🌽 Midwest Markets Rise, Student Housing Flourishes, M&A Deal Wave Incoming

Good Morning TIM subscribers,

In our first weekly bridge loan news:

We dive into the robust growth of the U.S. industrial real estate sector, explore lucrative opportunities in student housing, and navigate the intricate landscape of M&A deal-making. From major joint ventures in real estate to the latest financing avenues for tech startups and potential pitfalls in the market, we've got the insights every investor, business owner, broker, and finance professional needs to thrive. Let’s get started!

Read Time: 5 minutes

MARKET RATES

🏙️ GUESS THIS ICONIC BUILDING?

This iconic residence was the brainchild of the legendary American architect and is nestled in the woods of Pennsylvania. Construction for the 5,300-square-foot building began in 1936 and reached completion in 1939. While the exact construction costs remain a mystery, it’s known that the initial budget was around $35,000, which exceeded to about $155,000 upon completion - equivalent to $2.8 million today. This cantilevered house comprises several levels, terraces, and a guest house and stretches over a waterfall, making it seem as if it’s floating.

If you guessed Fallingwater, you would be correct. This masterpiece, designed by Frank Lloyd Wright, stands as a symbol of architectural innovation and nature’s beauty intertwined. With its cantilevered design over a waterfall, it’s a residence that’s genuinely “going with the flow.”

For more info, check out this guide if you want to visit.

📈 MARKET PULSE

Real Estate
Per CommercialEdge's August report, the U.S. industrial real estate sector is showcasing its resilience. Rents have surged by 7.5% year-over-year, reaching an average of $7.39 per square foot, while the national vacancy rate has dipped to a mere 4.4%.

Opportunity:
⮞Investors can target Midwest industrial markets, such as Nashville, Detroit, and Columbus, that are outperforming with low vacancy rates and rising rents for acquisitions.

⮞Brokers can use this regional data to guide clients toward markets with the best potential for growth and returns.

⮞For CPAs, advising clients on managing finances in a high-interest-rate environment and assisting businesses in understanding and maximizing tax credits and incentives related to manufacturing and EV production becomes crucial.

Real Estate
Investors, like Blackstone and Hudson Pacific Properties, are focusing on student housing in Sun Belt states, capitalizing on the higher rent growth of this "recession-proof" sector than traditional multifamily properties.

Opportunity:
⮞With nationwide rent growth averaging over 7% and some universities experiencing growth of over 20%, investors can capitalize on these robust returns.

⮞Brokers can focus on these regions, identifying properties catering to the student population.

⮞With the city offering reduced rents and incentives for specific projects, CPAs can advise on the financial implications and benefits of such incentives to potential investors.

M&A
According to a recent survey by Grant Thornton, industry professionals are gearing up for a resurgence in deal-making, with a whopping 99% predicting a spike in deal volume in the coming months. 66% of these professionals are innovatively exploring alternative financing methods, with a notable 45% leaning towards increasing equity components to sidestep steep lending rates.

Opportunity:
⮞For business owners, especially those considering an exit or strategic acquisition, the current environment, marked by innovative financing methods and corporations flush with cash, presents a golden opportunity to buy companies at depressed values or position their businesses for acquisition.

⮞Investment bankers can expand their service offerings, advising clients on these newer, more flexible financing options and focusing on smaller transactions that are becoming more prevalent in the current market.

⮞CPAs can assist in accurate business valuations and financial due diligence, ensuring their clients get the best deal.

🤝 TEAM UP

Real Estate
Arixa Capital has teamed up with Oaktree Capital Management in a dynamic $100M joint venture to originate senior secured loans for residential and commercial real estate in regions like California and Arizona.

Opportunity:
⮞For investors, this means a more accessible and reliable source of capital for their projects, especially in the booming urban infill markets of the Western U.S.

⮞CPAs and brokers can advise their clients on these new avenues, ensuring they're well-positioned to capitalize on this influx of capital.

Real Estate
Blackstone, Hudson Pacific Properties, and Vornado, backed by a $185M construction loan, are teaming up to build a 266K SF campus in Manhattan’s west side-driving economic growth, creating jobs, and rejuvenating a key waterfront site.

Opportunity:
⮞Investors should recognize this trend and consider diversifying their portfolios by investing in properties suitable for content creation, given the lucrative returns evident from Blackstone's previous investments in Hollywood studio campuses.

⮞Brokers can leverage this trend by scouting for underutilized spaces that can be transformed into content production hubs and facilitating deals between private investors and city authorities to capitalize on potential incentives and reduced rents.

⮞CPAs can leverage this opportunity by offering specialized advisory services to stakeholders involved in similar projects, ensuring optimal financial planning and compliance.

💰 STACKING CHIPS

Equipment
Post Road Equipment Finance (PREF) is stepping up, announcing a boost to its non-recourse senior warehouse facility from $550 million to a whopping $700 million from Wells Fargo Bank, which signals a thriving environment for equipment financing.

Opportunity:
⮞Business owners can capitalize on this by securing more favorable loans for equipment needs.

⮞Brokers and CPAs can leverage this strengthened banking relationship to negotiate better deals for their clients and offer a broader range of financing solutions.

Tech MCA
Seattle's Lighter Capital, a revenue-based lender, has unveiled two fresh funding facilities totaling $130 million, targeting startups in the U.S., Canada, and Australia.

Opportunity:
⮞Startups and businesses in the tech sector can secure capital without diluting ownership or relinquishing board seats.

⮞CPAs and MCA brokers can guide clients toward this non-dilutive funding option, especially if they're wary of traditional VC financing routes.

💲 LET’S MAKE A DEAL

M&A
By providing Lion Equity Partners with a robust $26.4MM credit facility, GBC played a pivotal role in acquiring Country Life, LLC, a prominent player in the natural supplements and personal care arena.

Opportunity:
⮞Business owners can leverage such reliable partnerships to ensure smooth transactions, especially in industries requiring specialized knowledge, like the supplements market.

⮞Investment bankers can capitalize on these innovative financing structures to offer their clients more attractive and less restrictive deal terms.

⮞CPAs can leverage ABL as a strategic acquisition tool, especially when traditional financing might fall short.

Real Estate
Carmel Partners secures a $360 million construction loan from Wells Fargo Bank to transform the historic Washington D.C. Marriott Wardman Park hotel into two 90-foot residential buildings while adding two acres of green space in the heart of the city.

Opportunity:
⮞Investors can consider diversifying their portfolios by investing in luxury and affordable housing units catering to a broader demographic.

⮞Brokers can leverage this community sentiment to guide potential investors toward opportunities that align with the area's evolving housing demands, ensuring long-term returns and tenant occupancy.

😲 DIDN’T SEE THAT ONE COMING

Real Estate
Vella Group's defaulted on a $79 million loan from Madison Realty Capital. This adds to the growing list of properties in the region facing financial hiccups and underscores the importance of understanding loan structures, especially in a fluctuating interest rate environment.

Opportunity:
⮞For investors, this could mean acquiring properties below market value.

⮞Brokers can benefit by ensuring their financing agreements are resilient to market fluctuations and offer hedging options, especially during interest rate hikes.

⮞CPAs can capitalize on this by staying informed about market dynamics and advising their clients on the best financing options.

Scams
The IRS has flagged a surge in ERC scams, where crafty promoters make grand promises about the credit, only to leave businesses facing penalties.

Opportunity:
⮞While the ERC can offer substantial tax breaks, falling for these scams can lead to hefty IRS penalties. Business owners should consult a trusted tax expert before diving into such claims and be wary of unsolicited offers that sound too good to be true.

⮞CPAs and brokers should position themselves as trusted advisors, offering guidance on the ERC by hosting informational webinars, workshops, or consultations to educate businesses about the ERC's genuine benefits and how to steer clear of scams.

🤵 LENDER LOUNGE

Looking to close your next CRE deal? This week’s bridge lender could help:

Time to Close: 2-3 weeks closing from term sheet signing
Paperwork Required for LOI: Property Address & Rent Roll
Min to Max Loan: $1M-$50M (sweet spot is $3M to $15M)
Min FICO Score: None
Interest Range: 9.75% to 12%
Loan-To-Value: Up to 70%
Origination Fee: 2 pts
DSCR: None
Due-Diligence Fee: $5K to $20K based on the size of the loan
Collateral Requirements: Multifamily, Mixed-use, Land, Industrial, Condo, Office
Repayment Terms: Interest-only for one year
Pre-Payment Penalty: 6-month minimum on 12-month loan
Extension of loan: Yes
Geography: New York, North Jersey, South Florida, Dallas, Houston
Refinance into a longer-term loan: No

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