Bison Financial Group

Your Rolodex is More Important Than Your Personal Financial Statement

admin — Mon, 06 Feb 2012 21:03:44 +0000

By David Repka, Co-Founder Bison Financial Group

Let’s face it, the last few years have been astonishingly difficult for anyone in the “dealmaking game” as fear, uncertainty and doubt have crept into the capital markets driving reliable sources of capital to the sidelines. No pocket of capital has been picked as clean as construction funding of large-scale, complex commercial real estate development projects. With REO inventories mounting and defaults on the rise many sources of capital have exited construction funding with vows to never return.

Out of this chaos investors seeking yield and willing to take prudent risks have entered the construction space. Rather than lending money on a predetermined payback schedule as was the norm in the go-go days, this new breed of investors is intent on owning income producing assets for the long-term and is entering into joint ventures with experienced project developers to get access to sales pipelines that can take years or decades to build. The developer brings their bulging Rolodex to the party filled with potential tenants seeking expansion opportunities. The funding sources bring capital and an openness to funding construction projects. This is an opportunity for everyone to win:

the tenant receives the exact, purpose-built space they want based on a build-to-suit;
the community benefits from badly needed construction jobs;
the investor receives a long-term income stream from a high-quality tenant;
the developer’s Rolodex not their personal financial statement, credit report, or credit score determines the viability of a project.

With this program a developer with personal credit that has been battered and bruised by the Great Recession is once again eligible for funding. Who you know and what you know determines the viability of a developer’s next project. Read more on the types of eligible projects in the Nexus Funding Platform.

Buffett Buys Big Solar Farm

admin — Fri, 16 Dec 2011 19:43:05 +0000

By Jeff McMahon, Forbes Contributor
Blogger Comment by David Repka

Warren Buffett‘s wind-energy company plunged into solar energy this afternoon, agreeing to purchase the Topaz Solar Farm project in Central California for more than $2 billion, the company announced.

In 2000, Berkshire Hathaway and other investors paid roughly the same amount to purchase MidAmerican Energy Holdings. MidAmerican entered agreements to acquire the 550-megawatt plant on the Carrizo Plain, one of California’s last large expanse of prairie, according to this afternoon’s press release.

“Adding solar energy to our generation portfolio is a strategic move to invest in yet another renewable energy source,” said Greg Abel, chairman, president and CEO of MidAmerican.

“As energy needs continue to increase, the Topaz project will allow MidAmerican to produce renewable energy for thousands of Californians. This project also demonstrates that solar energy is a commercially viable technology without the support of governmental loan guarantees and reflects the type of solar and other renewable generation that MidAmerican will continue to seek to add to its unregulated portfolio.”

MidAmerican is currently the largest owner of wind-powered energy generation among U.S. rate-regulated utilities, Abel said. The solar farm is large enough to supply electricity to 160,000 average American homes.

[BLOGGER COMMENT: The greatest individual investor in history has entered the solar industry as an investor! Hallelujah! Validation of our business plan to enter the renewable energy industry in 2010. To Buffett solar is just another "black box" cash flow machine like the Buffalo News or GEICO.]

Famous for wildflowers and rent by the San Andreas Fault, the Carrizo Plain is home to a national monument, reintroduced pronghorn antelope, and several threatened species including the San Joaquin kit fox and the antelope squirrel.

The project’s original developer, First Solar, has agreed to construct and operate the Topaz project. Construction began in November 2011 and is expected to be complete by early 2015.

Pacific Gas and Electric Company has signed a 25-year agreement to purchase electricity from Topaz, helping the utlity meet a state mandate to generate 33 percent of its power from renewable sources by 2020.

View article in Forbes

Are Hotel Foreclosures an Oncoming ’Train Wreck’?

admin — Fri, 25 Nov 2011 19:22:59 +0000

Hospitality industry expert, Steve Van (pictured right), sees trouble ahead with foreclosures in the hotel sector. BLOGGER COMMENT listed below by David Repka of Bison Financial Group.

Steve Van hates being the pessimist, but he can’t help it. The CEO of Prism Hotels & Resorts says comparing the last two years of hotel distress to what’s coming is like comparing “a car wreck and a train wreck.”

He doesn’t see any other way to avoid the oncoming flood of CMBS maturities that originated in 2007, at the absolute pinnacle of the lodging industry, as well as a wave of costly property improvement plans now being mandated by franchise companies emboldened by strong operating results.

Van knows a thing or two about hotel distress. The Dallas-based hotel management company he founded in 1983 has handled more than 150 receivership assignments since 2000. It currently is acting as receiver at approximately 30 properties and Van believes many more are coming.

“How long can you hold your breath?” he asks of the extend-and-pretend strategy employed by many lenders and owners the past two years. “At some point you start getting brain damage.”

The delinquency rate on securitized hotel loans was at 14.12% through October, highest among all commercial real estate classes, according to Trepp, a New York-based analytics firm that tracks the commercial mortgage-backed securities (CMBS) industry. Van believes the number could reach 50% next year with all the loans coming due that originated in 2007 and earlier that were extended.

He’s not alone. At the Bloomberg Commercial Real Estate Summit in New York this month, hotel developer Robert Sonnenblick described the wave of CMBS loans coming due and the lack of replacement capital available as a “close-to-catastrophic problem.”

Van believes Prism will add approximately 25 more receivership assignments in the first quarter alone next year, tipping the scale of his portfolio of 55 properties to more short-term than long-term assignments.

The 33-year industry veteran with a law degree from Texas and author of the Hotel Default Blog recently discussed the oncoming train wreck, as well as his optimistic view of lodging fundamentals and the future of the industry.

Stoessel: Are you surprised we haven’t had more defaults and foreclosures to date?

Van: I kept thinking we’d have a tidal wave, but it’s been more a steady stream.

[BLOGGER COMMENT: In addition to the solutions outlined in this article out of the box solutions such as adaptive reuse need to be considered. As a commercial real estate advisory firm based in Florida we are in the epicenter of one of the three most devastated hotel markets in the nation. We are currently working with Florida-based developers seeking opportunities to buy hospitality assets for 20-50% of replacement cost with the business plan of completely changing the use of the asset. For more on our pursuit of socially conscious investments follow this link.]

Stoessel: But you expect that to change sooner than later?

Van: With all the tens of billions of dollars in hotel debt that is coming due next year because it originated in 2007 or because it was pushed back because of extend and pretend, there’s just not enough replacement capital out there.

There are two huge forces driving this: One is the loan maturities and the lack of replacement capital to repay them. Underwriting strategies have changed, it’s night and day from 2007 to 2012. A $50 million loan then is now a $30 million loan. And two, the brands: Bill Marriott is tired of giving two- and three-year hall passes on [property improvement plans]. Hilton, Starwood, really everyone is cranking this up.

All these owners are no longer owners in many cases and the mezzanine funds are. So who’s going to come up with that money for the PIPs? And if the Marriott flag comes off the building, its value just got cut in half.

Extend and pretend made sense the last two years, but everyone assumed the world would get better. That’s no longer true. Many will extend and pretend as long as possible, but many are out of ammunition and time. Many loans have limits in pooling and servicing and the time is up. Extend and pretend has been permitted by bondholders who are now saying we want our money. Who knows, 2012 could be more of the same. I did think this would happen in 2010 and 2011. But it’s not like things are rosy: We’re at an all-time high now on defaults. Compared to what’s coming, though, is like the difference between a car wreck and a train wreck.

Stoessel: If there’s this much distress out there and a tidal wave of foreclosures coming, this has to be the ‘buying opportunity of a lifetime’ we’ve been hearing about, right?

Van: I think so. Private equity has hundreds of millions of dollar raised and they haven’t really put it to use. They’re not going to do anything stupid. The capital always finds the opportunities.

I am a total optimist about the U.S. economy in the next five years. We’ve got all these incredible economic drivers—pharmaceuticals, robotics and technology to name a few. We’ll come out of this just fine. You want to be buying hotels the next two years. And you want to own hotels the next three to five years. Another huge factor for buying hotels: Inflation is a friend of this business. You can raise rates this afternoon, it’s not like an office building with a five-year lease.

Stoessel: If there’s a successful European bailout and a return of some significant CMBS lending, could the tidal wave be avoided?

Van: It will help. I’ve talked to a lot of special services lately and let’s say there was maybe 50 or 60 billion dollars of CMBS lending this year, and the most optimistic estimates are for 100 billion dollars next year. That will help, but not enough.

Stoessel: What about more traditional lending?

Van: Banks aren’t lending. Maybe on a Marriott in New York or San Francisco, but I just don’t see where the money will come from. And it’s anybody’s guess on what will happen in Europe. [Last week] was the first tremor of the earthquake. On the front page of the Wall Street Journal was a story saying Norfolk Southern Corp. decided not to do business with European banks. A huge company like Norfolk Southern? That’s what happens when banks start failing.

Stoessel: It’s a strange time in the industry with operating performance so vastly different from the real estate and capital sides…

Van: It’s a fantastic time to own a hotel if you’re not overleveraged. Those are the smart people in this business. Or if you can buy a hotel for 50 cents on the dollar. Those two groups will make a huge capital appreciation in the next five years.

I’m bullish on the hotel business in the next five years. It’s the hotel capital structure that’s so screwed up. Not the industry—it’s robust. If you’re not overleveraged, it’s great. Otherwise you’re toast. I bet the owners of half the hotels aren’t the real owner. If values have dropped 40%, how can they be?

Stoessel: So extend and pretend could work for those owners and lenders still able to?

Van: If you can hang on, it’s the smart thing to do. I have never seen a time in the hotel real estate business so affected by things not in the hotel business. The Greek bond market? Who ever would have thought we’d be talking about that? It’s such an integrated world economy now. The industry fundamentals are great: rates, business travel, demand is increasing, international travel. But it’s so important to have a healthy capital structure in your hotel.

View original article in Lodging & Hospitality

Wawa Starts Construction on First Florida Store

admin — Tue, 15 Nov 2011 13:38:42 +0000

From Convenience Store News

ORLANDO, Fla. — Wawa’s plans to move into the Sunshine State are beginning to take concrete shape as construction is set to begin on a convenience store in Orlando. The site will be the Pennsylvania-based retailer’s first in Florida.

The 5,000-square-foot Wawa will rise across from Sea World at International Drive and Central Florida Parkway, according to the Orlando Sentinel. A groundbreaking ceremony is scheduled for Wednesday, and the c-store is slated to open its doors in July. Cuhaci & Peterson Architects of Orlando designed the location.

This will be the first of several stores Wawa has planned for the state. Four more are expected to follow, including two in Orlando, on Hoffner Avenue and S. Goldenrod Road, and John Young Parkway and Silver Star Road. The remaining two will open in Kissimmee, on U.S. Highway 192 and Simpson Road, and Orange Blossom Trail and East Donegan Avenue, the newspaper reported.

In total, Wawa hopes to grow its portfolio by 100 Orlando-area stores in the next five years.

[BLOGGER COMMENT: Calling all WaWa Developers! Are you hunting down sites for the Pennsylvania powerhouse entering the Sunshine State? Are you a merchant developer looking for a profitable exit? Do you need access to construction funds? Or an equity partner? Simplify your life and talk to us today about our proprietary Nexus Funding Platform where we combine equity, construction funding and sale in one simple, user-friendly execution.]

Read Original Article in Convenience Store News

Construction Funds Available Now

admin — Wed, 12 Oct 2011 18:50:44 +0000

ST. PETERSBURG, FL – Bison Financial Group headquartered here launches their ambitious “Nexus Funding Platform” aimed at bringing liquidity to the commercial real estate market and bringing jobs back to our communities. According to David Repka, Co-Founder of Bison, “Over the last three years we’ve witnessed a level of economic devastation not seen since the Great Depression. People are unemployed or underemployed and investment capital is scarce due to the fear, uncertainty and doubt for an economic recovery. As we survey the wreckage dotting the financial landscape one area of limitless opportunities smacked us in the head: creating a reliable source of construction financing.”

According to Repka, “The void created by the implosion of so many national construction lenders forced us to craft an out-of-the-box solution to fill the capital gap. What we’ve created is the proprietary Nexus Funding Platform.” Since a nexus is a “connected series or group” Bison realized that the traditional merchant builder structure that has been used for decades needed to change with the times. A deeper collaboration among the deal participants needed to emerge to solve the problem and create thousands of construction jobs that our economy needs. The Nexus Platform combines:

Investor Equity
Construction Funding
Sale of the Asset to a Long-Term Investor

…. into one logical transaction. Bison started by understanding the risk / return profile of its investors and then working backwards to design an investment vehicle that met the financial needs of their investors while reducing risk along the development path. By starting out with the needs of the long-term investor in mind Bison crafts transactions that work for them. The process can best be described in an image:

The focus of the Nexus Funding Platform is on the investment needs of the ultimate Purchaser seeking an alternative to buying 10-year Treasuries that yield 2%. Opportunities are crafted in the Nexus Platform to take maximum advantage of their abundant capital and mitigate their risk at every step of the way. According to Repka, “The best risk adjusted way to achieve compelling returns is to take some development & construction risk.”

Significant cost savings can be achieved by combining into one nexus what has been traditionally three separate closings:

close on the land for cash with equity investors
close on a loan with a construction lender
close on the sale of the property to a long term, passive investor once it is built and stabilized

Currently seeking opportunities to invest in compelling development or redevelopment projects including:

retail
office
industrial / warehouse
municipal
student housing
special use properties (data centers, gas stations, convenience stores, refrigerated storage, etc.)
renewable energy with power purchase agreements (wind, solar, geothermal, biomass, etc.)
tenant improvement programs / green renovations

According to Repka, “The best fit is a project sponsored by an experienced development team that builds single tenant or ‘easy to understand’ multi-tenant projects with tenants we like.” Bison is focused on single transactions over $10 million or aggregation opportunities to build “cookie cuttter” projects with the same tenant and development team. A basic guideline for tenant quality is tenants rated BBB- or better by Standard & Poors, but private, well-capitalized companies without public credit ratings will be considered on a case by case basis.

Since the financial viability of the project is established by the credit quality of the tenant(s), not the developer, this is the perfect program for a developer that has magnificent industry contacts and connections, but has had their credit trashed by the downturn. Banks and LifeCos are typically not willing to overlook the battle scars and bruises to a Developer’s credit, Bison’s investors will. The meticulous focus on risk reduction in this model gives a long-term investor comfort to back this type of developer. Bison is also seeing deal flow from developers at the early stages of their careers because the traditional conventional lending model is that a developer needs a net worth two times the project size to qualify for funding. That means a $80 million net worth requirement to do a $40 million project. “Since our investor is the ultimate owner of the project we don’t have to live in that restrictive box”, quipped Repka.