{"id":1004121430,"date":"2015-06-17T11:54:45","date_gmt":"2015-06-17T19:54:45","guid":{"rendered":"https:\/\/www.commercialsearch.com\/news\/?p=1004121430"},"modified":"2022-12-07T21:43:45","modified_gmt":"2022-12-08T05:43:45","slug":"stonemonts-advise-on-cre-investment","status":"publish","type":"post","link":"https:\/\/www.commercialsearch.com\/news\/stonemonts-advise-on-cre-investment\/","title":{"rendered":"Fruitful Tips on CRE Investment"},"content":{"rendered":"<p><em>By Keith Loria, Contributing Editor<\/em><\/p>\n<div id=\"attachment_1004121432\" style=\"width: 160px\" class=\"wp-caption alignright\"><a href=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2015\/06\/Bob-McMahon.jpg\"><img loading=\"lazy\" decoding=\"async\" aria-describedby=\"caption-attachment-1004121432\" data-attachment-id=\"1004121432\" data-permalink=\"https:\/\/www.commercialsearch.com\/news\/stonemonts-advise-on-cre-investment\/bob-mcmahon\/\" data-orig-file=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2015\/06\/Bob-McMahon.jpg\" data-orig-size=\"336,341\" data-comments-opened=\"1\" data-image-meta=\"{&quot;aperture&quot;:&quot;0&quot;,&quot;credit&quot;:&quot;&quot;,&quot;camera&quot;:&quot;&quot;,&quot;caption&quot;:&quot;????????????????????????????&quot;,&quot;created_timestamp&quot;:&quot;0&quot;,&quot;copyright&quot;:&quot;&quot;,&quot;focal_length&quot;:&quot;0&quot;,&quot;iso&quot;:&quot;0&quot;,&quot;shutter_speed&quot;:&quot;0&quot;,&quot;title&quot;:&quot;&quot;,&quot;orientation&quot;:&quot;0&quot;}\" data-image-title=\"Bob McMahon\" data-image-description=\"\" data-image-caption=\"&lt;p&gt;Bob McMahon&lt;\/p&gt;\n\" data-large-file=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2015\/06\/Bob-McMahon.jpg?w=336\" class=\"size-thumbnail wp-image-1004121432\" src=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2015\/06\/Bob-McMahon.jpg\" alt=\"Bob McMahon\" width=\"150\" height=\"150\" \/><\/a><p id=\"caption-attachment-1004121432\" class=\"wp-caption-text\">Bob McMahon, Stonemont Financial<\/p><\/div>\n<p>New analysis by Stonemont Financial Group forecasts commercial real estate investing to be on an upward trend and investors can expect commercial property to increase an average of 7.6 percent annually through 2017.<\/p>\n<p>\u201cWith bond yields at historical lows and the S&amp;P 500 trading north of 18 times earnings (with a corresponding dividend yield below 2 percent), investors are hungry for yield,\u201d Bob McMahon, Stonemont Financial Group\u2019s co-founder, told <em>Commercial Property Executive<\/em>. \u201cI would say any time is a good time to invest in CRE, provided an investor is getting appropriate risk-adjusted returns.\u201d<\/p>\n<p>In a market environment like today, where valuations have rebounded from the last recession, an investor must be careful and prudent to avoid the issues they faced in 2008.\u00a0 That\u2019s why Stonemont advises investors to acquire assets with reasonable leverage that they are comfortable holding long-term, through multiple real estate cycles.<\/p>\n<p>\u201cIn the net-lease world, if you are acquiring an asset with a short remaining lease term (five years or less), you better be comfortable stressing market rents in case your tenant doesn\u2019t renew and you have to find a new tenant in the midst of a down cycle,\u201d McMahon added. \u201cAt today\u2019s valuations, an investor needs to look long term.\u00a0Make sure you are comfortable with the asset through another downturn, so stress your rent and occupancy assumptions to be comfortable that you can refinance any short-term debt you are using to acquire the asset.\u201d<\/p>\n<p>With cap rates compressing significantly for top MSA net-leased assets with high-quality tenants, McMahon cautions investors about buying some of these deals as the cap rate compression has come from demand for single-tenant net-leased assets due to the hunger for yield. Additionally, investing in vacant, \u201cspec\u201d deals can offer high returns but are certainly riskier than going into a deal with a long-term lease to a quality tenant, which is why an exit strategy is very important today.\u00a0 If you are investing in a build-to-suit transaction at today\u2019s cap rate levels, be comfortable holding long term rather than looking for a quick flip at the end of construction.<\/p>\n<p>According to McMahon, Stonemont Financial Group specializes in CRE investments with net leases to creditworthy tenants attached, as well as private student housing investments.\u00a0These investments can provide double-digit cash-on-cash leveraged returns as well as provide an inflation hedge due to corresponding rent growth.<\/p>\n<p>\u201cIn the net lease side of our business, just about everywhere is doing well,\u201d he said. \u201cTertiary is less of a bad word today as it relates to market location.\u00a0Many deals in top MSAs with high quality tenants are over-valued, in my opinion, and are trading at levels approaching the mid-2000s, just before the recession.\u201d<\/p>\n<p>That\u2019s why Stonemont Financial Group focuses more on secondary markets with tenants it likes, even if it means financing a more special purpose asset.<\/p>\n<p>\u201cIn the student housing side of our business, we\u2019re focusing more on tier II schools (generally 10,000-15,000 students with good enrollment trends) that have had little to no development of purpose-built student housing in this cycle,\u201d McMahon concluded. \u201cMany tier I schools have been overbuilt in this cycle.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"<p>New analysis by Stonemont Financial Group forecasts this about commercial real estate investing and offers useful tips.<\/p>\n","protected":false},"author":451,"featured_media":1004121432,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[37301],"tags":[],"class_list":["post-1004121430","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v28.0 (Yoast SEO v28.0) - 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