All of us know the real estate sector took a beating throughout the least year or so, however, it wasn’t all doom and gloom. In particular, you stay fairly busy in some specific segments of the real estate fund market, mainly for lenders but such as on a borrower-side trade in November that at the time was the biggest hotel sale in funding because the onset of COVID-19 in the first quarter of 2020. Can you tell us about your expertise in a few of those flourishing areas of the housing market?
Steve Hamilton: Sure. As we know, 2020 was a little bit of a dumpster fire for the real estate business, but there were several highlights also there were some places which did boom. We saw a great deal of action, at least at the construction loan sector of everything I do, between industrial buildings and warehouses such as distribution facilities. We saw numerous retail jobs which ordinarily people would believe were fighting during stay-at-home orders, even throughout COVID, but a few developers and retailers really found opportunities there. An instance –at many of shopping centers where you had the likes of Toys-R-Us along with other insolvent firms, there was space which was available and you saw Amazon, as an instance, come in fairly hard in the past half of the year rebranding those shopping facilities or those stores with areas like their four-star stores where they bring goods direct to customers. Instead of simply having them delivered to their front door they’d put some of the most popular things which are trending on their online portals into brick-and-mortar where folks want immediate gratification. They wish to pick this up. They can’t wait a day or 2 for Prime. They wish to go get it today. And they’ve gone beyond Whole Foods. There are currently Amazon-themed grocery stores. So that was kind of a new thing which we watched –not just construction loans but also a retooling of existing retail facilities around this marquis product since the one thing which lenders definitely like is consistency. What we saw during the pandemic was there are certain retail establishments that people need regardless of what is going on. Grocery stores and the Targets of earth are the types of shops that people still have to visit once or twice every week to pick up the essentials. Therefore any retail facilities which are offered by a grocery store–people are super-great credit for the lenders and they flock to people.
You mentioned the funding for the resort up in Orange County I was involved . This was an opportunity that one of our borrowers had to buy a marquis merchandise at a discount since the resort had been shuttered for some time or was at least under restricted use, also with the right direction and eyesight, they view that merchandise or home as being a boon, that they are going to redevelop it and it is going to be a marquis resort in the near future when they finish their improvements. So there are some bright spots out there in the event that you look hard enough; you just need to find the ideal patrons doing the right kind of development. These large industrial buildings which are being used for distribution facilities for the likes of Amazon ports and such–that is definitely something which the lenders are searching for, and we did quite a few loans in the second half last year and the start part of 2021 for those types of products.
Simon: Individuals are certainly significant contrasts to some other subsectors in real estate for example mom-and-pop retail, specific big box stores, and strip malls which have taken huge hits. I understand there has also been a sector and demographic change due to, or accelerated by, the pandemic–creating opportunities for new house construction in addition to for apartments and midsize and more compact cities in certain areas of the country. How do you tell us all about those opportunities?
Hamilton: That is another thing which was a little surprising at the latter half 2020 and today into 2021–there’s a flourishing flat market out there. A great deal of developers and lenders alike are developing new turnkey, luxury apartments, many in that which we call secondary cities or outside the primary urban locations. We’ve closed on multiple apartment loans in the last six months where you have millennials who are visiting the huge cities. With COVID, they are not tied to the large urban centers they were when they had to commute into work daily, so you’ve noticed a motion where these apartment projects–particularly in the western states where I primarily do my deals–they’ve become quite appealing. Moreover, I’ve seen a variety of new subdivisions popping up along with subdivision loans. The housing market is quite hot. You’ve people, again, fleeing in the urban centers and searching for a house to themselves where they are not sharing an elevator or shared amenities with people and they need to space out. They want a house with a third bedroom or a fourth bedroom or even a fifth bedroom or whatever it can be to be used as a home office. So we’ve seen a variety of fresh subdivision loans come online in the last six weeks, and anyone who has tracked home prices throughout the pandemic, it definitely does not monitor the despair and gloom that people have called. In actuality, at least here in the West and I believe in other major metropolitan areas, the housing market is going crazy. Lenders see that there is this trip into the suburbs along with the values are there, along with the lenders will always loan at which the value is. I see that process continuing today that the genie is out of the jar –many people are utilized to operating from home and will continue to want to accomplish this. Having that house office and much more room to breathe is definitely a thing that people will be searching for.
Simon: I’d love to return to something you mentioned previously regarding large distribution centers, warehouses, and port cities or transportation hubs. I suppose companies can check at those as a means of lowering operating expenses when they can take advantage of the market in that way, and it seems like a possible win for sure areas which need to shore up their tax base in addition to provide jobs and attract new residents. What are your ideas on this subject of growth?
The interface of Jacksonville has been expanding over the last ten years, along with the surrounding areas in Jacksonville that’s the biggest metropolitan region within the USA, has risen exponentially during that time, therefore there are opportunities there. Since the e-commerce world grows, the distribution facilities are getting increasingly more important for those e-retailers. They are interested in being able to get their merchandise off the boat and at a distribution center and quickly to the end user so that they can meet their one-day shipping or two-day shipping or in some instances six-hour shipping, and thus having proximity to ports–whether it’s Jacksonville, New Haven, Long Beach–with proximity to those ports and also to major distribution hubs along with the highway system will be critical. Along with the Biden administration is pledging two billion bucks. That is going to be a enormous sum of money going toward ports and bridges and expanding what is already there and making it modern, and I believe the banks will follow that. If the programmers are constructing warehouse facilities, cold storage, then what are you, to serve people e-retailers, the lenders will follow along with love to see credit when if you have the Amazons or the Wal-Marts of the planet putting in distribution facilities –that is blue chip. That is gold star. The lenders follow that. The programmers seek those tenants out, and now I definitely see those port areas being farther siphoned and moving toward a future where there’ll be increasingly more distribution facilities in those areas to be able to meet the requirements of the customers who currently have a slightly insatiable desire to get things delivered at a minute’s notice. I definitely see that trend continuing post-COVID.
Simon: It seems like we’ve got a subject for a future episode–that the tie-in of real estate and infrastructure. Thanks so much for this look at a few of the bright spots in what was an otherwise gloomy season for new real estate projects and funding. …