August 20, 2010—Jim Sellers sells Tucson to life insurance companies

By Roger Yohem

INSIDE TUCSON BUSINESS

August 20, 2010

Commercial mortgage banker Jim Sellers is a conservative guy who thrives in a conservative business. His clients are looking for low-risk, long-term investments.

During his 50-year career, the cornerstone of his success has been trust. When clients commit to a deal, they have confidence in what he’s selling—and not selling—to them.

“In this business, you spend a lot of time developing relationships. It takes five to 10 years to get to the point where they trust you to bring them the kinds of deals and loan structures they want,” said Sellers. “In the ensuing years, you spend a lot of time maintaining those relationships.”

As owner of Heritage Advisory Corporation, 2960 N. Swan Road, Suite 300, Sellers has cornered the market on “importing” capital to Tucson’s real estate economy. Through his long-standing relations with life insurance companies, pension funds, banks and other lenders, he oversees financing for all types of commercial real estate locally and nationally.

About 30 life insurance companies make these types of loans. Among his regular clients are Lincoln National Life, Sun Life of Canada, Nationwide Insurance, Farm Bureau Life of Iowa, and American Equity Financial.

Through Cigna Life, Sellers arranged a $35 million loan for Loews Ventana Canyon Resort. MetLife did a $35 million loan for the Hilton El Conquistador Resort property in Oro Valley. For Lincoln National, $8 million and $15 million loans were arranged for a west side shopping center anchored by Safeway; and an eastside Home Depot complex. For medical office buildings, American Equity has made loans.

Sun Life of Canada has financed the 5151 E. Broadway office building; a PetsMart center on the east side; and a La Paloma Corporate Center office building in the Catalina Foothills.

“Usually, the common denominator is a Tucson borrower. I make sure I know all the commercial property owners so when they’re ready for a loan, I’m the guy they’re going to call,” Sellers said. “At this stage of the game, I’m out there selling Tucson to the life insurance companies.”

Heritage does not hold or manage any properties. Instead, they “look after” the investments and service the loans. They make sure the taxes and insurance are paid, and submit performance reports to lenders.

Sellers emphasized that he is a mortgage banker, not a broker. That designation allows him to handle money for clients. Heritage services about 110 loans worth about $350 million in value from which it collects a one-tenth of 1 percent annual service fee.

Insurance companies put about 80 percent of their investable funds in stocks and bonds, explained Sellers. Then, being conservative, a portion or all of the remaining balance is invested in commercial real estate mortgages.

“Their goal is to make long-term loans on properties that are not going to have problems. They try to earn at least 1 percent more on their real estate than their stocks and bonds,” he said.

“They put the money out for five to 25 years and match the loan payments and maturities to their actuarial numbers that, on the back end, show what has to be paid in claims to people who die,” he added.

Any property with a strong income stream is desirable and most loans are underwritten at 70 to 75 percent of value.

“So the first thing I’ve got to do is pretend I’m an appraiser. There’s no rocket science to it. They show you the rent list, the vacancy, then deduct what you think are the expenses. Capitalize that number and that’s the economic value of the property,” Sellers explained.

Current loan rates run about 4.75 percent for apartments; and 5 to 5.75 percent for shopping centers and office buildings.

Sellers began his career as a junior escrow officer in 1958 with Phoenix Title & Trust. After many career moves, mergers, the horrid government-run Resolution Trust Corporation days, executive posts, and watching his former partners and peers retire, Sellers is now the field’s dominant player at age 76.

“I don’t know how to quit. I’m a child of 1930s depression period. I grew up with a work ethic and goal to have a job I was interested in going to every day. My goal wasn’t to go out and have a lot of fun, although my wife has been trying to change that lately.”

“The business is interesting but must look boring from the outside. I want to keep doing what I’m doing for as long as I can,” he said.

Next week, Sellers talks about the money that’s waiting to be spent on Tucson opportunities.

Contact reporter Roger Yohem at [email protected] or (520) 295-4254.