Here to Help Series – Restructuring the Deal – The New Capital Stacks
By Victoria Comer
Webinar Part 4 Recap
ULI Michigan Here to Help Webinar Series
Restructuring the Deal – The New Capital Stacks
ULI Michigan started part 4 of our Here to Help Webinar Series doing something we have never done before! In this segment, where we usually would of had one of our Co-chairs, Dan Cassidy or Jill Ferrari, announce the topic and speakers, they passed the Mic to ULI Michigan member and community advocate, Karen Burton – CEO of SpaceLab Detroit. Karen did a spectacular job defining the values of ULI Michigan and announcing our topic of the day. #SharetheMicNowDetroitCRE
In this webinar we explored financial perspectives both nationally and locally, as well as the difference between how public and private entities are building their capital stacks. We heard from national expert, Mitch Roschelle from PricewaterhouseCoopers (PwC) New York, who gave a brief on capital markets and emerging trends. Locally, we were given expert perspectives from: Michele Wildman with the Michigan Economic Development Corporation (MEDC), who explored Michigan state incentives; Tosha Tabron with Invest Detroit, who touched on the public perspective and CDFI’s; and, Barry Swatsenbarg with Colliers International – Detroit, who explored conventional lending options for private entities.
Below you will find some of our key takeaways and resources from the webinar presentation:
Click Here for the Full Slidedeck
Mitch Roschelle – Partner & Business Development Leader, PwC
- Trends in Real Estate
- Pre-existing real estate trends are being hyper-accelerated
- Work from home
- Emphasis on walkability
- Millennials moving away from urban core and settling into suburban communities
- Retail rightsizing as emphasis shifts to ecommerce- brick and mortar must adapt
- Healthcare shifts- resurgence of minute clinics and urgent care facilities outside of main hospital spaces
- Pre-existing real estate trends are being hyper-accelerated
Michele Wildman – Senior Vice President of Community Development, MEDC
- Michigan Economic Development Corporation has had to shift dollars to support small businesses
- Gap financing programs are being used to make deals work
- Community Revitalization Program
- Brownfield Act 381
- Community Development Block Grant
- Gap financing programs are being used to make deals work
Tosha Tabron – Senior Vice President of Lending, Invest Detroit
- Invest Detroit has seen capital stacks become more complicated due to COVID-19
- There has been a need for rent relief programs
- CDFI Partners
- SNF
- Stabilization fund-defer rents from tenants through rent relief program
- Expecting that there will be another wave of need in the next year
- Next wave of need will likely be seen in next 10-12 months
- There has been a need for rent relief programs
Barry Swatsenbarg – Executive Vice President of Investment and Loan Sale Advisory, Colliers International Detroit
- Trends have changed in financing deals
- Prior to COVID-19 Real Estate Focuses:
- Industrial/Big Box
- Hotel
- Office
- Retail
- After COVID-19 Real Estate Focuses:
- A lot of negative issues with retail because of lender interest
- Disruptions with hospitality
- Industrial continues to be a hot item (depends on how tenant is performing)
- Office
- Capital Stacks for Investment Product
- Higher interest rates
- Any deals in 3-6 months will have heavy scrutiny on how they performed during the COVID crisis
- Trends changed rapidly (especially in retail)
- Things are looking up from where they were 30 days ago
- If there isn’t another wave, we could see the lending landscape normalize over the next year
- Prior to COVID-19 Real Estate Focuses:
Fireside Chat
- How has underwriting changed (approach) and how hard is it to think through the assumptions you have in an underwriting with the current climate?
- MEDC deals with housing, hotels, retail etc. Always working with partner lender
- Need to be flexible
- Responding to needs on projects that they were already invested in
- Detroit has many opportunity zones so the private developers working with Invest Detroit have an opportunity to tap into the program
- Shift to need for industrial space/attributed to e-commerce gaining popularity
- Hidden Gems in Real Estate/Secret Sauce over the next year
- Manufacturing/industrial
- Design lessons to be learned from COVID
- Rethinking how projects are done
- Creating more resilient spaces
- Class C multi-family
- MEDC deals with housing, hotels, retail etc. Always working with partner lender
Resources:
Michigan Economic Development Corporation