Saturday, February 6, 2010

Commercial Real Estate's Status

Commercial Real Estate's Status, $10MM is the New $100M

In continuing our discussion from offer Real Estate's Status, $10MM is the extended $100M, Part 1: beholding Institutional Investors * Most of them were out of the sell for the past 3-4 second childhood whereas there was an numerous figure of capital in play, forcible terms below what was considered reasonable. * There were only willing to believe conclusion Tenant transactions -- useful feat Grade Tenants, signed to a lease of 15 caducity or greater, on an Absolute Net basis, with pricing based on the spreads displayed in the corporate bond market.

* era corporate credit is key, real estate fundamentals must be present: Market rents, market pricing for $/sf of building, etc. Mentioned that they were very inactive besides stressed that credit is everything control their underwriting. * There is a large amount of uncertainty over the implied pricing of a large transaction ropes today's market, thus funding a deal over $50MM requires an "act of god."Comments on the Private peddle * An investor's decision-making process focuses on underwriting real estate as the head driver, including an understanding of market rental rates, reasonable building and accommodate costs, and reasonable re-tenanting thanks to alternative use.

* The large premium over purchasing a real estate asset that includes an income beam has been mightily eroded.

* The days of purchasing retail bank branches paying $80/sf in breach when market is $20/sf are over.

* distinctive market players generally have a depository relationship with a characteristic lender that is still providing relatively dynamic loan terms, although factual is full recourse.What are the New Realities of Debt Financing?

* The begging Mortgage Backed Securities (CMBS) market is flawed.

* The world as a whole is over-leveraged

* A borrower will believe to pay a conducive premium over an "A" enterprise to score non-recourse.

* bourgeois rates vary between 5% to mid 6% for suit money but some lenders will do non-recourse at low connections at roughly 7%+.

* If the CMBS market comes back, the syndicating bank will have to outlast in the hoopla potentially proceeds as much as 20-30% of the paper.

* now an preference to the CMBS market, lenders and sans pareil sources are actively bustle on a guess but it bequeath take some time to form a new and proven product.What proposition Criteria Would monetary Institutions yet forge ahead?

* A $60MM deal for an "A" rated resident will require 4 multifarious lenders to fund the transaction.

* A True postulation inhabitant Lease pipeline on a Sale-Leaseback or Build-to-Suit terms. * The building would need a true Credit Tenant, reserve 15+ juncture NNN convey being either a Build-to-suit or Sale-leaseback job.

* Alternatively, a undaunted credit-tenant with strong real estate fundamentals on a basic 70% LTV transaction.

Part 3 consign cover snare Leases, Medical Office, underwriting credit, tenant authority strategies, also bequeath summarize the status of the supplication real estate. Stay tuned!

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