Capstak Influencer Gary Nelson on Financing Commercial Property

by Capstak

 

 

Gary Nelson

Gary Nelson | Senior Capital Markets Advisor for Marcus and Millichap

Gary M. Nelson arranges financing for commercial real estate projects nationwide in his role as a Senior Capital Markets Advisor for Marcus and Millichap Capital Corp.

During his 30-year career, Gary has underwritten and placed more than $1 billion in financing, managed the loan servicing and credit administration of a $3 billion commercial loan portfolio and overseen and liquidated more than $10 billion in bank and savings-and-loan assets for the Resolution Trust Corp. and the FDIC.

While he provides debt and equity financing for a wide variety of commercial real estate projects, Gary has financed more than $750 million properties in 35 states that provided more than 2,500 units of seniors housing and 2,000 hotel rooms.

Gary’s experience includes work with S&Ls and private lenders including D.A. Davidson & Co. and Miller & Schroeder.

He attended the University of Minnesota in the Twin Cities. Today, he is based in Reno, Nevada.

 

He answers our questions:

 

1. With all the traditional options along with government loans like SBA and USDA, how do you choose the right financing type for your customers?

The main CRE financing options include conventional, SBA, USDA, Fannie Mae, Freddie Mac, and life insurance companies. All of these options, besides conventional, are long-term and are best suited for owners that intend to hold the asset for a long period. These loans are typically sold to investors who are provided guaranteed repayment terms. This results in the need for prepayment penalties, which can be onerous. However, some of these options, such as SBA, involve assumable loans.

With certain asset types, like hospitality properties, the percentage of equity required is substantially lower with an SBA loan versus conventional. Lenders typically require 30-35 percent equity for hospitality loans, with SBA only requiring 15 to 20 percent. On a $10 million project, this could equal $1.5 million less equity.

Conventional financing typically suits owners with shorter-term plans to hold the property. Many bank lenders like 5-year loan terms and sometimes 10 years. If you are buying a property with the intent to improve its cash flow and/or the property itself, and then plan to sell it at a profit, a bank loan is many times a better choice. The long-term prepayments are then not required.

 

2. You have been in this industry for more than 30 years. How do you maintain your edge?

Many brokers specialize in one CRE property type, and I understand why they do this. I purposely work with all types of CRE properties. This rounds out my experience and provides the opportunity to be continually learning and refreshing my knowledge, which is very stimulating to me.

I strive to embody and promote the following attributes that are never outdated:

  • Creativity
  • Integrity
  • Being fair and equitable
  • Providing solid advice
  • Being upfront
  • Consistency
  • Determination
  • Doing what I promise to do and never overpromise

 

3.  Is there one project you have worked on that stands out in your mind? What made it special?

I spent quite a bit of time working with a local business owner who had gone through the very deep, recent Reno area recession. He did not give up when it was the very hardest and did whatever he had to do to keep his business up and running. He never considered “handing the keys back to the lender,” although that would have been a much easier solution. After the economy turned around, his business started to turn around, too. 

During the hard times, the business owner took a second mortgage on his house and even used multiple credit cards to fund the business. His credit score was not the best.

He wanted to consolidate his CRE and all high-cost credit into one loan. However, his existing lender, and other lenders, would not help him.

I took the time to structure the refinance loan and present the “story” to the local lenders, and we were finally successful. The business owner is doing well and the refinance really helped him out.

 

4. What factors are you currently watching closely to gauge the capital markets?

  • Underwriting standards
  • Availability of credit
  • Appraisal standards
  • DSCR requirements
  • Regulation changes
  • Cash-flow analysis
  • Loan-sizing

 

5. Commercial real estate can be a brutal industry. What keeps you coming back for more?

There are several rewarding things that I get out of being a CRE broker.  I like to help people access capital. I like to provide my expertise, knowledge and experience to help arrange, analyze and “tell the story” of the credit. I enjoy providing a service to people who need my help. And I enjoy assisting in the building, renovation, sale, purchase, repurposing, and turnaround of CRE property.

 

 

 

Community + Connectivity + Knowledge

Capstak is a market network for the commercial real estate capital markets. Capstak’s proprietary technology solutions empower the $15 trillion commercial real estate industry by enabling CRE professionals to find deals, source capital and identify trusted business partners with greater ease and efficiency. CRES provides bespoke services to enhance the efficiency of the matchmaking of capital for capital seekers and brokers advising the debt and equity CRE capital markets. The company is headquartered in Reno, Nevada with offices in New York and San Francisco. www.Capstak.com