Over the next few weeks, ConnectCRE will preview speakers and moderators from the varied panel discussions at Connect Texas Multifamily on August 20th. One of the panelists for the Development & Redevelopment session will be Tower Capital’s George Maravilla. Tower Capital helped arrange financing for a number of recent transactions. Here are a few:

Skyview by Zen, Phoenix—Tower Capital arranged $51.5 million in non-recourse construction financing for the development of Skyview by Zen, a 190-unit Build-to-Rent (BTR) community in Phoenix’s West Valley.

Village at Mayfair, New Braunfels, Texas

Tower Capital arranged $47.4 million in non-recourse construction financing for Village at Mayfair, a 217-unit Build-to-Rent community in New Braunfels, Texas. 

George’s responses follow:

Tower Capital has arranged financing for a number of build-to-rent projects lately, in Texas and other markets. From a financing standpoint, what are the advantages of BTR for developers—and where should borrowers be mindful of risks?

There are multiple advantages to BTR including:

• Demographic trends – boomers and millennials wanting more privacy (less shared walls), yards, 
• Generating operating income prior to finishing construction of the project
• Exit optionality through a bulk sale to 1 group or individual unit sales to retail buyers of all or part of the community

In today’s environment, developers need to be mindful of market/submarket vacancy and inbound supply that is under construction coupled with the timing of job growth.  This will influence rents, concessions and absorption. Has the current lending environment meant a shift in the types of debt and equity solutions borrowers are seeking when they come to Tower Capital?

• The current lending environment certainly has impacted the financing for our developer clients especially.  Private equity continues to be sparse for ground up projects.  Banks are still offering lower leverage than they had previously in addition to deposit requirements.  This has put an emphasis on developers that have or can raise their own equity that are open to non-bank higher leverage financing options with higher interest rates than they may be used to.  

Arranging capital for developable land is among the specialties of Tower Capital’s team. Have you seen a shift toward adaptive reuse on already-developed land as greenfield land costs ​increase in Texas?

• We aren’t seeing much adaptive reuse.  Generally, folks thought to convert office buildings into multifamily or some other use, but quickly realize that it takes a uniquely narrow office building to convert to multifamily.  We’ve primarily seen a focus on BTR, industrial and self-storage construction across the sunbelt.   

Tower Capital can call on a sizable array of capital sources. Are any of them less active currently when it comes to financing development?

• Yes – Joint Venture Equity.  Most private equity groups continue to shy away from development today as they tend to feel they can get similarly opportunistic returns from by purchasing existing assets at a basis below replacement costs without having to take any construction risk.

Register to hear from George and other leading experts in multifamily lending, dealmaking, and more, at Connect Texas Multifamily in Dallas on August 20^th.