Mixed News On CRE Funding [Housing Tracker]

Seeking Alpha's Housing Tracker is a collection of housing-related excerpts from various sources, grouped by topic. Feel free to post any interesting links on the subject in the comments section below.

Commercial Real Estate and Real Estate Investment Trusts [REITs]

Ciena Capital Declares Bankruptcy. “NYC: Ciena Capital, a local provider of commercial real estate financing and factoring services, has filed for chapter 11 relief in the US Bankruptcy Court for the Southern District of New York, according to a statement by its major investor, Washington, DC-based Allied Capital.” (Globe St., Oct. 1) 

$212M Bridge Financing in Place for D.C. Office.  “Despite being slowed down by the economy's downward spiral and the debilitating credit crunch, Washington, D.C.'s office market has remained relatively strong. Still… Republic Properties just got its hands on $212 million in financing for The Portals III, its nearly 510,000-square-foot premier office building in budding southwest Washington, D.C. Real estate services firm Cassidy & Pinkard Colliers orchestrated the two-tiered debt transaction that consisted of a senior loan from a commercial bank on the West Coast and a mezzanine loan through a national pension fund advisor.” (Commercial Property News, Oct. 1) 

Failed Deals Replace Boom in New York Real Estate. “Developers are complaining that lenders are now refusing to finance projects that were all but certain months or even weeks ago. Landlords bewail their inability to refinance skyscrapers with blue-chip tenants. And corporations are afraid to relocate within Manhattan for fear of [falling] rents fall or… layoffs… Last Friday, HSBC [cancelled a] move… to 7 World Trade Center after bids for its existing home at 452 Fifth Avenue, came in 30% lower than the $600 million it wanted for the property. A 40-story office tower under construction by SJP Properties at 42nd Street for the past 18 months still does not have a tenant… Developer Tishman Speyer Properties… abruptly pulled out of a deal to buy the former Mobil Building  on 42nd Street… for $400M.” (NY Times, Sept. 30)

Bankers Write Commercial Real Estate Loans More Carefully. “Wilmington, N.C. area developers, builders and brokers: Banks are underwriting their loans a lot more carefully now. The difficulty in getting a commercial loan, however, depends upon what’s being financed. Smaller, owner-occupied businesses and expansions of existing businesses are faring better than new, speculative projects, said [local] experts in the commercial real estate market… Local builder John S. Clark Co.: “We are hearing from developers that bankers are requiring a higher percentage of equity or a higher percentage of preleasing. Lenders are looking for 20% to 40% equity,” he added, “and preleasing requirements have risen from 40 to 50% to 60 or 70%.” (Star News, Sept. 30)

Experts: CRE at Standstill, Will Get Worse. “The commercial real estate industry lags somewhat behind what’s going on in the financial market today. Most experts agree that, after a shaky past month or two, a standstill has come over the industry, as financing has dried up, jobs get cut and corporate America holds its collective breath as politicians duke out the country’s future… Bob Bach, SVP and chief economist with Grubb & Ellis: There’s still some time before commercial real estate is heavily affected, as there’s far fewer delinquent loans for the CRE side as compared to the 15% of residential loans.” (Globe St., Sept. 30) 

Maguire Completes $100 Million Refinancing to Reduce Debt. “California landlord Maguire Properties, Inc. completed a $100 million refinancing that will give the REIT breathing room in its efforts to reduce its overall debt. Maguire, based in Los Angeles, secured a new mortgage on its Plaza Las Fuentes property in Pasadena, Calif. The property includes an eight-story office tower and a 350-room Westin hotel. The loan was originated by EuroHypo AG and Wells Fargo & Co… The firm simultaneously extended a construction loan on a separate property in Irvine, Calif... The company paid down $33M on that $214M loan, which otherwise would have come due today.” (WSJ, Sept. 29)

Is Commercial Real Estate Next?  “Today, debt on office buildings, shopping malls, hotels and apartment complexes continue to perform well. The default rate for commercial mortgage-backed securities loans stands at just 0.47%, while commercial mortgages in life insurance company portfolios have a default rate of just .03%. Nevertheless, the $200 billion annual CMBS market is now dead in the water. Credit to the sector from other sources has almost completely stalled… For construction workers, this means delayed projects and layoffs. For property owners, and for Main Street, this means property values are at risk of a free fall. For state and local governments, it means less revenue from commercial property taxes and an even tighter budget crunch.” (WSJ Op-Ed., Sept. 27)

                                                                    

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