BETHESDA, MD—Locally-based Phillips Realty Capital could be arguably described as the CRE industry's best kept financial secret. The company closes about $100 million a month in deals, according to CFO Joe Tilley and is on track to end this year with $1.4 billion or so in transactions. It also works with a wide range of capital providers, he tells GlobeSt.com. "The 70 or so transactions we close this year will have been with 43 separate providers," he says.

The company does deals up and down the Mid-Atlantic, but most of its business is in the DC area. Deal size ranges across the board, between $30 million to $60 million, although the firm will go lower than that if the client needs it, Tilley says.

"Our biggest strength is collaborating with clients," John Sieber, principal, tells GlobeSt.com. "Oftentimes they are only in capital markets a handful of times during the year and pricing and structures can change rapidly in the interim." Clients might approach Phillips Realty Capital with a structure or deal vision in their own mind, he says, which often works out just fine. In other instances, "we persuade them to look at a different structure that might have a lesser cost of capital."

GlobeSt.com spoke at length with Tilley and Sieber about Phillips Realty Capital's operations and what they see for 2015. Following are excerpts of the interview.

About our bread and butter: We can do just about any structure or form of financing but some form of fixed-rate debt is our bread and butter. That is what we ultimately do.

Popular deal feature of the moment: Many of our borrowers are inclined to consider forward financing given the uncertain interest rate environment of the next year. The borrower locks in a rate today for funding that will take place in the near term or even out as far as a year. We are working on two such deals right now.

Why construction perm financing can be difficult to secure: Also a good way to remove interest rate risk associated with development. Typically the borrower pays interest only on the loan until the property is stabilized and then the loan converts to a fixed rate. However, lenders are fairly particular about these transactions, with stringent underwriting requirements. For example, construction perm is popular with multifamily, a hot asset class in itself, but lenders want to see metrics that show the project is strong enough to reach stabilization within a specific time frame.

The ignored class B, C assets: Sales of these assets will increase, or at least more of these assets will come to market, with the 2015-17 CMBS maturities. That is because many will find it difficult to secure refinancing, depending on the terms under which the loan was first originated.

Come back tomorrow when Tilley and Sieber talk about Phillips Realty Capital's foray into EB5 financing.

Instant Insights /

Phillips Realty Capital Eyes $1.4B in Deals for 2014

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