Report On Commercial Real Estate Funding [Housing Tracker]

Quote of the Day 

"[The banks] say, 'If I foreclose, I am going to take a 30 or 40 percent loss, so why don't I sell the paper at 15 or 20 percent loss, and save the horror and the brain damage of having to go through this over the next year or two?'" - Richard Nardi, a partner in the law firm of Loeb & Loeb and the counsel to the Mortgage Bankers Association of New York. In this real estate downturn, lenders are not waiting for the owners of commercial properties to go into foreclosure. Instead they are discounting and selling off mortgages on commercial properties where borrowers are having trouble making payments.  (The Real Deal, July 8^th)

Commercial Real Estate Financing

Fitch Withdraws Ratings for Irvine Apartment Communities.  California: “Fitch Ratings has withdrawn the following ratings for Irvine Apartment Communities, L.P.: Issuer Default Rating (IDR) at 'A-'; Senior unsecured notes at 'A-'. The withdrawals follow the repayment of all rated senior unsecured debt at the aforementioned entity. Irvine Apartment Communities, L.P. is a real estate partnership that is focused on owning and managing multifamily apartment communities in coastal California. The partnership is a subsidiary of The Irvine Company LLC, a privately-held real estate company in CA.”  (Press Release, July 8^th) 

Staving Off Commercial Foreclosure.  NY: “Real estate research firm PropertyShark: Real estate investors and vulture funds are buying mortgages on distressed commercial properties and either working out new deals with borrowers or making preparations to foreclose. Commercial foreclosures have not risen dramatically compared to the last three quarters. In the first five months of 2008, lis pendens notices in the city were filed on 524 vacant properties, 45 office buildings, 33 warehouses and 22 industrial buildings. However, many of the transactions involving distressed commercial real estate take place behind closed doors and before the property listing ever reaches any part of the foreclosure process.”  (The Real Deal, July 8^th)

CBRE Capital Markets Arranges $45M in Acquisition Financing for Hampshire Partners.  “CBRE’s Capital Markets group in New York City have secured a $45 million loan on behalf of Hampshire Partners Fund VII L.P. for the financing of certain assets of Fund VII’s portfolio. The loan, financed by Capital Bank N.A., was structured at a floating rate over LIBOR on an interest-only basis. The financed assets consisted of six properties [in NJ, MD, CT and VA.] comprised of a mix of retail, office and industrial… Encompassing 1,182,415-square-feet, the portfolio’s combined occupancy at closing was 83%.”  (CPN Briefs, July 7^th) 

Real Estate Investment Demand OK; Funding Slow. Idaho: John Stevens of the Thornton Oliver Keller Commercial Real Estate Investor Services Group: “We have experienced substantial change recently in the demand for, and ability to finance, investment real estate that has any vacancy over 5%.” A year ago, sellers could figure anticipated, pro-forma rents into their prices and buyers could obtain financing with traditional loan-to-value term. “Now lenders will not give buyers much, if any, credit for proforma rent. Lenders are requiring higher equity positions from buyers and higher debt-coverage ratios. If the lenders are giving any credit for escrowed rents, they are requiring higher escrowed balances.” (Idaho Business Review, July 7^th) 

154,660-SF Building Gets $25M Refi.  “Meridian Capital Group has arranged $25 million for the refinance of the St. James Building located at 1133 Broadway in New York City. The office building here consists of 16 stories and 154,660 sf of rentable space comprised of over 200 office tenants. The property also features ground floor retail space. Allan Lieberman of Meridian’s New York office negotiated on behalf of the borrower to secure a fixed-rate of 5.75% upon application.” (Globe St., July 7^th) 

Commercial Real Estate Easing in Economic Slowdown.  “National Association of Realtors: Tight credit availability has significantly slowed the volume of commercial real estate transactions. Vacancy rates in the retail sector will probably edge up to 9.3% in Q4 from 9.2% in Q4’07. Average retail rent is expected to rise 1.3% in 2008, compared with a 2.9% gain last year. Retail transaction volume during the first four months of 2008 totaled $7.5 billion, significantly below the $27.7B in the same period last year. Strip center transaction volume is down 77% from a year ago. Investment in commercial real estate during the first four months of 2008 was $48.2B, down 69.5% from $157.8B during the same period in 2007.”  (American Coin Op, July 7^th)

How Lehman Brothers Veered Off Course.  Bakersfield, California: McAllister Ranch, envisioned as a 6,000-home, multibillion-dollar recreational community… So far, this development alone -- part of a major bet on Southern California's Inland Empire -- has cost Lehman $350 million… Lehman's commercial paper unit is on the hook for a $235M loan it made to the development… In 2006, Lehman invested a total of $2 billion in deals with McAllister's developer, SunCal, a Southern California firm severely spattered by the bursting of the real estate bubble. The $350M McAllister loss looks increasingly like only a down payment.”  (Washington Post, July 3^rd)

 

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Comments

[rob powell:]

Sounds like a plan to me since things look to be getting worse for commercial landlords. My question is who is buying the paper?

Great post....

2008 Jul 09 11:38 PM