« The Real Estate Capital Scoreboard® – July 2008

Mortgage Lending Reaches Extremes

realtycapital, 15 July 2008, No comments
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Chicago, Illinois, July 15, 2008 — Commercial mortgage lenders are becoming more scarce as the second half of the year approaches. Lenders are reluctant to fund projects based on any “conventional” norms. Instead, funding sources reach for two different, and extreme, lending profiles: (1) Low-Leverage and (2) Opportunity financing. Each of these profiles are discussed as follows:

Lower-Leverage:

Even in today’s market, competitive mortgage pricing is selectively available to commercial property and multifamily property owners requiring lower leverage based on:

Availability: Limited to life insurance companies for terms of five years or longer. Banks and credit companies providing short-term funds.
Leverage: Low-leverage is defined as fifty percent or less.
Pricing: Starting as low as 350 basis points over comparable term treasuries. On occasion, the agencies may dip below such levels on extremely prime-quality multifamily projects. However, most common spreads are between 400 to 450 basis points over comparable term treasuries for fixed rate loans. Veritable rate loans are priced over LIBOR or Prime, generally starting at at least 300 basis points above.
Guarantees: Full personal recourse required for bank deals, while life insurance companies and pension funds continue offering on recourse.

Opportunity Financing:

Opportunity financing represents substantial yield premiums for projects that don’t fit into the “Lower-Leverage” category discussed above. For the most part, this financing format covers second-tier locations, leverage above 65%, older conventional properties and newer, non-conventional properties (e.g., special-purpose and lodging properties). Pricing starts in the mid-teen-percent range.

The Real Estate Capital Scoreboard® – August 2008 »

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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.