Lewis Investments Refinances $17 Million in Assets
Lewis Investments is a real estate investment and development firm based in Round Rock, Texas. It announced on January 21, 2021, that it had recently completed a $17 million transaction with JLL to refinance some of Lewis Investments’ key assets.
JLL
JLL is a Fortune 500 company listed on the New York Stock Exchange (NYSE) under the same name. It specializes in real estate investment and management, often through the use of advanced technology. JLL creates opportunities for its clients and communities by developing real estate property properties and creating sustainable solutions for maintaining them. Its annual revenue is $18 billion as of September 30, 2020, with operations in more than 80 countries and a workforce of over 92,000. JLL is also a registered trademark of Jones Lang LaSalle Incorporated.
Terms
The transaction between Lewis Investments and JLL is a refinance of three of Lewis Investments’ core assets. It was funded by the Federal National Mortgage Association (FNMA), commonly known as Fannie Mae. The total value of the loan was $17 million at a fixed interest rate of 2.77 percent and a term of 10 years. These terms are the same as those currently offered by 10-year Treasury bills, or T-bills, the interest rate on which is currently at a historic low.
The intent of the refinance was to obtain a secured, non-recourse loan for Lewis Investments. This type of loan gives the lender the right to seize the collateral and sell it in the event the borrower defaults on the loan. However, the lender has no further recourse if the proceeds from that sale are less than the loan’s balance.
Fannie Mae
Fannie Mae is a government-sponsored enterprise (GSE) in the United States. It has been a publicly-traded company since 1968, with the purpose of providing securities for mortgage loans that are backed by the mortgage. This arrangement allows lenders to reduce their reliance on local financial institutions and reinvest their assets into other loans, thus increasing the number of mortgage lenders. As a corporation, Fannie Mae was ranked 21 in the United States based on total revenue as of 2018.
Delays
Lewis Investments initially approached JLL about a refinance in early 2020. However, the spread of the COVID-19 pandemic created great volatility in credit markets by March. This development brought the project to a temporary halt, which Lewis Investments initially regarded as unfortunate timing. However, the JLL team, composed of Alastair Barnes, Chris McColpin, and Kelly Layne, uses the suspension to find alternative sources of funding.
They succeeded in finding a lender in the form of Fannie Mae that would allow them to refinance the $17 million portfolios For Lewis Investments. This portfolio consists of three properties in Central Texas, including large manufactured housing (MH) and recreational vehicle (RV) communities. Kip Lewis, the owner of Lewis Investments, was highly impressed by the efforts of the JLL team, saying “I can’t say enough good things about the JLL team.” Lewis added that the debt market was unstable at the time, but JLL still managed to provide a refinance package that surpassed his expectations. He also said he was grateful to JLL for the transaction’s success.
Revitalization Efforts
Lewis Investments has been developing real estate in Central Texas for nearly three decades. The firm has been particularly active in revitalizing downtown Round Rock, Texas, which is a historic district. Lewis saw an opportunity for investment in this area, as many of these buildings were abandoned or in need of repair. Lewis acquired his first property in this area in 1996, which was located at 109 East Main Street. This Kip Lewis Round Rock property eventually became the firm’s home office.
The second building that Lewis Investments acquired was located at 117 East Main. This building was full of trash, but its 110-year limestone walls were still solid. Lewis’s team removed the plaster covering the walls, revealing the original limestone blocks. The next step was to restore the wood floors, which primarily consisted of sending them. They also removed parts of the old structure that were beyond repair and restored the storefront. A day spa and salon occupied the building shortly thereafter.
The third acquisition for Lewis Investments was a brick building at 118 East that was previously a bank for many years. Ray Gill, a local architect, acquired the building from the bank and later sold it to Lewis’s investments. The firm restored the interior, and the building now houses Main Street Grill, Round Rock’s first fine-dining restaurant.
Lewis admits to being a little nervous shortly before the restaurant’s opening, wondering if it would have any customers. However, Main Street Grill was highly successful during its operation from 1999 to 2017, becoming the favorite restaurant in Round Rock for both business lunches and evening dining. Furthermore, the Bank Vault at Main Street Grill was also Round Rock’s most reserved seat.
Lewis is most proud of his firm’s restoration of the property at 121 East Main. This building was still occupied by Kelly Cleaners when Lewis bought it, although it almost needed to be completely demolished. The first task was to restore the limestone walls, which were close to caving in at several locations.
Lewis’ restoration team also discovered that the building had many doors and windows that previous owners had covered with stone over the years. They removed the stone covering these openings and installed modern windows and doors in their place. The restoration of this building marked the beginning of the overall revitalization of downtown Round Rock, causing many other businesses to open in this area.
The restoration of the Nelson Hardware Building at 203 East Main Street was Lewis Investments’ final project in downtown Round Rock. Lewis began considering the purchase of this property as soon as he heard it was on the market due to its potential for maintaining the momentum in his revitalization efforts. Part of the purchase agreement established a requirement that Lewis would only lease the ground floor to retail businesses. Once the restoration of the building was complete, it was quickly occupied by two restaurants.
Lewis Investments restored a total of eight buildings with a total of 45,000 square feet of space during its revitalization of downtown Round Rock over the past 25 years. The city itself also made significant investments in restoring this area. Lewis himself received a great deal of support from city leaders while he was president of the downtown business Association.
Lewis Investments
Kip Lewis founded Lewis investments in 1992 by draining his savings account of its last $2,000. This real estate investment firm owns both commercial and residential properties throughout Texas, primarily focusing on buying properties that are undervalued or poorly managed and making them profitable. Much of the Kip Lewis Austin, Texas properties consist of MH and RV parks, although the company is also involved in many other segments of real estate development. Giving back to the community is also a core value for the company. Lewis Investments currently has about 30 employees.
About Kip Lewis
Kip Lewis founded Lewis Investments when he was only 27 and is still the chairman and CEO of the company. He earned a bachelor’s degree in business administration from Texas State University and has also studied abroad. Lewis has previously served on the Board of Directors for the Round Rock Chamber of Commerce.