Commercial Real Estate Finance

Posts Tagged ‘Prudential Mortgage Capital’

Starting out in brokerage, several friends told me that the mantra for rookies was “Fake it ’til you make it.” Now, it might be the owners, who those same brokers were calling on, who may have to heed the same advice. With occupancy continuing to decline and as sales prices become more and more depressed, most lenders are doing everything they can to amend and extend distressed loans. Their goal? To keep the keys in the pockets of the current owners.
Lenders across the nation are bolstering their asset management staff and taking a magnifying glass not only to a borrower’s financial statement, but also to the assets themselves. “One of the main concerns that the agencies have, and that we have, is deferred maintenance,” says David Durning, senior managing director for Newark, N.J.- based Prudential Mortgage Capital Co. “One of the most important factors in making a decision about showing some flexibility is whether the physical quality of the property is being maintained.”

In the past, many portfolio management techniques were asset-centric, but lenders are taking a much closer look at the borrower these days, and a property’s appearance can mirror a borrower’s financial health. Prudential looks for evidence that the property’s cash flow is being reinvested into the property, or whether that cash is being used to pay off other corporate bills—a possible sign that the borrower is in trouble.

For amendments and extensions, the company likes to see borrowers with some skin in the game. “Lenders like to know that borrowers have put additional capital at risk—repaving the roads, putting on new roofs, whatever,” Durning says. “Those are important signals to a lender of going forward.”

One of the largest balance-sheet lenders in the business, Chase Commercial Term Lending (formerly Washington Mutual), is also trying to get in front of the issue by expanding its asset management capabilities. “We’re reaching out more than people are reaching out to us,” says Al Brooks, president of New York-based Chase Commercial Term Lending.

Owners who are keeping the property up—through maintenance, landscaping, and graffiti removal—are at the top of the list for workouts. “During a difficult period is when people really earn their stripes as property owners,” Brooks says. The company is particularly sensitive to good owners in bad markets—cases where a specific market’s fundamentals are roiling a normally solid property, Brooks adds.

Keep your properties humming, continue to service your debt as best you can, and be upfront with your lender if you feel things are headed south. Honesty really is the best policy, lenders say.

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The Week of August 8-14

- Bernanke, or not to Bernanke? That is the question.

Where will funds and REITs turn to with little available private capital? The public, of course.

- Freddie Mac reported a quarterly profit.

- The largest deal of 2009 in the Pittsburgh region went down this week to the tune of $90M.

- S&P lowered its ratings for 19 different classes of Chase CMBS. Read the rest of this entry »

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