Author Archives: levercp

Preparing for the Impending Real Estate Downturn

​It’s good to read articles like this to keep things in perspective. Yes, there has been quite a run up in the commercial real estate space recently and the downturn will be inevitable. Having been through a few cycles already, some of the ideas they site are ​good ones. When the market is rising everyone seems to be a genius, but your real estate knowledge will be truly tested when the market moves against you. So getting ahead of the issues by negotiating long-term leases, pursuing rehabs, working on maintenance issues and embracing technology is sound advice. We can either help you in advance or when the poop hits the fan. The choice is yours.

-Adam Horowitz, Lever Capital Partners

Click here to read about how you can prepare for the inevitable real estate downturn

 

Increase in Multifamily Development Costs

​As the cost of lumber, steel, other materials and labor increases, a strain is being put on the multifamily apartment developers​. For a group that raises capital like ours, this makes our job a little harder since the margins tend to decline in this type of environment. At this part of the cycle our job is to determine the strength of the borrower and work towards making sure they have the best team put together. Weaker developers will have a harder time getting financing. You’ll have to show a proven ability to develop similar projects at or below cost to get the lending and investing community excited about your deal.

-Adam Horowitz, Principal, Lever Capital Partners

Click here for more insight on apartment development projects becoming more expensive

 

Is Apartment Development Specifically for Short-term Rental the Future?

There are going to be plenty of pivots regarding the short-term rental market. Many owners and developers are trying to take advantage of what they see as a way to capitalize on the increased use of services like Airbnb. Although markets like NYC and Las Vegas crack down on the use of short-term rentals in larger buildings or in residential neighborhoods, those cities and others are looking for ways to make it work within the legal system. I’ve seen transactions come across my office for whole buildings and condo type spaces that plan on catering to short-term rentals. I think the market will look very different in a few years as the various models sort themselves out.

-Adam Horowitz, Principal, Lever Capital Partners

Click here for more insight into short-term rental projects

Millennials and Multifamily Properties

​Ahhh Millennials, aren’t they the best.​ This article hit most of the key points in terms of what they’re looking for in the apartment rental market. I was hiking yesterday with a young millennial who said he never desires to own a car, wanted an apartment that was convenient to public transportation, and that he needed that apartment to be near food options that catered towards a more eco friendly young crowd (i.e. vegan or vegetarian). What does this mean for the apartment market? If the units in your building are tech forward so your tenants can work from home, and they have some of the amenities listed in the survey below, then you have the ability to draw millennials to your new or renovated property.

-Adam Horowitz, Principal, Lever Capital Partners

 

Click here to see the 2018 Consumer Housing Insights Survey conducted for the NMHC:

http://www.nmhc.org/uploadedFiles/Articles/Analysis_and_Guidance/2018-Consumer-Housing-Insights-Survey-One-Pager.pdf

Nevada Construction Projects Funded with Out-of-State Lenders

Lever Capital Partners’ Amnon Cohen and other commercial real estate professionals spoke with Nicole Raz of the Las Vegas Review-Journal to discuss new construction projects being funded by out-of-state lenders.

Click the link to read the article and view a video of Amnon Cohen sharing his insight on local lenders and construction projects: https://www.reviewjournal.com/business/many-new-nevada-construction-projects-funded-by-out-of-state-cash/

Podcast: Las Vegas Money Resource with Travis Scribner

​”It was a pleasure to sit down with Travis ​Scribner of WestPac Wealth Partners. I’ve been listening to his podcasts recently and always enjoyed his interviewing style where he digs into the professional, personal and community aspects of his guests. During my podcast I was able to talk about my path to the creation of Lever Capital Partners, knowledge of the Las Vegas market, involvement in the Entrepreneurs’ Organization and being the President of the Real Estate Capital Alliance.”               – Adam Horowitz, Principal, Lever Capital Partners

Click here to listen to Lever Capital Partners’ Principal, Adam Horowitz, talk with Travis Scribner:

http://lasvegasmoneyresource.libsyn.com/adam-horowitz-principal-of-lever-capital-partners

Avoiding Commercial Real Estate Investing Mistakes

Loved this article from Michael Episcope titled “Avoid These Four Common Commercial Real Estate Investing Mistakes”. He did a good job of highlighting some of the pitfalls when buying commercial property. These are good tips once you’ve decided to jump into the deep end, but you might want to ask yourself “Why am I going swimming at all?”. Being a real estate owner isn’t easy and you need to make sure you’ve identified your desired outcome from the beginning. Are you trying accumulate wealth through holding assets long-term or do you feel like there’s a “bargain” here that you can flip and make a profit in a shorter time frame. Whatever you decide to do, make sure you’re buying it right and are willing to outwork your competition…as there are NO shortcuts.

Click here to read more about the four common mistakes to avoid when investing in commercial real estate: https://www.forbes.com/sites/forbesrealestatecouncil/2018/01/05/avoid-these-four-common-commercial-real-estate-investing-mistakes/#16e2c8f65fcc

How To Close a Deal in 60 Days

October 31, 2017 | BY CAPSTACK

So can you get that 60-day close and beat the Jan. 1 deadline that threatens to kill your deal?

Maybe — probably — but it’s going to require a committed deal team, nimble organizations prepared to move quickly and an unwavering focus on the finish line.

And don’t forget that “60-day close” is a misleading concept in the holiday-filled final weeks of the year.

“Two months is two months except when those two months are November and December when two months really are 50 days,” says Adam Horowitz, founder of Lever Capital Partners, a New York-based investment banking firm that specializes in structuring complex commercial real estate transactions.

Making matters even more challenging, the time available to close a transaction becomes even more squeezed as these 60 days come to end. Just when more time may be needed, less time is available because participants close up shop for the holidays.

And remember that you’re not alone. A rush of deals is hitting lenders, lawyers and other professionals as the year-end deadline looms.

So how are you going to pull this off?  Start by being honest with yourself, says Heather Goldman, founder and CEO of Capstak, Inc., and a long time industry capital markets executive.

“Have realistic expectations,” Goldman says. “Understand that the underwriting process is about lenders being able to protect their principal through an accurate valuation of your project and its cash flows, and establishing a long-term business relationship with you, the borrower. This is not about you selling a rosy, best-case scenario in a one-off trade.”

This isn’t the time for extended back-and-forth about the underlying economics of the project. It’s a time for quick agreement.

A good advisor will provide a clear-eyed view of the project, ensuring that your team isn’t blinded by its own optimism. A good advisor, Goldman notes, also can ensure that you’re not leaving money on the table by helping optimize your capital structure and who understands the current market.

“Go with the advisor who challenges your business plan,” she says.

Horowitz says the entire deal team — lenders, lawyers, appraisals and other professionals — needs to be committed from the start to closing the transaction by the end of the year.

“Only certain lenders can close within a 60-day time frame,” he says. “So make sure that your expectations are established up front, and make sure everyone understands their responsibilities.”

It’s equally important that the advisor keep numerous options open.

“Go into the deal with an advisor who can manage multiple term sheets for potential back-ups,” Goldman says. “Have a well-considered plan if your lender isn’t able to fund at closing, or not able to close on the same deal terms.”

An accelerated closing may be more costly than one completed on a conventional schedule. Lawyers and lenders may appreciate working on a highly efficient schedule that reduces the risk that deals will fall apart, but as Horowitz notes, lawyers who are called into work over a weekend during the holiday season are likely to charge premium rates.

The need for efficiency begins with your own organization.

“You don’t want to be the reason that things get delayed,” says Goldman. “Be immediately responsive to lender requests for information. Understand their internal process so that you are prepared to meet due-diligence requests, able to clear any legal conflicts early and ready to meet the requirements of the lender’s credit committee.”

Throughout the process, keep a close eye on the potential risks associated with moving too quickly — risks that range from typos and math errors to the loss of negotiating power and major strategic errors.

Take a deep breath, suggests Horowitz, and give your desire for a year-end close a fresh look. Make sure the effort of trying to close in 2017 clearly outweighs the ease of closing in Q1 when you can take your time and possibly negotiate a better deal.

“Know when you are cutting too many corners which could be costly in the long-run,” says Goldman.

If the costs and risks make sense, time is ticking.

Today is the day to inspire your organization, put together a deal team committed to a year-end close and get to work.

https://www.capstak.com/news/blog/how-to-close-a-deal-in-60-days

What Institutional Investors Look for In a Joint Venture Equity Partner

ADAM HOROWITZ, PRINCIPAL, LEVER CAPITAL PARTNERS

In seeking a joint venture partner for your project you’ll come across many equity investment sources today including high net worth individuals, family offices and broker dealers. This article will focus purely on Institutional Investors, which are organizations that pool large sums of money and invest those sums in real property. There are as many investment requirements as there are Institutional Investors but we’ll summarize many of the common characteristics of a deal worthy of their investment.

Real estate capital / equity is available in many formats so regardless of whether you’re trying to find a Limited Partner or Co-General Partner, each investment from an institutional party will be evaluated for the following; Sponsor Strength, Economic Viability, and Alignment of Interest.

Sponsor Strength –

Investors are looking for a sponsor with experience in similar deals, property types, and geographic market of the asset. They want a strong personal balance sheet and a focused team that spans the necessary requirements. When creating a joint venture most transactions will have a first mortgage as part of the deal and Limited Partners will not sign on any recourse or carve-outs as part of the JV.  The same partner will be looking to their GP partner for relative expertise on the day-to-day operations of the real estate deal and they therefore must have complete confidence in their ability to not only manage the project during the good times, but also have the understanding of what to do when things don’t turn out as projected.

Economic Viability –

  • Average total return targets (lower for strongest markets):
  • Value-Add: 15-17% IRR/Equity Multiple Focused
  • Opportunistic: 18%+ IRR/Equity Multiple Focused
  • Capital structuring creativity utilized to solve risk and return requirements of investor & sponsor
  • 10-15% sponsor co-investment capital required/meaningful dollar amount to sponsor in aligning partnership’s interests & goals
  • Promote structures sized on a deal-by-deal basis/becoming more favorable to sponsors (particularly through competition)
  • Cash-on-Cash Yield more important component of total return

Alignment of Interest –

Conceptually, the LP is a passive partner in the management of a fund. Investment and risk management considerations, for example, are entirely delegated to the GP.  In most jurisdictions—and this is a major obstacle in enhancing the governance role of the LP—the LP will lose the limitation of liability if it interferes in management. As a consequence, LPs have limited rights to participate in day-to-day operations, challenge decisions of fund managers, or approve major transactions as board members in a publicly listed company would do.

The success of the partnership model relies on the interests of both parties being adequately taken into account. One way to address still existing shortcomings in the alignment of interests could be what we will call here an ‘Enhanced Alignment Model’. The goal of such a model is ‘defensive’—to ensure that the GP and its fund manager deliver on the agreed investment objectives, undiluted by other interests.

About Lever Capital Partners –

Lever Capital Partners represents private equity funds, developers and other market players in structuring and negotiating joint ventures, mezzanine loans, credit facilities, preferred equity, company acquisitions and other transactions related to real estate projects around the world.  Drawing upon the firm’s traditionally strong real estate practice, we have experience with virtually every asset class, including hotels, resorts, gaming facilities, office buildings, retail centers, industrial facilities and residential and mixed-use projects.

http://nreionline.com/viewpoints/what-institutional-investors-look-joint-venture-equity-partner

How Healthcare Is Borrowing From Retail, Hospitality

IRVINE, CA—No longer sterile, institutional-looking properties, today’s healthcare facilities are borrowing from the warm, lifestyle-inspired and community-oriented designs of modern retail and hotel development, LPA Inc. executives tell GlobeSt.com. With higher healthcare costs and low occupancy rates, healthcare facilities are being forced to rethink how healthcare is delivered in their community.

LPA’s designers have noticed healthcare facilities are now looking to retail and hospitality design to give their facilities a fresh look that caters to the new lifestyle design trend that is sweeping the nation. This means a shift away from the “big box” hospital to community-based spaces with updates to their interior design—with emphasis on better lighting and fresh interior-design elements and furnishings. We spoke with the firm’s senior medical planner Marcus Thorne and project director Gigi Bainbridge about how healthcare facilities are changing the way they deliver services to communities and the crossover between healthcare and other real estate sectors.

GlobeSt.com: How are healthcare facilities changing the way they deliver healthcare to communities?

Thorne: Healthcare facilities are responding to consumer demands by offering community-based outpatient clinics in retail/commercial settings where their patients live and work. This makes providing healthcare more affordable for their patients, instead of the traditional “big box” hospital. The current trend is fewer acute-care patient beds, smaller hospitals (micro hospitals) and more community-based services.

GlobeSt.com: What guiding principles are these providers using to help them create more effective solutions in delivering healthcare?

Thorne: One such guiding principal is to think of healthcare as a “lifestyle” choice. Healthcare’s past goal has been to get you in and out as quickly as possible. Now patients are considered consumers who have a choice as to where they go for their healthcare needs. They are now looking at making the patient more comfortable, while addressing specific healthcare needs.

GlobeSt.com: There seems to be a lot of crossover among the various commercial real estate sectors in terms of design solutions? What is causing so much crossover?

Bainbridge: The recognition by the healthcare community that the patient/client is much more than the medical treatment required at the time of service has pushed service delivery into realms previously not considered. Architects, in collaboration with caregivers, are looking to the hospitality sector for improvements to group waiting spaces—taking advantage of the calming environments in restaurants; using the genius of retail marketing to organize, present and market wellness equipment provided by the healthcare facility; using gaming principles to get patients recovering from surgery moving around and tracking their movements. There are so many exciting current examples of cross-pollination and many more yet to be introduced.

Thorne: Design is now about “lifestyle,” where the focus is on creating an environment that is centered on how people live, work and play.

GlobeSt.com: What else should our readers know about changing healthcare design?

Thorne: Healthcare facilities across the country are faced with a variety of dynamics that are changing the way they do business:

  • Consumer oriented patients; more convenient services. As an example, Millennials are expecting services that are convenient to their lifestyle and located where they work, live and play. Healthcare providers are listening and taking services out of the hospital into retail, education, and commercial settings.
  • Reducing expenses. Moving services out of the costly hospital space and into outpatient clinic spaces is a big savings of which providers are taking advantage.
  • Changing healthcare environment. The Affordable Care Act or ACA is requiring healthcare providers to be responsible for their patient’s successful outcome, by providing a higher level of care. Hospitals are now following up with patients to make sure their needs are being met and scheduling additional follow up meetings.

http://www.globest.com/sites/carrierossenfeld/2017/04/27/how-healthcare-is-borrowing-from-retail-hospitality/