9 questions with self-storage capital advisor Noel Cain

September 29, 2015 0
9 questions with self-storage capital advisor Noel Cain

Looking for a loan?

If you are like most self-storage operators in the business there is a pretty good chance you are at least thinking about refinancing. You may also be one of the many operators or newcomers in the industry in search of financing to jump on the current development wave.

The growing need for financing in the self-storage industry has created an opening for Tampa, FL-based BayView Advisors to add a capital markets advisor to its bench of real estate brokers who specialize in storage deals.

“On the construction end it is a little bit of the have and have-nots.” – Noel Cain

Noel Cain joined BayView in September after more than five years with a Chicago, IL-based self-storage capital group. Cain is now a managing partner at BayView and works from an office in Milwaukee, WI. The BayView Capital Markets Group offers access to permanent, construction, bridge, and mezzanine debt placement along with many different options for refinancing.

The Storage Facilitator chatted with Cain to discuss the current lending environment for self-storage borrowers. Below is an edited transcript.

 Noel Cain, managing partner at BayView Advisors.

Noel Cain, managing partner at BayView Advisors.

What prompted BayView Advisors to add a capital advisory service to its firm? What was the need in the marketplace being addressed?

Noel Cain: Jay Crotty (founder and managing partner of BayView) was getting a lot of feedback and interest in financing from clients but just didn’t have that arrow in the quiver. So we are filling the need of those clients. Also we realized there is room in the lending market for some new people to jump in.

As you talk to potential borrowers, what type of loans are they most interested in?

Coming out of the recent trade show (SSA Expo 2015) the biggest interest I am seeing right now is in construction loans. Acquisitions are happening, but most of the acquisitions are going to REITs or private equity guys that frankly don’t need a broker as much for their financing–they have funds available. Refinancing activity will continue to be strong. There are people trying to tap into their existing equity to build expansions.

Is it difficult for new entrants to find a lender that will give a construction loan for self-storage?

Construction lending tends to be very fragmented. There are not as many big players like there were before the great recession that have come back to fill the need on a global or national level, so it’s mostly coming from local or regional banks. Depending how strong your rolodex is with banks in your market, or if you are building outside your market, you might not be aware of what lenders are available.

Of your development prospects, what percentage of those are new to the business?

It is a little bit of both. Right now based on the calls and inquiries, it is about 50 percent new entrants into the self-storage world looking to build their first facility and the other 50 percent are really experienced builders. In those cases they have tapped out their existing banking relationship and are looking for someone new.

 Construction loans for self-storage are increasingly in demand, says Cain.

Construction loans for self-storage are increasingly in demand, says Cain.

What do you mean when you say they have “tapped out” funding from their previous lender?

It is common for local and regional lenders to only have a certain size bucket for certain types of construction. It doesn’t take too many deals until you tap out with your local bank. I have found clients that are looking for new sources.

Is competition amongst lenders still strong in the sector?

Definitely for any of the stabilized properties. The debt on them is being bid on really competitively. It is obviously a great time to be a borrower.

What about for construction loans?

On the construction end it is a little bit of the have and have-nots. I think the borrower with the strong balance sheet and a strong track record, those deals are being bid aggressively. A lot of the new guys are undercapitalized who are struggling to find debt.

How has business been since launching? What does your pipeline look like?

We are four weeks in now and our pipeline looks pretty good. I’ve got some clients getting quotes from banks and getting applications together. We are moving forward fast.

What types of loans are you getting started on?

I have a little bit of everything on my plate, but no acquisitions yet. Right now it is 30 percent construction and the other 70 percent are refis or bridge loans. I have two guys looking to do expansions who are refinancing with additional cash.

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