BPM's Real Estate Insights 2019 Volume 01 | Page 12

What Lies Ahead: Interview with Tom
Wright, Vice President of NorthMarq
Capital’s San Francisco Office
By Helen Moulis
In December, we had the privilege of speaking with Tom
Wright of NorthMarq Capital. Tom has underwritten and
closed $2 billion of debt and equity transactions. Northmarq
has close to 200 mortgage brokers nationwide and is very
active in the Bay Area. Tom shared his views on where he
sees the markets in the near term.
As we look to the New Year, what
do you see as to the availability
of debt for real estate?
Looking at it from the perspective of the Agencies (Freddie
Mac and Fannie Mae), it is business as usual. The Agencies
are mandated by the FHFA [Federal Housing Finance Agency]
to lend to a cap. If you look at that cap, some expected
the cap to be lowered from $35B each, but in fact, it was
kept constant. That says the FHFA still thinks Freddie and
Fannie will be lending at same market share as before. Not
increasing the cap says something too—they think it is going
to be similar to 2018.
of where that market is (whether Reno, Sacramento or
Livermore). The Agencies are still going to be very active in
lending in those areas. However, we have started to see that
people are priced out and are moving to secondary markets-
to the point now where even Oakland is not so much of a
discount as it was.
With Square, you are going to see Oakland continue to grow.
The number of housing units and amount of office being built
in the Uptown neighborhood is incredible. We also might
see some more creative development that explore ideas
such as micro-units and co-living. We have clients looking
for financing on both. Agencies are already financing micro-
units, and co-living is on the horizon for those Agencies. As
the Agencies become more informed on new products types,
it will open the doors a little bit and make it easier to finance.
The cost of capital may differ from the traditional apartment
cost of capital. Another thing, for a complex that is essentially
adult dorms, you have to think about who is living there and
for how long. It may make sense for someone new to the
city or fresh out of college, but once they get a boyfriend/
girlfriend/husband/wife/kid they are not going to be able
Where do you see interest rates
going in the next 12-18 months?
Many people think rates will end 50 basis points higher by
next year. With that, you can start to see cap rates going up. If
that happens, then values will remain flat or go down. It could
limit the number of transaction that are taking place if there
is a 50 basis point jump. There is still a lot of business for
refinance. When borrowers see that interest rates are rising,
they want to lock in long-term fixed rates.
With your clients, are you seeing
higher investment in secondary
versus primary markets now?
We have already seen some of our borrowers going outside
their traditional comfort zone of gateway markets to get higher
yields in secondary markets like Salt Lake City, Portland
and Denver. Those markets are growing very rapidly. I don't
think, necessarily, the Bay Area will struggle as much as
other markets because of the incredible demand drivers in
tech. Something to keep in mind, Freddie and Fannie have a
mandate to provide affordable workplace housing regardless
12 BPM Real Estate Insights
(Continued on Next Page )