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Financing Talk: Q&A with Northwestern Mutual’s Kevin Westra
Northwestern Mutual Real Estate’s Regional Director – Central Region – Kevin Westra is one of the panelists with the upcoming Connect Houston event on Feb. 7. Connect Media recently asked him some questions about the company’s strategy in Houston.
Q. Does Houston seem to be a good region for funding?
A. Northwestern Mutual was very active investing in Houston on both the debt and equity side prior to “Low Oil.” As a result, we have a great basis in several Houston joint venture apartment investments. Most of the office loans we originated in Houston were also before the market converted to “NNN,” so those loans have a very safe loan PSF as well. Northwestern Mutual has been more selective in Houston since oil prices fell. We focus more on the long-term stability of the asset, strength of sponsorship and the ability to refinance the loans when interest rates rise. We have been less aggressive on our rent growth, stabilized vacancy rates and cap rate assumptions since the Low Oil prices.
Q. Are you cautious about financing CRE projects in Houston?
A. Yes. Office vacancy/sublease space is the highest it has been in quite some time. The apartment market has been strong recently, but it is yet to be determined if this will last long term. As a result, we currently favor retail and industrial investments in Houston. Borrowers interested in holding the assets long term (through the cycle) and willing to consider lower loan-to-value/loan-to-cost are the best fit for our company.
Q. What projects will Northwestern Mutual be looking at in Houston this year?
A. We recently pursued an industrial joint venture equity opportunity, and quoted a few retail loan opportunities in Houston. My production goal for the Central Region is $1 billion of debt and $300 million of equity (joint venture development of apartments and industrial). We have been most active in Minneapolis, Chicago, Denver, Dallas and Austin/San Antonio.
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- ◦Financing
