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CRE Financing Adapts to the Times

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CONNECT CRE – July 28, 2022 BY AMY WOLFF SORTER

Once upon a time, debt was inexpensive, meaning more leverage for more commercial real estate investments and projects. Fast-forward today, and so-called cheap money is dwindling in the rear-view mirror. Up ahead seems grim news as the Federal Reserve attempts to pull back on inflation, and the GDP fell for a second quarter in a row.

What this means for commercial real estate is that “borrowers and lenders alike are becoming more discerning about their financing decisions,” said Gary Bechtel, CEO of Red Oak Capital Holdings. Or, as Bechtel and other experts told Connect CRE, commercial real estate financing borrowing and lending are far from dead. Rather, they’re undergoing some shifts as investors, owners and developers attempt to navigate through today’s economic reality.

Aeraj Patel pointed out that both investors and capital providers are coming up with what he called “several unique methods” that seem to be effective when considering economic and market volatility. “These include use of interest rate swaps, interest rate cap purchases and low-cost bridge financing,” explained Patel, who is Matthews Real Estate Investment Services’ Associate of Capital Markets. Still others are “seeking out assets that carry a debt structure, which includes assumably,” Patel added.

Meanwhile, iProperty Management, which works with apartment and property owners and managers throughout the United States, has long been examining other financing methods. “It’s definitely pushed us to look for other methods of financing, like hard money loans,” said CEO Leonard Ang. “We’re also starting to explore the idea of tokenization to raise money from investors.”

Other operators and investors that saw the writing on the wall in 2021 acted to add cash to their balance sheets. Terranova Corp. refinanced approximately $150 million of its properties in Q4 2021 in anticipation of a run-up in interest rates and an economic slowdown. “We entered the downturn with strong liquidity, ready to participate in distress opportunities as they begin to surface,” Terranova Founder and CEO Stephen Bittel said.

Along those lines, Patel noted that many investors are cashing out, re-leveraging and trading up into greater cash-flow assets, sometimes with help from 1031 exchanges. Meanwhile, Ang said iProperty is directing more financial resources into upgrading and improving units, and “automating our management practices to increase margins with less growth.”

Even in the midst of fearful economic news, the experts expressed confidence that plenty of capital is available for a multitude of projects. But in the current environment, obtaining that liquidity requires ingenuity, planning and some creativity. “The good news is the number of options available for borrowers is higher than ever, particularly from the alternative/non-bank lending community,” Bechtel said. “The capital stack has expanded, and borrowers now have a wide array of options, and don’t have to rely on one capital sponsor for the entire project.”

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Mindy McIlroy, President of TerraNova Corp.

Parkinson’s Diagnosis Hasn’t Hindered Terranova President’s Success: ‘Outlook Plays a Big Role in How You Feel’

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DAILY BUSINESS REVIEW – April 12, 2022 BY MELEA VANOSTRAND

Mindy McIlroy, president of commercial real estate investment firm Terranova Corp., has completed $1 billion in retail leasing deals throughout her unique career in South Florida, but her success hasn’t come without challenges.

McIlroy was diagnosed with Parkinson’s disease in 2014. But instead of letting it slow her down, she decided not to view herself as a victim and tackle the disease head-on by being open about it with her colleagues.

“It hasn’t been a challenge as far as how the community views me. Some days, physically, are more challenging for me than others, but I really believe with any sort of illness, whether physical or mental, your outlook plays a big role in how you feel,” said McIlroy.

Parkinson’s is a central nervous system disorder that affects movement and often causes tremors.

Even while battling her condition and on top of her responsibilities at Terranova, McIlroy joined the board of directors of the National Parkinson Foundation and became chairwoman of the Moving Day Miami, the foundation’s annual fundraising walk. She also served as co-chair of the development committee for the foundation.

Today, in her role as president of Terranova, Mindy oversees all day-to-day operations for the company’s national retail portfolio. She focuses on a variety of retail properties, such as suburban shopping centers, lifestyle, entertainment centers, urban retail and mixed-use projects.

During the most challenging times of the COVID-19 pandemic, McIlroy is credited with leading her company to complete over $230 million in capital markets transactions in 2021 and closing deals worth over $61.7 million across 200,000 square feet of South Florida commercial retail space on behalf of a Terranova-affiliated landlord.

McIlroy is also known for conceptualizing establishments such as The Lincoln Eatery, a food hall in Miami Beach’s Lincoln Road district. She co-founded the Lincoln Road Property Owners Association, which is now the Lincoln Road Business Improvement District, and is currently an executive board member.

Employees ‘Aren’t Just People Sitting at a Desk’

McIlroy said one of her biggest accomplishments is creating a work environment that feels like a family.

“We care about each other, we have a nice working environment and everybody helps each other to get things done. Being a leader and developing that culture has been very rewarding and is one of the highlights of my career,” she said.

To create that kind of culture, McIlroy said business owners must take the time to get to know their employees on a personal and professional level.

“They aren’t just people sitting at a desk. It takes time, energy and effort to really care about your staff. You need patience, to spend time offline and not always within the confines of the office, and take them out to lunch from time to time,” said McIlroy.

McIlroy’s career began in 1997, when McIlroy moved from Atlanta to South Florida. After going through a staffing agency, McIlroy was hired as an executive assistant at Terranova working under its chairman and founder Stephen Bittel.

“I never sought this career. I think it sought me,” said McIlroy. “I ended up in that role because I was in the hospitality industry and I was in a sales position, and, in order to grow in sales, you have to be able to relocate often to larger locations.”

After a couple of years, McIlroy resigned from Terranova with the intent to go back into sales in the hospitality industry, when Terranova’s then-president offered her a real estate sales position. From there, she moved through the ranks.

McIlroy credits much of her success to her mentors, including Terranova chairman and founder Stephen Bittel, along with her predecessors Trish Blasi and Beth Azor.

“People who are in leadership roles should absolutely be conscious of the fact that they need to give back and mentor someone,” said McIlroy. “A lot of my acceleration in my carerr was due to the fact that I had worked directly for him [Bittel] for two years.”

Since Bittel is such an icon in the real estate industry, McIlroy said she was able to recognize all of the big hitters who came through the office and get acquainted with them.

“You develop a relationship where you can talk very candidly with each other, so he certainly didn’t miss any opportunity to tell me when I wasn’t doing something right,” said McIlroy. “From that, I would learn very quickly, because you want someone you trust to tell you what you need to do differently to improve your situation.

It’s Not Who You Know, But ‘Who Knows You’

Being successful in any field means developing thick skin, in McIlroy’s experience. She said the key to success in being involved in the community, nit just for networking purposes, but to improve it.

“It’s not who you know, it’s who knows you,” said McIlroy.

McIlroy held a leadership position for two consecutive terms as president of the Coral Gables Business Improvement District, and has also served as a retail advisory board member of the Kelley A. Bergstrom Center of Real Estate Studies at University of Florida’s Warrington College of Business Administration, and as a mentor in the Women of Tomorrow Mentor and Scholarship Program. She’s currently a member of the International Council of Shopping Centers. 

For fun, McIlroy said she likes to work.

“Because I find all aspects of my work fun, including the work I do for my company and the work I do for my community,” she said.

In her downtime, she enjoys traveling, planting and growing fruits and vegetables, and considering new real estate concepts from around the world to better enhance Terranova’s real estate portfolio.

 

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Cheesecake Factory inks lease on Miami Beach’s Lincoln Road

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THE REAL DEAL- February 22, 2022 BY KATHERINE KALLERGIS The Cheesecake Factory inked a lease on Miami Beach’s Lincoln Road in the former Sushi Samba space, The Real Deal has learned. The publicly traded Cheesecake Factory, based in Calabasas, California, plans to open this fall at 600 Lincoln Road, according to Terranova Corporation Chairman Stephen Bittel. The restaurant group signed a 20-year lease, with renewal options, for the 7,000-square-foot corner space. It’s expecting to secure a building permit soon for an extensive interior buildout and could open in the fall, he said. Second-generation restaurant spaces, meaning they have built out kitchens and grease traps, have been in high demand over the past year throughout the region. “After really a treacherous 2020 in the restaurant business, restaurants have experienced a remarkable recovery in markets like South Florida that have been wide open the whole time,” Bittel said. Sushi Samba closed in December 2019, just before the pandemic began. Terranova owns the property with Morgan Stanley’s Prime Property Fund. A Terranova affiliate paid $108.6 million for the property with two addresses at 600 Lincoln Road and 1630 Pennsylvania Avenue in 2014. The building was completed in 1931.

Bittel said the negotiations with Cheesecake Factory “took a significant amount of time.” He declined to disclose asking rent and final rent. Blatteis & Schnur represented the restaurant. “We all had needs to be met in the document, so this was not a quick deal,” Bittel said. Cheesecake Factory expects to lease outdoor space from the city of Miami Beach for outdoor dining in front of the restaurant, Bittel said. The restaurant, known for its expansive menu, could hire about 200 employees. Bittel said that retail leasing, led by restaurants, is up on Lincoln Road. “We’re returning it to the glory that it experienced before the convention center closed [while it was being renovated],” he said. The high street retail corridor has experienced significant vacancies in recent years due in part to high asking rents that only national tenants could afford, brokers and tenants say.

In 2020, the independent local book store chain Books & Books closed its Lincoln Road store after more than 30 years of a presence on the street. But since the short-lived lockdowns were lifted, there’s also been a surge in investment sales of properties surrounding Lincoln Road. Two office buildings north of Lincoln Road on Meridian Avenue recently sold for $27 million and nearly $50 million, respectively. In August, Witkoff bought the retail building at 1681 Lenox Avenue for $15.4 million. It’s leased to the restaurant Yard House, which is owned by Darden Restaurants.

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