When pursuing a large loan amid a turbulent time in the financial markets, it helps to have an experienced advisor in your corner. It helps even more if you have two of them.
Talonvest Capital and The BSC Group are two well known capital advisory firms in the self-storage industry, and they typically compete against each other for business. But a recent deal led the two firms to join forces.
The two firms worked together to secure a $58.25 million refinance loan for a 10 property portfolio owned by Stor All Self-Storage, which has 18 self-storage facilities in Ohio and Kentucky. The CMBS financing, issued by an unidentified national bank, is a non-recourse, cash out, securitized refinance loan with three years of interest-only payments and a 10-year fixed interest rate
So how did Stor All President Steve Womack get these two competitors to work together?.
Womack initially thought to refinance the 10 properties separately, giving half the portfolio to Chicago, IL-based BSC and the other half to Newport Beach, CA-based Talonvest, according to Shawn Hill, a principal of BSC.
“We both advised him that you are going to get a better execution in the market if you keep the portfolio together,” Hill said, “He knew we both had his best interests in mind because we both gave him the same exact unsolicited advice.”
Finding that the two companies were open to working together on this particular portfolio, Womack hired both firms to represent him.
“We don’t want to set a precedent in the market that we are going to hook up on $3 or $4 million dollar deals. This situation was unusual, but it was a very good situation,” Hill said.
Divide and conquer
Tom Sherlock, a principal of Talonvest, said competition was very strong amongst the various lenders looking to win the loan.
“I’d say between the two of us, we talked to about 30 lenders, and had bids from 20. We narrowed it down quickly to the top three or four viable lenders,” Sherlock said.
Sherlock said with both teams working the deal, they were able to “divide and conquer” the conversations with various lenders and speed up the process quite a bit.
“Some of the initial bids were so aggressive some of the other lenders we were talking to got out right away,” Hill said of the 30 or so prospective lenders they spoke with.
Another benefit of having two experienced firms revealed itself as the Greek debt crisis started to create uncertainty in the financial markets.
“When the markets started to move, the client felt very well represented as he had two voices that were able to test the market,” Hill said, “It was a situation where it helped to have a lot of firepower behind him.”
Womack said he was pleased with the outcome of the unlikely partnership.
“Because of the brokers’ relationship with the top decision makers at the bank, I was able to get the loan dollars, rate, and structure I wanted,” Womack said, “Even in the middle of all the market turmoil.”
The loan was funded on June 8. The portfolio covers 685,000 rentable square feet and is located in Louisville, KY; Lexington, KY; and Cincinnati, OH.
Full speed ahead
Sherlock said since that market turmoil has cooled off, the current environment for self-storage lending is as strong as ever.
“We have gotten past the uncertainty in the market. I think the lenders are engaging very actively again and new business flow is high,” Sherlock said, “I still think storage, for lenders who understand it, is a favored property type.”
The two firms worked collaboratively to execute the loan. Joining Sherlock and Hill in the effort were Jim Davies, Kim Leslie, and Laura Bogart of Talonvest and Devin Huber from BSC.
As for what it was like working with the competition, Hill said it is much more congenial that many might expect.
“People think we are like the Blackhawks and the Red Wings, but we have a good relationship and mutual respect for each other. Both firms were willing to put their own egos aside to do what is best for the client,” Hill said.