Commercial Real Estate Finance

Posts Tagged ‘investors’

Commercial Real Estate Week In Review for the Week of August 7-13

- Bank of America is seeing very few requests from investors and insurers to repurchase sour loans.

- Could teaming up with REITs be a way for pension funds to boost their returns?

- Industrial Income REIT has been busy, buying 16 assets for $43.5 M.

- How does the Volcker rule change the game for private equity investments?

- Grant Thornton is predicting there will not be a recovery in commercial real estate until 2011.
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CMBS stands for commercial mortgage backed securities.  Of course, if you asked borrowers about 18 months ago (and many even today), you might have thought it stood for Commercial Mortgage Bull $hit.  When CMBS financing was introduced to the commercial real estate industry earlier in the decade, it was viewed as a Godsend.  This was because rates and terms were better than those being put out on term sheets from conventional banks.  The reason for this, of course was that the loan originators (often large banks) would not keep these loans on their balance sheets, but instead sell them off in tranches, with the help of investment banks, to individual investors who had a wider appetite for risk.  Rather than putting all of their eggs in one basket with one property, they technically owned pieces of multiple properties that were all pooled together.  On the surface this seemed like a great idea and a win-win for all involved.  Obviously, the lax underwriting standards for these loans did not (and maybe could not) have taken into account the tumultuous events of the credit crisis. Read the rest of this entry »

Regardless of where you live in the United States, one thing is likely true.  There is a highway, bridge, state road or some other modicum of vehicular transportation in disrepair.  After suffering through one of the worst (in terms of snowfall and damage) winters in the Mid-Atlantic’s history, those potholes, sinkholes, bathtubholes and entire-kitchen-holes are getting greater in number.  The bottom line is that the United States’ aging infrastructure is in need of massive repair.

So how do we go about fixing this problem? A private equity fund may have to buy our bridges and invest ongoing capex in them, lest they become Palin-esque and lead to nowhere. Read the rest of this entry »

Let’s get one thing clear. Pension funds are real estate investors. But they are passive investors. They are not experts, not do they hold themselves out to be. They simply are looking to allocate a portion of their massive coffers into a sector that generally has yielded above average returns and long term capital appreciation, something their constituency values greatly. So it has made a lot of sense for them to partner up with shrewd business and real estate minds to place their money for them to attract the best returns possible. For the last several decades, this partner has most often been private equity groups. Most pension funds have come to regret this decision over the last 18 months, as their portfolios have been hammered, almost across the board, but with particular pain in the real estate sector. But I have to ask, was this a failure of their own making? Read the rest of this entry »

First you get the money. Then you get the power. Then you get the women. I believe an inebriated Homer Simpson said that.  And usually that mantra is associated with high powered Wall Street types. We all probably have a friend or two who saw Boiler Room, and wanted to be just like the powder-sniffing, high-flying, lavish-spending stock brokers in that film. But who says real estate guys don’t know how to have fun? Read the rest of this entry »

An analysis of the housing crisis by Karl Case:

For the last few years, we have shed many tears
Living through a recession.
The economy’s broke and it’s not a joke,
When we talk of another depression.
Fifteen million without a job,
Foreclosures and banks that fail,
401K’s became 201K’s,
And everything’s up for sale.

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Ryan joined Sentry in 2009 bringing a wealth of financial experience to the organization with a special focus in Hospitality Real Estate. As the holding company’s CIO and Principal, Ryan oversees all capital, investment and new business development transactions. In addition, he controls relationships with investment partners, lending institutions, and oversees Finance and Operations for Sentry Centers, the new urban conference center platform of the company. Ryan comes directly to Sentry from Gramercy Capital where he served as a Vice President responsible for the workout and restructuring of Gramercy’s hospitality related assets. Prior to this, he worked for Lehman Brothers within their commercial real estate group. Ryan is an active member of the Urban Land Institute (ULI) and a graduate of Villanova University.

Q: As a company, tell me about the niche you have carved out for yourself and how you feel you are different from the competition. Why do you find this product type more appealing than alternative real estate asset classes?

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The credit crisis is beginning to mirror Congress.  Good ideas and solutions to problems are getting muddled by bureaucracy.  Much like global warming, or any other potential disaster, the government must act before its too late. And really there are only two outcomes to the credit crisis…what happens if market liquidity returns, and what happens if it doesn’t.

If market liquidity returns, real estate values will stabilize, in turn stabilizing banks’ balance sheets.  More balance sheet lenders would return to the market, which would cause CMBS yields to normalize, causing a restart to the CMBS market, which would make the spreads on refi’s fall.  With the glut of debt coming due over the next few years, this would be essential to providing more normalcy, and averting disaster.  However, if market liquidity doesn’t return, real estate values would fall even further, banks balance sheet would deteriorate, borrowers would fail to be able to refinance and banks would de-lever.  This would cause forced loan extensions as well as loan defaults, which would wipe out equity positions, and force distressed sales. So what’s the solution to providing liquidity to the market? Read the rest of this entry »

In yesterday’s video of the week post, Congress seems to finally be proposing some reform to the credit agencies, and how they function.  This is a good thing.  Currently, companies pay credit agencies to rate their company debt.  Investors then use this information to make investment decisions.  The conflict of interest should be beating you over the head with a two-by-four any minute now.  The worst part however, is that up until now, the credit agencies have zero skin in the game, which allows the conflict of interest to be exacerbated.  The good news is that Congress does want to regulate the agencies and hold them accountable by making them liable in some form or fashion for their information.  Hallelujah! Unfortunately, what the subcommittee has proposed is not nearly good enough. Read the rest of this entry »

The New York Times recently published an article highlighting a developing trend in investment banking–the deferral of underwriting fees until an offering has proven to perform.  In several REIT IPOs this year, investment banks representing the REITs have agreed to defer a portion of their fees until the REIT achieves a pre-specified hurdle rate of return for investors.  In theory, the deferral of fees aligns the underwriter’s interests more closely with the investor’s.  Underwriters will naturally be more conservative in their underwriting if they know their payout is directly tied to the performance of the offering they are bringing to market.

The NY Times article points out that aligning the underwriting investment bank’s interests more closely with shareholders’ provides for a fairer IPO process.  In my opinion, however, the practice of deferring fees pending the performance of the offering is not about to catch on with other securities.  Instead, the deferral of fees is just a way of bringing mortgage REITs to market in a difficult economic environment.  After all,  Wall Street investment banks have always found clever ways of getting deals done in the sourest of times under the guise of streamlining their operations for the benefit of investors.

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