Finance • Section 12
long-term ownership where capital investments continue to be made into the property to support and increase value.
Mezzanine debt and preferred equity are generally available for larger transactions, and are often readily available in today’s lending climate. These two interests are lodged between spon- sor equity and senior lender first lien position, and represent the next priority for cash flow. These interests are still riskier than the senior debt position, and thus commonly command higher interest rates in the range of 10 to 20 percent, depending on the risk profile and specific attributes of the transaction. Mezzanine debt and preferred equity have a strategic place within the capi- tal stack, and can be utilized to finance very large transactions or help to recapitalize maturing loans.
As previously mentioned, the recovery in self-storage values
following the recession has largely occurred in most markets, with a few markets lagging. These days, it is more likely to use the mezzanine and preferred equity for properties that are tran- sitioning ownership, adding units, or undergoing substantial renovation. The following sections generally detail first mort- gage lending opportunities, but there may be applicable mez- zanine and/or preferred equity lending arms associated with each category.
Sources Of First Mortgage Debt Commercial mortgage origination has made a healthy come- back since the pinnacle of the financial crisis, as evidenced by the MBA’s quarterly origination index. Debt originations in 2009 and 2010 were in stark contrast to heightened pre-crisis origina- tion levels. At the time of writing, stats on origination are not available for the second half of 2015 from MBA. However, in each year of recovery, with the exception of 2011, there is a trend of el- evated Q4 origination over the preceding three quar- ters. The Q2 2015 level of origination represented the highest non-fourth-quarter volume recorded since the economic crisis as seen in Chart 12.3.
Through Q2 2015, delin-
quencies on commercial and multifamily loans across all property types continued trending downward, with CMBS debt and commercial banks showing the largest decreases from Q1 2015. As shown in Chart 12.4 and Table 12.1, CMBS debt and banks have enjoyed steady declines since peak levels in 2011.
5.0% 4.0% 3.0% 2.0% 1.0% 0.0%
The self-storage asset class has shown much more favorable
trends when it comes to delinquency, outperforming most oth- er commercial property types, during the recession and into the recovery. According to data from DBRS, the CMBS delinquency rate for self-storage peaked at 3.04 percent in 2011 and sat at 0.71 percent as of November 16, 2015. This is well below the CMBS average of 2.96 percent. While some have speculated that self-storage is largely “recession-proof,” the performance has el- evated the property type’s acceptance as a core product that lenders and investors seek to diversify their portfolio mix.
As of Q2 2015, outstanding commercial mortgage debt sat at
$2.72 trillion, up from approximately $2.56 trillion from Q2 2014. The Commercial Real Estate Debt Outstanding chart shows commercial real estate debt outstanding by lender type (at the end of Q2 2015) as seen in Chart 12.5 on page 126.
Continuing the trend from recent years, commercial banks
lead the lending market in new originations. This intuitively makes sense, since many banks and thrifts have cleared trou- bled loans off their balance sheets and are in a better position to lend again. Financing options available to self-storage own- ers are primarily provide by banks (both local and regional), CMBS, and insurance companies. Agency and GSE programs are primarily geared toward multi-family lending; however, there is
Table 12.1 – Lender Delinquency Rates CMBS (30+ days)
Life Companies (60+ days) Banks & Thrifts (90+ days)
Source: MBA Databook Chart 12.4 – Deliquency Rates
10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0%
5.00% 0.06% 0.9%
Banks & Thrifts (90+ days)
Source: MBA Databook
CMBS (30+ days and REO)
Source: MBA Databook 2016 Self-Storage Almanac 125
2000 Q1 2001 Q1 2002 Q1 2003 Q1 2004 Q1 2005 Q1 2006 Q1 2007 Q1 2008 Q1 2009 Q1 2010 Q1 2011 Q1 2012 Q1 2013 Q1
2014 Q1 2015 Q1
2000 Q1 2001 Q1 2002 Q1 2003 Q1 2004 Q1 2005 Q1 2006 Q1 2007 Q1 2008 Q1 2009 Q1 2010 Q1 2011 Q1 2012 Q1 2013 Q1
2014 Q1 2015 Q1
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76 |
Page 77 |
Page 78 |
Page 79 |
Page 80 |
Page 81 |
Page 82 |
Page 83 |
Page 84 |
Page 85 |
Page 86 |
Page 87 |
Page 88 |
Page 89 |
Page 90 |
Page 91 |
Page 92 |
Page 93 |
Page 94 |
Page 95 |
Page 96 |
Page 97 |
Page 98 |
Page 99 |
Page 100 |
Page 101 |
Page 102 |
Page 103 |
Page 104 |
Page 105 |
Page 106 |
Page 107 |
Page 108 |
Page 109 |
Page 110 |
Page 111 |
Page 112 |
Page 113 |
Page 114 |
Page 115 |
Page 116 |
Page 117 |
Page 118 |
Page 119 |
Page 120 |
Page 121 |
Page 122 |
Page 123 |
Page 124 |
Page 125 |
Page 126 |
Page 127 |
Page 128 |
Page 129 |
Page 130 |
Page 131 |
Page 132 |
Page 133 |
Page 134 |
Page 135 |
Page 136 |
Page 137 |
Page 138 |
Page 139 |
Page 140 |
Page 141 |
Page 142 |
Page 143 |
Page 144 |
Page 145 |
Page 146 |
Page 147 |
Page 148 |
Page 149 |
Page 150 |
Page 151 |
Page 152
