets at one of our complexes (think tide, dawn, toilet paper, paper towel roll etc).  We are trying to turn around the complex & we think it might improve tenant morale.  However we should probably do something nice for the existing tenants as well.  

@Jeff Rabinowitz it's definitely a great point.  Turnover is our biggest expense as landlords especially with B & C class properties.  Retaining current tenants is something that should constantly be on our mind.  Unfortunately sometimes we can get caught up with so many other things that we forget to make sure our current tenants are happy.  That's where a good property management group can come into play, especially with mid to large apartment complexes.   @Dawn Anastasi I like the unexpected, random gifts, great idea.  

@Scott Malkin 

Someone has a plan for the building, whether they can successfully execute on it or not, that is the question.  Santa Monica is extremely strong, where demand is so high that many investors (institutional etc) feel very safe putting their money to work.  

I met a large multi-family investor in California earlier in the year on a flight.  His company has been around for a long time, upwards of 6,000 units owned in California.  We were talking cap rates and most of his current acquisitions were in the 4's.  They still funded each deal separately with high net worth investors.  I was asking him how he set up his pref returns etc.  And although the preferred returns were lower they always achieved strong double digit returns upon sale.  Demand was always there for strong appreciation.  

Are we coming to a peak in the cycle, I would say yes, at a 3 cap it's hard to make income producing real estate work.  I would probably sell...

@Nate Byer 

Without seeing the broker packet it's hard to tell. I would imagine it's stated somewhere or can be derived from some basic information on the "pamphlet/flyer" (although I've seen some poor "flyers" on smaller multis). How many units? Rental rate in the area? That should quickly tell you what the broker's pro-forma number is (i.e. 12 unit with rents at $500/month = 72k gross, NOI could potentially be 32k). As you stated be very careful with pro-forma numbers especially on smaller multi-family properties. Brokers dealing with smaller buildings tend to be less sophisticated and can provide wildly unrealistic numbers (not always).

Ask for a current rent roll & prior 2-3 year actuals.  Beyond that you will need to understand cap rates in the area you are buying, cost per unit sales comparables (for similar size buildings), and age/condition when comparing to other properties and building your pro-forma.  

I would continue participating and learning on BP among many other sources.  

@Kyle Bentz 

The multi-family investor will tell you multi-families and the commercial investor (let's say retail) will tell you retail.  The multi-family investor will tell you that although cap rates are compressing they are making money on disposing of assets and recycling back into value add opportunities.  It honestly depends what works for you and what aligns to your goals.  If you have zero experience I think it's important to get an education and potentially work (intern) in the industry (if that's what you want).  Unless you have another career path in mind and want to invest on the side.  

Consistency is key, don't jump around.  Get proficient, build a plan, and execute on it.  That doesn't mean you can't invest across different asset classes it just means it's extremely difficult to be an expert at all classes.  

@Manish A. 

MAI is essentially the highest designation you can receive as an appraiser of commercial, residential, and industrial real estate.  Many MAI's will specialize in a specific area of real estate.  I think once you've narrowed down what you want to build it's a good idea obtain a feasibility study.  And it might not set you back more than 15k-20k give or take depending on the requirements, bank requirements etc.

I agree with Joel, speak with an experienced broker regarding potential retail & med office ideas.  I would speak to broker's that have contacts with national credit tenants to lease your space as well.  Talk with local developers that have built and leased space in your area.  You could potentially use their expertise in exchange for developing the site.  The more local experts you speak with the better.  Make it easy for the professionals to meet with you, i.e. stop by office, meet at the coffee shop across from their office, etc.  Make sure you respect their time.  

Good luck! 

Chris 

Doug thanks for your kind words.  

@Randy Benglan 

It's exciting to hear that tourism in your area is booming.  Especially great for your business!  I'm active in the hotel and multi-family space.  Mainly hotel construction and multi-family investment.  A few questions about the hotel deal:

-Do you have hotel operations or investment experience?  

-Are you going to be an owner operator?  If so have you spoken with Best Western about this? It's a smaller hotel however many brands want experience or at least an experienced management company.  You mention you have a business currently. Does that take up most of your week?

-Is tourism coming back in your area or just starting to boom as an undiscovered area?  Always remember that hotels are cyclical.  We are in the upswing of the hotel cycle with many strong years ahead however make sure your feasibility study includes several worst case scenario stress tests. 

-Who performed the feasibility study? Do you have a STR report? What are hotels/resorts currently trading at in your town? What is the next newest branded hotel similar to your proposed property? Has that sold recently and at what cap?

-Have you spoken to experienced management companies in and around the area.  Preferably with experience managing a hotel/resort in your area. 

-I'm guessing with your LTV numbers that you are seeking an SBA loan? I'm not extremely knowledgable about SBA products however they might not be feasible for new construction. You could probably refi into one after 12 months of stabilization however that will take time. And honestly you are looking more like 65% LTC for an A&D loan. Which would put your equity raise to north of 2MM.

-You are estimating just about 94k/key to build.  Does this include all hard and soft costs for development?  Who put together your budget?  Who is your builder?  Do they have experience in the hotel space?  Do they have a reputation for speed and quality?  Who is managing the builder? 

-Regarding the equity raise, you will need to raise a lot more than just the down payment.  You need to fully understand what costs can be financed and what costs can't.  You will also need a significant reserve to weather the first 18-24 months.  Beyond that make sure you account for insurance (property, GL, work comp), taxes, FF&E reserve, utility deposits etc.  

Regarding your main question of how to structure and what to offer investors. What will you be bringing to the table?  Equity?  Experience?  Beyond structuring the entire deal are you going to manage the property or just the management company?  Are you going to oversee construction?  You will need to define exactly what you will be doing as the sponsor.  As far as the structure there are a million ways to slice and dice the deal with you and your investors.  I like to keep it simple.  I also would rather take more equity with no fees and more upside on performance.  If you are putting capital into the deal, managing the entire process from acquisition to development, plus managing the asset after stabilization I would push for a 50/50 split.  It really depends on what the market will accept.  With a new construction deal your investors probably won't see a return for 2-3 years.  So you need to make sure you structure everything in such a way where the return swings the other way on years 3,4, & 5.  You need to offer a preferred return that is acceptable to your investors.  

Good luck!