Commercial Real Estate Finance

Posts Tagged ‘mortgage’

There was a very interesting article on Globest.com yesterday that caught my eye.  It was titled exactly the same as above, but without the questioning. A mortgage broker helped an owner/user acquire a small, 11,000 square foot vacant office building for $4.2M by obtaining financing on the buyer’s behalf for almost the entire purchase price.  Unfortunately, the writer of the article either didn’t ask how this was achieved, or the broker dodged such lines of questioning purposely.  Sometimes, appearing intelligent, or in this case as a miracle-worker, is in what you don’t say.  So let’s make some assumptions as to why, and or how, this deal possibly could have gotten done in today’s capital markets. Read the rest of this entry »

Sorry James Dolan, but while we wait to see if LeBron James will give hope to your New York Knickerbockers, the trade for the Knickerbocker Hotel has given great hope to the commercial real estate industry. Its not the fact that something of significance traded hands, but more so the pricing at which it traded hands.  The competitive bidding environment for this property, at this point in the cycle, may indicate a paradigm shift in investment strategy for those rich with capital to deploy.  Let’s examine further. Read the rest of this entry »

Commercial Real Estate Week in Review-Week of May 23-29.

-What’s in the Senate Banking Bill? Read the full text here, and summaries here.

-Healthcare REITs get upgraded rating. Time to buy in?

-Welsh Property Trust’s new projection for their IPO is 17.5M shares at $19-21 per share.

-Banks are shoring up their balance sheets by selling their distressed debt in order to acquire failed competitors.

-Need a place to store your property assets? Do what Sun Healthcare Group is doing, create a REIT.

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This Valentine’s Day, Bill Maher has a message for all of us who are still in an abusive relationship…. with our Bank!

Despite 22 year record high national vacancy rate of 7.8%, the multi-family sector has performed well compared to other asset classes. Several multifamily properties have recently traded at 6.5% cap rates, demonstrating investor confidence in this market sector. I am bullish on the multifamily sector for several reasons.

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I recently bought a duplex both as an investment and as a place to live for the next few years. Because I intended to live there and it was less than four units, I was able to get a 96.5% loan to value, 30 year fixed rate 5.00% mortgage. I know, I was amazed as well. Uncle Sam made the deal even sweeter for me by kicking in an $8,000 first time homebuyer tax credit. From my perspective the government made this a no brainer- all I had to pay for was closing costs, because the $8,000 tax credit will cover more than my down payment. Effectively, the government guaranteed my mortgage, allowing me to borrow 96.5% at a ridiculously low rate, and then gave me the other 3.5%! This is all great and good, but under this scenario, will I stay in the house if the market continues to get worse? With a 96.5% FHA loan during a turbulent market, it would take only a small change in property values for me to find myself underwater.

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This list of Top 5 Loan Modification Myths is reproduced from the New York Real Estate Lawyer blog written by The Devery Law Group.  It is geared towards borrowers in single-family homes, but I think owners of commercial property can benefit from some of the points as well. 

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The National Consumer Law Center (NCLC) just published a report entitled Subprime Revisted: How Reverse Mortgage Lender’s Put Older Homeowners’ Equity at Risk.  The report details the market and process for reverse mortgage lending and couldn’t be more appropriately titled as the reverse mortgage market reeks of subprime lending pitfalls.  Worst of all, the concept targets senior citizens.  The public at large (aside from maybe the dumbos on Jay Leno’s J-walking segment) are generally familiar with how lackadaisical mortgage lending got borrowers and financial institutions into a disastrous mess.  To avoid getting ourselves into another mess, I think we need to take notice of the reverse mortgage storm that is brewing early so that we can properly regulate the market and avert another disaster.

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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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John P. Korman
Chief Executive Officer
Korman Residential Properties, Inc.

Korman Residential, Inc. traces its roots to 1919 and to the founding of the family real estate development firm that evolved into a fully integrated, multi-divisional investment, management and development organization. The Korman family is one of the largest owners of residential property and a significant owner of commercial and industrial property in the Greater Philadelphia Metropolitan Area.

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? Read the rest of this entry »