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Monday, 01 October 2018

UC Funds Ramps Up Lending Against Light Transitional Properties

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Commercial Real Estate Direct Staff Report

UC Funds, a Boston provider of middle-market bridge loans against commercial properties, is shooting to fund between $400 million and $500 million of loans this year under a program it launched only last year.

Loans under the program, UC Go, are designed for properties that are undergoing light transitions. They generate cash flow, but might be undergoing renovations or are just shy of being stabilized.

The program was launched at the beginning of last year and so far has seen some $525 million of volume, with $250 million of that being funded last year. So it's close to reaching at least the lower end of its target. If it hits $500 million, "that would be a silver star for us," said Daniel Palmier, who had founded UC Funds in 2010.

"We're ramping up," Palmier said, adding that his company has a staff of 50 on its loan-originations team, including servicers and underwriters. It also plays in the equity real estate market, where it has a staff of 25 evaluating and investing in properties. The goal, Palmier said, is to ramp up to a $1 billion annual run rate.

Before founding UC Funds, Palmier had founded and ran Potomac Realty Capital, another alternative lender, and before that, he was with Arbor Realty Trust and Lehman Brothers, when the investment bank was an active investor in distressed mortgage assets following the savings and loan bailout.

UC Funds, which relies on a network of high net-worth investors, family offices and sovereign wealth funds for its lending capital, focuses on the middle market. It has $1 billion of assets under management and funds loans of $5 million to $35 million.

Under its UC Go program, it can provide non-recourse loans of up to 85 percent of the value of the underlying real estate. It will lend against most property types, save land, against which it lends through a different program. Its loans typically have terms of one to three years, inclusive of extension options. Pricing typically starts at Libor plus 295 basis points.

Palmier called UC Funds a one-stop shop for commercial real estate capital solutions. It can make an equity or preferred-equity investment in a property, provide mezzanine financing and construction financing. UC Go loans typically fill the financing need created after a property's construction, but before its stabilization. The loans typically get retired as stabilization is reached.

While the company leverages its lending operation, it hasn't yet turned to the collateralized loan obligation market. But that's a potential exit strategy for the UC Go program.

Palmier said the alternative lending space is a creative field. To succeed, a lender must understand a sponsor's business plan and its ability to execute on that plan. Loan requests typically are not what Palmier called "cookie cutters." Instead, he said, each request is unique. "So we have creative people, inclusive of our credit people." It helps that UC Funds makes equity investments. "We win business when we're able to talk the talk in the markets where we own properties," he said.

"Most clients come to us because we're quick and reliable," Palmier said, adding that the bulk of the company's new business is driven by client referrals. "The referral network is vast," he said. "And we've been doing this for a long time."

Comments? E-mail Orest Mandzy, or call him at (267) 327-4281.



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Data Digest

 

CMBS DELINQUENCY VOLUME

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CMBS SPECIAL SERVICING VOLUME

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Top Bookrunners Domestic, Private-Label CMBS - 2017
Investment Bank #Deals Vol$mln MktShr%
Goldman Sachs 17.59 11,819.34 13.68
JPMorgan Securities 14.52 10,968.11 12.70
Citigroup 12.04 10,012.71 11.59
Wells Fargo Securities 14.02 9,936.06 11.50
Deutsche Bank 12.55 9,879.74 11.44

 

RCA CPPI

 

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CMBS 2.0 Spreads

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Top CMBS Loan Contributors - 2017
Lender #Loans Vol$mln MktShr%
Goldman Sachs 146.89 11,719.34 13.63
JPMorgan Chase Bank 117.68 10,114.14 11.76
Deutsche Bank 198.48 9,689.97 11.27
Morgan Stanley 166.18 8,539.78 9.93
Citigroup 199.05 8,088.24 9.41

 

 

 

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