by Dan Rafter
Craig Kegg, senior vice president and office manager with the Columbus office of Grandbridge Real Estate Capital, says that his office is seeing an ever-increasing number of financing requests. Consider it yet another sign that the commercial real estate market continues to strengthen.
Midwest Real Estate News: How busy is Grandbridge today when it comes to financing requests?
Craig Kegg: We definitely are busy today. I have been excited – we’ve been excited as a company – by the velocity at which deals are coming in. Specifically, here in Columbus we are getting many more requests this year than last.
MREN: Why do you think there has been so much activity?
Kegg: I believe that we are seeing more activity largely because of the interest-rate environment. We are seeing more activity, too, because of where we are in the cycle of borrowers and in the cycles of the different asset classes. In the Midwest we are seeing folks asking us for more long-term money. The standard is a 10-year term. We have had more requests for 15-year, 20-year, 25-year and even in some cases 30-year money.
That is a direct reflection of where the borrowers are at. We have some members of our borrowing population who are now getting to the fall or winter of their cycles or their careers. They are looking to basically move from a creating-wealth approach to a sustaining-wealth approach. If they are able to fix their costs of capital for a long period of time, longer than 10 years, that’s what they want to do. The low interest rate environment has caused people to think longer-term when it comes to their investments.
MREN: Where are you seeing the most lending activity today?
Kegg: We have seen a lot of activity in the apartment sector, as I am sure everyone else is seeing. All of the boats are rising now thanks to the strength of that sector. Our office sector is getting stronger. The industrial sector is coming back. Couple that activity with the low interest rate environment, and it’s clear why we are seeing more activity today.
MREN: What do you look for when deciding to which borrowers to lend money?
Kegg: The quality of asset continues to be a main driver. Often times, the quality of the asset also speaks about the ownership group or the sponsor. Has the building been maintained? Are there ongoing programs to maintain the property? Location also comes into play. In Columbus we have seen a resurgence in center city locations. That doesn’t mean our suburban locations aren’t being positively looked at, too, though.
The other things we like to see when evaluating a financing opportunity are the more obvious ones. We like to see a strong operating history on the part of the borrower. We like to see rents that are at market level. We look for a historical performance without a lot of ups and downs. All of those things speak to the project themselves and the sponsorship and how they approach their business.
MREN: When you look at the Columbus market, is there anything that makes it a special market, that sets it apart from other Midwest markets?
Kegg: First and foremost , as a citizen of Columbus, I have to say that we don’t do a very good job of selling the city. And we haven’t done a good job of doing this for a long time. We are getting better, but we are nowhere near as vocal as we should be about promoting Columbus. That said, there are several things that are attracting both buyers and capital here. There is the stability that Columbus offers. We are also the state capital. We have a number of really strong economic corporate citizens here, such as the Limited Brands, The Ohio State University, Nationwide Insurance and Cardinal Health. We have a very stable economy.
The university is a real benefit to working in this city. We are fortunate to have a constant rotation of new talent coming into the city because of the university. The new talent brings fresh ideas to the city. There is also an energy in our city because of the student population. Now that the city has matured and we have started to provide new amenities, we are more appealing to the 22- to 33-year-olds. We are now starting to retain more of that talent in the city. In the past, folks would graduate from the university and leave town. But now we have a nice mix of Millennials in our city.