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| John Oharenko |
Chicago, IL -- The
commercial mortgage lending industry
held its annual conference
(CREF) in San Diego this month with industry
veterans remaining very
bullish on the funding goals and objectives for this
year. In summary, an abundant supply of capital
combined with conservative,
yet competitive
underwriting summarizes the state of the market. Some of
the key comments shared by
lenders include the following:
► “We have more money than
deals!”- Most funding sources have same
allocation as last year.
CMBS lenders expect to be very active, but only at
profitability levels that
accurately reflect risk retention.
► “For the right deal,
we’ll win on pricing”- Life insurance companies
clearly lead the industry
as far as pricing, with the lowest spreads dipping
below 130 basis points
over the ten-year treasuries for lower leverage
opportunities of 50% or
less, for example.
► “Spreads just keep
tightening"- Mortgage spreads over treasuries are
narrowing, but intense
pricing competition remains for lower leverage
offerings. Typical loan
pricing at 65% LTV fall comfortably below 200 bps.
► “75% LTV, but on my #s”-
Some lenders concerned about peak pricing level
use internal underwriting
restrictions such as capitalization rates with
floors. In these
instances, leverage levels of 65% are "normal" and 70% or
more is considered
"high leverage.” Apartment still attract up to 80% LTV.
 |
| Jeanne Peck |
► “Can't get enough
apartments/industrials” - Capital sources demand more
multifamily and industrial
properties to balance out their portfolios as
these are the two most
favored categories. Apartments for cash flow
stability and industrials
for diversification.
► “Not just a one-trick
pony”- In addition to balance sheet lending, life
insurance companies are
teaming up with private and public capital sources
for placing debt and
equity through fund management vehicles.
► “Gumby prepayments” -
With rates close to record low levels, lenders
compete by offering
extremely flexible prepayment privileges for fixed and
floating rate loans (e.g.
yield-maintenance and declining balance instead of
Defeasance).
John Oharenko,
a director of The Real Estate Capital Institute®, observes,
“Lenders are awash with
cash, but still maintain funding discipline in light
of regulatory oversight
and industry oversight. Even as rates
stay low and
leverage levels tighten,
most lenders will still stretch for the ‘right’
deal.”
For a complete copy of the company’s news release,
please contact:
Jeanne Peck, Executive
Director
