« The Double-Digit Delight – Mortgage Spreads Continue Dropping

Fune-tuning a Permanent Mortgage

realtycapital, 26 January 2007, No comments
Categories: Education, News|Views

Chicago, Illinois, January 26, 2007 — Borrowers feast on extremely competitive loans as lenders fund record amounts of debt in a highly competitive realty capital market. Rates, amortization schedules, prepayment provisions, good faith deposits and other traditional underwriting terms are liberally negotiated.

Creative lenders find unique methods of offering even more attractive terms and conditions. Some examples include:

Collateral substitution rights – offered chiefly by balance-sheet lenders such as life insurance companies and banks.
Tenant cancellation clause – acceptance of rent roll subject to cancellation, even if lease terms are at market price.
Waiver of completion guarantees – if minimal construction needed as part of cash flow earnout.
Prepayment flexibility – alternative to shorter-term bank debt deals. For example, a quarter-point rate premium buys par (or near par) pricing on a five-year deal.

John Oharenko, a member of the Advisory Board of the Real Estate Capital Institute, suggests “fierce bidding among lenders demands very creative solutions for structuring loans. Any underwriting advantage helps win deals above and beyond rate and term.”

The Real Estate Capital Institute is a research organization dedicated to studying debt and equity markets for commercial properties in the United States. The Institute’s website (www.reci.com) offers various information on fixed and floating rate debt pricing. Also, interest rate market updates are available on an hourly basis by calling the Real Estate Capital Rateline at 7RE-CAPITAL (773-227-4825.)

The Real Estate Capital Scoreboard® – February 2007 »

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Las Vegas, NV - February 6, 2010 - According to industry leaders gathering in Las Vegas this week, debt capital is readily available for 2010. Optimism is in the air and the mortgage lenders are starting to offer more generous terms and conditions. In summary, timing is excellent for select borrowers in securing debt based on the following conditions: (1) Recovering economy, (2) Ample supply of capital and (3) Limited supply of financeable real estate assets. The following highlights summarize the 2010 state of the realty capital markets including an overall outlook and overall funding program offerings: Back to Basics: As lenders workout of their legacy problems, new funding goals surface which are clearly more ambitious than 2009. Still underwriting of actual numbers w/o projections, yet inflation fears exist. Most lenders are Indifferent to spreads, but not competition. Valuing real estate properties in a declining market still a challenge. More allocation of funds available above target amounts if deal flow is of sufficient quality Underwriting Dynamics: As has been the case last year, high-quality projects in major markets backed by excellent sponsorship and cash flow characteristics are most desired—especially based on low leverage of 65% of value. Location/Property Types: Major MSAs strongly preferred for optional pricing and leverage. Otherwise a substantially most costly financing with lower leverage. Preferred property types ranked in order: (1) Multifamily, (2) Credit-Tenant lease of all property types, (3) Industrial, (4) Retail, (5) Office - however medical office ranks equal to Industrial and (5) Lodging. Pricing (Permanent Fixed-Rate Loan): Agency pricing for apartments starts in the low to mid-5% range for 5 year or greater term. Life company pricing starts mid-5% to 6% for 5 years or more term mostly targeted for commercial property pricing (agencies are more competitively priced) More entrepreneurial funds start at 7% or more targeting secondary markets, smaller fundings, older properties and lodging assets. Add a pricing premium of 25 to 50 basis points for loans below $5 million. Yield differential disappearing - typical ($5 to $50 million) vs. larger loans. Forward funds available up to a year based on 6 o 8 basis points premium per month. Leverage: Above 65% LTV on a select basis combined with lower spreads. Values based on the lower of: (a) purchase price, (b) appraised value or (c) lender imposed capitalization rate.