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Stephon Smith
Founder of accredev | Tech-powered CRE analyst 🏢. Better underwriting 📈. Faster fundraising ⏩. Stronger returns 💵. Supercharge your FP&A while saving $50K / year 🪙.
Stephon Smith is the Founder & Lead Analyst for CRE Investment Firms at accredv, a tech-powered commercial real estate analyst firm.
With expertise in increasing deal flow, refining financial projections, and crafting compelling property narratives, accredv offers quick and precise solutions to your real estate needs.
Stephon's background includes studying B.S. in Economics, Psychology, and earning Honors in Energy, Mineral, and Environmental Economics at Penn State University, Schreyer Honors College.
He also has previous experience at renowned organizations like Carbon Black Financial, Sunetric, and Simple Solar, City Electric.
If you are seeking to enhance your underwriting process and impress your investors with a comprehensive story, Stephon and his team at accredv can assist you in boosting your CRE deal flow.
Highlights
For a commercial real estate development, what happens when floating interest rates don't come down as quickly (or at all) relative to what was assumed in original underwriting?
When rates don't come down as expected during construction, a project burns up its interest reserves more quickly than planned.
If the delta between expectations and reality is big enough, this could lead to the reserve's depletion before the project has adequate absorption to cash flow the debt service.
In such cases, developers might have to tap into other reserve accounts or the overall slush fund of the budget to stay current on payments.
For projects with comfortable construction contingencies, the sponsor may be able to reallocate funds accordingly, to the extent the lender approves of this use of funds, or if the budgeted contingency was higher than the lender's requirement to begin with.
However, for projects that are experiencing higher than anticipated interest rates AND higher than budgeted construction costs, this strategy may be untenable.
Now, add on higher operating expenses for, say, insurance and security, and introduce weaker than forecast rent growth, and you see a confluence of factors that all work against the ability of the project to stabilize before its capital is depleted.
This is the position many projects find themselves in today, where reserve accounts are being tapped out across the budget.
What's the solution?
Prior to final underwriting and fundraising, there are simple things a sponsor can do to risk mitigate.
One of these is to assume a flat interest rate through the construction period if forward curves are anticipating a decrease, or a slightly increasing rate if forward curve are anticipating stable rates.
This would increase the budget based on higher finance costs.
Another option is to purchase interest rate caps or swaps to limit exposure to interest rate movement.
However, once a project has its capital and is in motion, these kinds of risk mitigants are practically unavailable (literally or economically), and the sponsor must resort to alternatives in the realm of execution.
These tactics could include applying more pressure on construction partners to deliver more quickly (perhaps with financial incentives), more aggressive marketing to juice absorption, negotiations with existing lenders, and taking on expensive short-term bridge financing.
The last and most desperate thing a sponsor can do is a capital call, which is a dreadful and embarrassing final concession that is best avoided at almost any cost.
What is the conclusion?
It has become necessary to model the financial dynamics of development with extreme visibility in order to: 1️⃣ mitigate against cash flow issues with a robust budget, then 2️⃣ detect issues before they become problems, and finally 3️⃣ resolve problems before they hamper or destroy the returns of the project.
#commercialrealestate #realestatefinance #realestatedevelopment #financialmodeling
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Mesh offers many advantages over other personal CRMs. Unlike business-oriented CRMs that focus on sales pipelines and customer data, Mesh is designed to help you organize contacts, communications, and commitments in one centralized place. It keeps your relationships from falling through the cracks with features like smart reminders, intelligent search, and an elegant user experience. Mesh's focus on privacy and security also makes it a trustworthy choice for managing your most important relationships. Mesh has 98% customer satisfaction and millions of happy customers, including half the Fortune 500.
Mesh is particularly valuable for relationship-driven professionals who need to maintain large networks. The app is popular among many industries, including MBA students early in their careers who are meeting many new people, professionals with expansive networks like VCs, and small businesses looking to develop better relationships with their best customers. Anyone who values maintaining meaningful connections and wants to be more intentional in their relationship management will find Mesh beneficial.
Mesh offers competitive pricing in the personal CRM market. Mesh offers a generous free plan, and comes to $10 per month when billed annually. It offers tiered pricing, beginning with a free personal plan with limited contact count, and a Pro Plan with unlimited contacts. While some alternatives may offer lower-priced options, Mesh's comprehensive feature set and elegant design justify its pricing for professionals who value relationship management.
Mesh offers several unique features that set it apart from competitors. Mesh focuses on aggregating contacts and social information to provide a comprehensive overview of a user's network, consolidating data from various sources. Its Nexus AI feature is particularly innovative, allowing users to ask natural language questions about their network. Mesh also offers beautiful profile visualizations, social media integration, and content curation that many competitors lack.
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