Commercial Property News - November 2008 - (Page 24)

INDUSTRY PULSE FINANCE as lenders tend to view hotels as the riskiest among the commercial real estate sectors. Development of those properties is even more precarious. Concord has agreements to develop 13 hotels under such major brands as Marriott,Hilton and Hyatt. So far, however, the company has received financing for only two of those properties. The increase in requirements for recourse is further deterring developers, putting them on the hook at a cost of 10 to 25 percent of the loan if they fail to meet certain requirements, such as debt service-coverage ratios, LaPort said. “That’s slimming the number of developers who are going to build hotels.” Concord, for instance, is going to wait until the first quarter of 2009 to gauge where the credit markets are before proceeding with construction. While the reconfiguration and exit of investment banks has changed the lending environment, most observers do expect securitization to re-enter the scene, though it is not likely to reach 2007 levels again, at least in the near term. “The (investment bank) talent is out there, and investors still need ROI,” Walsh pointed out. Securitization may look different this time, though, as lenders could be required to hold the B piece, Carroll said. Deals may also resemble some Fannie Mae and Freddie Mac financing, incorporating a buyback provision on the lender’s part if the loan goes bad. “It’s like a forest fire,” observed Mesa West Capital principal Jeff Friedman. “After (the forest) burns down, new plant species start to grow.” —Reach senior editor Eugene Gilligan at eugene.gilligan@nielsen.com. Visit www.cpnonline.com/finance for more finance coverage. EXCEEDING EXPECTATIONS. SURPASSING THE COMPETITION. Telltale Signs While the credit crunch is stifling commercial real estate dealmaking, many are looking for indicators of when transaction flow will pick up again. KeyBank Real Estate Capital executive vice president Daniel Walsh is watching for financial institutions to start lending to one another again. “It’s going to come back slowly,” he said. “Financial institutions have to gauge counter-party risk. When the cost of capital goes down for the lenders, it should be lower for businesses.” The health of the U.S. economy is not helping. “The big issue is how the turmoil in the financial markets is going to affect the economy,” said Gary Painter, associate professor in the School of Policy, Planning and Development for the University of Southern California and director of research for the USC Lusk Center for Real Estate. “If we see a lot of job losses, that is going to affect commercial real estate.” Year-to-date defaults on commercial real estate loans are low on a historical basis, but Mesa West Capital principal Jeff Friedman also worries what effect a slowing economy and higher unemployment will have on that number, noting, “It’s going to make life more challenging.” WWW.C WC A P I TA L .CO M For more information or to discuss your speciﬁc ﬁnancing needs, contact: TAMMY HEYMAN | SENIOR MANAGING DIRECTOR | CAPITAL MARKETS | 646.253.8827 | THEYMAN @ CWCAPITAL.COM 24 COMMERCIAL PROPERTY NEWS • November 2008 • www.cpnonline.com http://www.cpnonline.com/finance http://WWW.CWCAPITAL.COM http://www.cpnonline.com

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CPN - November 2008 Contents Starting Line Seniors Housing Data/Analysis Conferences Through the Fog CPN’s Top Cities for Investment & Corporate Relocation Finance International Sustainability CPN-Nielsen Claritas Special Report

Commercial Property News - November 2008

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