Real Estate Investment: Optimism vs. Cautions
January 5, 2017 — A Wall Street Journal article in November titled ‘Trouble Brewing in Commercial Real Estate’ paints a bleak picture of the $11 trillion sector in 2017. As someone who works with debt and equity capital providers on structured finance transactions in good times and on workouts in not-so-good times, I would characterize the market in terms of opportunity more than danger—although both elements are present.
Reports of the Death of Suburban Office Are Greatly Exaggerated
November 15, 2016 — In recent years, I’ve talked to investors and advisors who suggested that suburban office markets might never recover from the recession, and that owners might consider adaptive reuse options for well-located buildings that would otherwise sit empty. Well, we can call off the deathwatch for now—suburban office is back on its feet.
U.S. Banks Shy Away from Risk, Settle for Lower Yields
August 23, 2016 — Banks have taken a decidedly more cautious stance on commercial real estate lending this year. They’ve pulled back from construction lending, except in cases where developers have capital at risk. Borrowers seeking to refinance can expect to find loan-to-value ratios in the range of 65 to 70 percent, maybe higher for pristine deals with no complications—“no hair on them,” in industry parlance.
Risk Retention Clarity is Key to CMBS Future
July 12, 2016 — The volume of commercial mortgage-backed securities (CMBS) issuance this year is running at about half of 2015’s level, for reasons that go beyond the disruption in global capital markets. CMBS sponsors are struggling to contend with new risk retention rules that go into effect in December. But as of now, it’s still not clear exactly how lenders can comply with the new rules. That lack of clarity is doing more to slow CMBS volume than the rule itself.
Under Regulatory Scrutiny, Banks Rein in Risk
June 2, 2016 — When the Dodd-Frank financial reforms were announced several years ago, some people said they went too far in restraining banks’ activities, while others believed they didn’t go far enough. Now that the legislation has gone into effect, however, it seems to be doing its job: motivating banks to make prudent loans and conduct proper due diligence, without causing a credit crunch. While it’s impossible to know what the future holds, there are signs that the limits placed on real estate lending will help smooth out the boom-bust cycle we’ve seen for decades.