Scotsman Guide > Commercial > April 2018 > Department

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Commercial Department: From the Editor: April 2018

 

From the Editor

When in doubt, use green as your color of inspiration

c_2018-04_FTE.jpgGreen bonds, or securities used to finance energy-efficient building projects and upgrades, have grown in stature in the commercial real estate world in just a few years. According to the Climate Bonds Initiative, the worldwide market for these bonds has skyrocketed from $11 billion in total issuance in 2013 to nearly $157 billion in 2017.

Clean energy also is receiving significant investments through more traditional mortgage products. From 2009 to 2016, Commercial Property Assessed Clean Energy (C-PACE) loans were utilized on more than 1,000 buildings nationwide. More than half of the $340 million in total financing on those projects occurred within the last two years of that eight-year period, PACENation reported.

Our April magazine is focused on green practices. Commercial mortgage brokers should keep these financing options in mind for a variety of situations, whether a client is investing in a value-add office project or ground-up construction of a retail center.

A pair of first-time authors give the green treatment to this month’s edition. First, on Page 31, Emily McLaughlin of the Institute for Market Transformation writes about a variety of market drivers and financing options, and shows how clean-energy investments correlate with higher rates of occupancy, tenant satisfaction and rental income for a property owner.

On Page 72, Chrissa Pagitsas of Fannie Mae explains the burgeoning role of green bonds and mortgage-backed securities (MBS). The government-sponsored enterprise is a green-lending leader for the multifamily sector, with more than $27 billion in MBS issuances in 2017. Even with that enormous volume, there is still plenty of existing multifamily debt that could take advantage of these products, Pagitsas writes.

Another popular financing vehicle — the U.S. Small Business Administration’s 504 program — is the topic of the article on Page 50 by Barbara Morrison of TMC Financing. Although brokers and borrowers may have experience with the 504 program to purchase real estate or equipment, they also should think about it when it’s time to refinance. An SBA 504 refinance works nearly the same as a purchase transaction, as the borrower pairs with a bank and a certified development company, or CDC, to share the costs.

On Page 46, Tyler Stone of Capstone Financial provides an overview of mixed-use financing. When working on property deals that combine residential and commercial uses, you should understand that lenders will view them with a skeptical eye. A solid loan submission that includes local economic data can buttress your client’s funding request.

In the wake of hurricanes Harvey and Irma this past fall, there are plenty of property owners in need of interim financing to aid their recovery efforts. On Page 56, freelance writer Brian A. Lee discusses interim-to-permanent financing vehicles on hotels. In a real-world success story, the owner of a hotel hit by Hurricane Irene in 2011 used bridge-loan proceeds to rebuild the property and eventually refinance at a lower rate with 37 percent greater leverage.

Our April edition wraps up with a discussion about a different kind of green. This time, green refers to the color of cannabis, a product that is creating massive — and largely unmet — real estate financing demands. On Page 76, Lawrence S. Brown of Evergreen Private Finance writes about how mortgage brokers can capitalize on the legal-cannabis industry, which is expected to grow from $6.7 billion in sales in 2016 to $50 billion by 2026.

We hope this month’s magazine provides a diverse range of advice that will help you leap into springtime. Maybe you’ll even get a few days away from the office to enjoy some outdoor activities — a long nature hike or a mountain-biking expedition, for instance — and be reminded why environmentally conscious building practices are so important.


 

Neil Pierson is editor in chief of Scotsman Guide Media. Reach him at neilp@scotsmanguide.com or (800) 297-6061.

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