Tag Archives: CommercialBuildingLoans

High Construction Costs and Delays are the New Normal

By Adam Vanlerberghe, Managing Director, Lever Capital Partners

The topic of high construction costs has been popular over the last year and continues to be relevant into the new year. At Lever Capital Partners (“LCP”), we work closely alongside our Developer clients who must navigate and mitigate increased labor rates, material costs and labor shortages and delays.

The pain has been felt throughout the industry and especially within the Multi-Family sector where there remains a shortage of specialized trades needed to finish jobs. “We’re measuring an average delay of around five months,” says Andrew Rybczynski, senior consultant for CoStar Group Portfolio Strategy.

These delays can also lead to increased financing costs and liabilities to the Developer and/or Loan Guarantor(s). Delays lengthen the construction phase of a project, which typically carries a higher interest rate than the completed, income producing phase/product. Even worse, the delay could result in a loan default and/or costly loan extension fees.

At LCP, we anticipate and understand the challenges associated with developing a commercial project in today’s high-cost, often-delayed construction environment. We have realistic, open conversations with our Clients and help negotiate favorable loan terms, extensions and language to address such contingencies with our vast network of capital providers. Further, we will assist and advise our Clients on the preparation of budgets and proformas that account for these contingencies. When done properly, our Client and their project gain valuable credibility with capital providers, improving the likelihood of effectively closing the transaction.

Reference:

NREI Online

Opportunity in the Apartment Market for Family Offices

I like Antonio’s article and hope that more family offices invest in multifamily assets. We’ve always enjoyed finding commercial real estate financing for family offices, but the challenge has been the locations. Antonio suggests that they should look in secondary and tertiary markets but what we’ve found is that the family offices tend to start off investing in locations near their home base with a GP partner before heading into a smaller market which makes it more difficult. We’d love to see more commercial real estate news saying that family offices are pouring into the space but only time will tell if they want to pick up multifamily assets and commercial building loans in markets they don’t know well.
– Adam Horowitz, Principal of Lever Capital Partners and President of the Real Estate Capital Alliance

Click here to read Antonio’s article on why family offices shouldn’t overlook the apartment market.