July 12, 2019
By Dennis Kaiser
Connect Bay Area is just around the corner on July 18thin San Francisco. Leading up to the annual gathering, Connect Media asked panelist, Bradley Ross, a Vice President at Madison Realty Capital, to share a few insights into the market, what’s driving investment decisions, as well as what has caught the investment firm’s attention in the Bay Area. Check out his responses in our latest 3 CRE Q&A.
Q: What are some of the overarching trends you see driving the Bay Area market as the year progresses?
A: There are trends in the Bay Area that are more prominent than almost anywhere else in the country. For example, we have seen significant interest and advancement in the modular construction field, as well as in co-living. Capital trends I’ve noticed include equity shortfalls on existing developments due to capital constraints overseas, union labor/prevailing wage making and breaking projects, projects being re-entitled for higher density because of rising construction costs, and developers trying to incorporate PACE financing into their deals. Madison Realty Capital has been actively pursuing construction, bridge, and note financing opportunities that have resulted from these evolving fluctuations in the market.
Q: How can and should owners/investors approach their decisions today, given the length of the cycle, interest rates and overall economic conditions?
A: It depends on each investor’s capital structure and investment horizon. There’s record prices but we’re bullish on the market long term. Despite being incredibly late into the cycle, fundamentals in the Bay Area generally remain sound. Madison Realty Capital looks to back project Sponsor’s that have created significant value-add opportunities, rather than projects that are bought at top dollar and are simply hoping for continued rent escalations.
Q: What are some examples of the types of assets or deals you are looking at and why?
A: Some of the projects Madison Realty Capital are pursuing include:
– New construction, mid-construction, and take-out construction loans for multifamily, condo, office, retail, industrial, and hospitality projects in the $10 million to $500 million range
– Projects with unique elements in the capital stack such as imputed equity, PACE financing, foreign national sponsors, etc.
– Quick close acquisition and refinancing opportunities
– Covered land plays, where we underwrite the existing asset although the Sponsor intends to entitle and develop.
For comments, questions or concerns, please contact Dennis Kaiser