by Andrew Little, Special Correspondent

Lenders at the recent annual Mortgage Bankers Association meeting spoke very little about the economy and how we were getting late in the cycle. Caution had been a mainstay of the past three or four years.But that was noticeably absent from most conversations. In fact, the overwhelming view was that when compared to other asset classes, commercial real estate and multifamily are undervalued and have a way to run.This attitude is precisely why Richmond area commercial and multifamily real estate has been on a tear for the past few years.

As opportunities to get comparatively good values in larger markets are disappearing, secondary markets like the Richmond region are coming into greater focus for investors.The Richmond region has always attracted out-of-town buyers for large apartment buildings, and many recent trades continue that trend. Our area also is attracting out-of-town money for office, retail and warehouse sales.For instance, the Gayton Crossing Shopping Center in Henrico County sold in January for $29 million to a subsidiary of an Atlanta-based firm.In the office world, several recent trades show significant interest from out-of-town buyers. An affiliate of the RMR Group, a Massachusetts-based real estate asset management company, purchased the Deep Run III building at 9954 Mayland Drive in Henrico for $56 million in January.

An entity based in Oklahoma purchased two office buildings anchored by Citizens One near Virginia Center Commons for $15.7 million in December.Alternative investment strategies are proliferating at many money managers’ shops, and real estate is high on the attractive list. So how does that translate to the everyday work of getting a new loan and or property purchased?A number of options across the risk spectrum are available to leverage real estate. For every insurance company or bank that is backing off risk to focus on ultra-secure low leverage deals, more than a handful of lenders are willing to increase their risk tolerance.Multiple debt funds and shadow banks are increasing product lines to include value-added and transitional loans as small as $5 million when they previously focused on deals of $20 million and more.Traditional conduit lenders have increased their appetite for leverage by adding bridge loans that allow them to do higher leverage first mortgages — so called “stretch seniors.”Translation: There is a lot of money searching for a home and plenty looking for a little higher yield in exchange for more risk.