Post by Sunny Sajnani
Metropolitan Capital Advisors (“MCA”) recently closed a very difficult transaction: the refinance of the Sunwest Portfolio—a collection of 25 single and multi-tenant properties scattered across eight states. Of the 25 properties, 20 were owned fee-simple while the remaining properties were subject to ground leases.
Our client was faced with a maturing conduit loan on a much larger pool of properties (60-plus assets across 15 states). MCA identified and carved out a select group of these assets to finance into a new permanent mortgage. Simultaneous with the refinance, the sponsor was able to sell nine properties to pay off the existing debt in full…ALL ON THE SAME DAY!
Reflecting on the events that took place and the decisions that were made during the preceding nine months in order to consummate the deal, this transaction supports the notion that using an experienced finance intermediary (preferably Metropolitan Capital Advisors) will add significant value to your capital requirement pursuits.
Below is MCA’s Top 10 list on how our firm delivered superior results on the Sunwest Portfolio:
1. Underwriting: MCA quickly mobilized to underwrite a transaction based on today’s market assumptions. MCA has a deep bench of producers and analysts that have underwritten thousands of deals. We were able to tear apart the Sunwest Portfolio within a couple days and present a proposal to the client that met all of their objectives. The proposal carefully analyzed which properties were financeable along with providing the client with a solid feel of what loan terms they could expect.
2. Confidence: Based on the initial underwriting analysis, MCA was confident with respect to its ability to deliver the proposed financing package and, indeed, our firm beat its competitors for the business. One competitor stated the deal was “too much work” and the other competitor had no idea how to structure a complex multi-property refinance.
3. Capital Sourcing: The Sunwest Portfolio was a very difficult transaction due to complexity and number of properties involved. Most lenders simply don’t want to do that much work. However, MCA presented the transaction in such a simplified manner that lender candidates easily absorbed the details. MCA reached out to over 50 capital providers and found an entrepreneurial CMBS lender that recognized the strong qualities of the deal.
4. Market Volatility: MCA has the ability to be agile—when the markets move abruptly, we immediately adjust our strategy. The initial marketing of the Sunwest Portfolio occurred in July 2011, just weeks before the U.S. downgrade by Standard & Poor’s, which, in turn, caused a massive pullback in the CMBS market. MCA stopped its efforts knowing the CMBS market would stabilize after Labor Day…which it did. Upon “re-launch” post-Labor Day, CMBS Lenders were again hungry for deals and we had immediate interest.
5. Certainty of Execution: MCA does not like to hold auctions between potential lenders or equity providers. We prefer to award the business to the capital provider that puts their “best foot forward” from the beginning. We received three very good quotes that were all competitive—proving the CMBS market is fairly efficient. The client selected the lender who offered some bells and whistles that separated their proposal from competitors. However, the lender was not selected based on a lower interest rate. Rather, the client selected the lender who offered the highest degree of certainty they would execute the transaction as advertised.
6. Processing: MCA has an in-house Closing Department that is responsible for coordinating tenant estoppels, SNDAs, surveys, site inspections, legal, etc. This is a HUGE “value-add” to our clients that do not have the time or patience to coordinate all the nuances of getting a loan processed and closed. You can only imagine the amount of processing required for 25 property portfolio across eight states!
7. Third-Party Reports: Not only does MCA coordinate the delivery of due diligence and arranging site inspections for all the third-party reports, we also respond quickly when the draft reports initially come back with unfavorable commentary. On the Sunwest Portfolio, the Property Condition Assessments (PCAs) contained numerous comments regarding repair issues that could have jeopardized the transaction. MCA quickly demonstrated that a majority of these repair issues were the responsibility of the tenants. MCA got the tenants to acknowledge the required repairs in their estoppels versus burdening the proposed loan.
8. Loan Structure: MCA’s strongest suit is to come up with creative solutions to problems “on the fly.” When the new lender came up with a “case of the shorts” on loan proceeds, MCA negotiated a cash flow sweep versus putting the lender requiring upfront reserves for capital and tenant improvements. MCA also raised additional proceeds via a mezzanine loan.
9. Closing: MCA’s Closing Department has consummated over 1000 transactions exceeding over $8.5 billion. Our Senior Closer coordinated the closing of the refinance to occur simultaneously with nine property sales from the existing portfolio.
10. Client Appreciation: MCA works hard to close deals on behalf of our clients. Customer satisfaction with repeat business is our No. 1 GOAL. Following the Sunwest Portfolio closing, MCA immediately entered into a discussion on our client’s next deal. Mission Accomplished!!!
The value of using an experienced finance intermediary (i.e. MCA) was a reoccurring theme throughout the Sunwest transaction. MCA is not only fearless in the wake of difficult deals—we embrace them with open arms. Clients see the true value of having our firm on their team, especially when times get tough. Once the value perception is acknowledged, Clients keep us in the loop on all of their real estate capital requirements.