Commercial Real Estate Finance

Posts Tagged ‘due diligence’

We have talked ad nauseum about how the CMBS market appears to be back.  Well, right alongside private investors,  their institutional counterparts are lining up behind them….hungry for commercial real estate. In a recent report by Real Estate Research Corp. institutional investors seem to favor real estate as an asset class over their competition, mainly stocks and bonds.

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Who took my Coke from the fridge? You did it!

Wasn’t me.  Must have been him.

Couldn’t have been him because he wasn’t even here…and you have a Coke in your hand.

Well I may have a Coke in my hand, but I swear I didn’t do it. It had to be somebody else.

If one thing is certain, it is that nobody wants to take the blame for anything anymore, no matter how obvious they are to blame. Maybe we should collectively blame our generation’s parents for coddling us way more than in generations past. Hell, even that was an excuse.  It seems today individuals are so adept at assigning blame to anybody but themselves, they might need their own reality show.  No, not that kind of reality show.  I mean somebody needs to show them reality. Read the rest of this entry »

Editor’s Note: With Valentine’s Day coming up this weekend (order your flowers ASAP!), we figured, why not start off the week with a Cupid-esque topic? We can’t wait to hear your feedback on this one….

When a joint venture partnership occurs in real estate, the term “getting into bed” is often tossed around. And despite the fact that real estate is an industry dominated by men (and therefore subject to more coarse, perverted analogies), this phrase is somewhat appropriate. When you sleep with someone, you want to make sure you are protected (from exactly what, I will leave to the reader’s imagination), right?  Well the same goes for your equity partner in a real estate transaction.  Yet, while all real estate transaction involve some form of due diligence, JV equity partnerships involve an entirely different level of due diligence.

Rather than scoping out the salient facts of the deal, examining the borrowers track record, and crossing all the “t’s” and dotting all the “i’s” of a particular transaction (like a bank might do), an equity partner has to get extremely comfortable with the sponsor’s style and personality in addition to the aforementioned due diligence.  For this reason vetting a JV equity partner has become a lot more like eHarmony than a one night stand. Read the rest of this entry »

In Wednesday’s New York Times, this article spoke of a fraudulent scheme orchestrated by a mortgage broker to defraud banks.  The long and short of the story is that the culprits are alleged to have bought homes from struggling sellers, artificially inflated the prices of the homes, underwrote mortgages that buyers couldn’t afford, and then pocketed checks from banks, leaving the new buyers high and dry.  After reading this story, you might have similar questions to those that I had, such as:

1. How do you “artificially” inflate the values of homes? Isn’t there something called comparable sales?

2. If buyers with good credit couldn’t afford the mortgages, why did they apply for them? Why did they believe they could “get out of the deal” if it wasn’t documented somewhere as to how? (stupid questions)

3. While banks may not have done the appropriate due diligence on these homes, knowing that they would not be servicing them, why wouldn’t the buyers have, knowing they’d be responsible for the payments?

and the list goes on and on…until I remembered one thing.  Read the rest of this entry »