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Low yields mean investors are attracted to financing and are leveraging back up to 60% or 70%, though not the 80% of the go-go days, said Prudential Mortgage Capital's Bryan McDonnell at ourBisnow Baltimore Capital Markets event last week.
Bryan McDonnell at the Baltimore Hilton on Oct. 26, 2011
Bryan says yields are in a race to the bottom. (They must be skiing.) Lending at an interest rate today of 3.9%, for instance, would yield real adjusted returns that are very low or negative. The decision on whether to securitize is one that needs to be made up front. If a loan is coming due or an investor needs capital, CMBS is the right call, considering the 6% rate isn't bad historically. Otherwise,balance-sheet investment is the way to go. Bryan adds that Prudential would actually like to step up its CMBS game.
Mike Cake at the Baltimore Hilton on Oct. 26, 2011
ING Investment Management's Mike Cale says his firm doesn't mind having a mezz company come into a deal behind it. In the case of a Vegas shopping center, for instance, a major bank involved needed to make a quick decision on acquisition, and mezz financing combined with ING's loan brought leverage on the deal up to 77% and helped get the deal done.
Tyler Blue at the Baltimore Hilton on Oct. 26, 2011
What a difference a year or two makes, Walker & Dunlop's Tyler Blue says, pointing out that no CMBS folks sat on the event's debt panel. He says early in the year, CMBS issuance was projected to reach as high as $100M. But since the summer meltdown, it will more likely hit $35M. He also reminded attendees that Q1 is a good time to make deals because life companies have new allocations.
Arnold Smeenk at the Baltimore Hilton on Oct. 26, 2011
M&T Realty Capital's Arnold Smeenk says a big pool of maturing loans spells opportunity. The question is how big a discount lenders will be willing to take. Acquisition financing has decreased to 30% of his book of business, replaced by refinancing deals. Some sellers are looking to liquidate as the bid-ask spread has narrowed. And banks are more flexible and active. The downside is that they're limited to five-year loans for now.
Tom Hauser at the Baltimore Hilton on Oct. 26, 2011
Big shout-out to Ballard Spahr's Tom Hauser taking his first run at moderating a Bisnow panel. More on the event coming later this week!
Michael Drusano and Jim Lighthizer at Baltimore Hilton on Oct. 26, 2011
Construction Risk Solutions real estate managing director Mike Drusano, with Chesapeake Real Estate Group principal Jim Lighthizer, tells us that since Labor Day real estate transactions needing highly specialized insurance have increased. In fact, CRS is getting ready to close on a deal binding coverage to protect against the loss of historic rehabilitation tax credits for a multifamily redevelopment deal in Canton.