CPN - March 2009 - (Page 19) ALTERNATIVE FINANCING Finding Financing Life Companies, Banks, Sellers Aim to Fill Lender Vacuum By Eugene Gilligan M ichael Schwartz is CMBS financing to get their deals small of a component to solve from working with regional banks always on the lookout done will need to refinance, as the entire problem. if they have a depository relationfor financing sources, many of these loans are coming In addition, port-folio lenders ship there, noted Weiser Realty but his search has lately yielded due. According to a recent Morthave dropped their leverage Advisors L.L.C. partner Howard disappointing results. “Many gage Bankers Association survey, levels significantly, Landsberg, who said times, the terms are not con$171 billion in non-bank-held despite the fact that that many of his ducive to doing a deal,” said the commercial and multi-family loans they are generally clients, which typicalchairman & CEO of Strategic are maturing this year and another much lower now. For ly transact deals in Storage Trust Inc., a non-traded $120 billion will come the $30 million to $60 REIT that owns 1,800 storage due in 2010. That is a For clients that want to sell their million range, are takunits and 196,000 rentable relatively small amount ing this route. properties but are unable to obtain square feet of space. but still significant Such banks may Banks, for example, are charg- given the state of the existing assumable financing, maintain cleaner baling points ranging from 1 to 2.5. economy. Many are we have developed a synance sheets than many Amortization, which was recently shorter-term floating- thetic interest-only alternative. of the household 30 years, has been lowered to rate loans that have names, Padilla report—Richard Walter, Faris Lee Investments 25 years. And, of course, interest- extension options built ed, as they may not only components have disap- in, but those options have as many toxic peared, all requiring higher cap come with challenges of their instance, insurance companies assets. But most smaller banks rates at a time when many sellers own.The result, noted NorthMarq were lending at a 75 percent charge high interest rates, when have not yet adjusted their pric- Capital L.L.C. CEO Edward Padilla: loan-to-value ratio two years considered on a historical basis, ing expectations. “They are scrambling to find lend- ago and now require levels of want recourse and veer toward Increasingly, Strategic Storage ing sources.” 50 to 65 percent, small to midsize deals. is buying assets with all cash—or Portfolio lenders, according to Mesa Insurance companies will offer using seller financing when it such as banks and West Capital princi- long-term fixed-rate financing and is available. The company is insurance compapal Jeff Friedman. non-recourse loans, but they tend to not alone, as developers and nies, are stepping in Still, both banks take a conservative approach to lendinvestors search for and insurance compa- ing, according to Cohen Financial financing that can Buyers can frequently obtain better nies are amenable managing director Christopher Carmake their deals loan terms from sellers, but “their to extending loans, roll.“These are straight,middle-of-thework. CMBS, formerly though for varying fairway deals,” he said.“They want to a huge component of new lender might not be afraid lengths of time. While see great sponsors (and) great real ” the commercial real of owning the real estate again. banks will extend estate, located in a good market.” —Jed Lassere, Pacific Coast Capital Partners L.L.C. estate lending mafrom 12 to 18 months, And some life companies have chine, is in mothsome life insurance exited the commercial real estate balls, and the quest for capital to fill some of the commercial companies will extend by five to lending space entirely, announcing can now be daunting. real estate lending void, but they 10 years, Padilla said. that they will not even refinance Indeed, investors that used are considered to constitute too Borrowers can benefit more their existing portfolio of loans, (delinquencies in millions of dollars) $2500 $2250 $2000 $1750 $1500 $1250 $1000 $750 $500 $250 $0 Lodging Retail Multi-Family Office 19 Triple Threat For the fourth consecutive month, delinquencies increased across all commercial property types. The significant increase in lodging delinquencies evidenced the speed at which the sector’s fundamentals deteriorated during the last few months of 2008. December’s 61 percent rise, to $543 million, marked the largest increase of all the property types. Owing to constrained liquidity and an expected sharp decline in property fundamentals, the overall CMBS delinquency rate could climb to 3 to 3.5 percent in 2009 from its year-end2008 level of 1.1 percent. Source: Standard & Poor’s www.standardandpoors.com • Larry Kay • 212-438-2504 Mar-2008 Jun-2008 Sep-2008 Nov-2008 Dec-2008 www.cpnonline.com • March 2009 • COMMERCIAL PROPERTY NEWS CMBS REALITY CHECK INDUSTRY PULSE http://www.standardandpoors.com http://www.cpnonline.com
For optimal viewing of this digital publication, please enable JavaScript and then refresh the page. If you would like to try to load the digital publication without using Flash Player detection, please click here.