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Higher CMBS Defaults Expected in 2016

April 5, 2016 by Randybaconin Commercial Mortgage Lending, Real EstateLeave a Comment

CMBS defaults may spike this year, as the high volume of upcoming loan maturities might leave some borrowers scrambling for funds to refinance their loans, reveal new reports from Fitch Ratings and Trepp LLC.

Defaults on CMBS loans have been on a steady downward slope for the past five years, falling to an annual rate of 0.39 percent in 2015, Fitch researchers note. (CMBS defaults reached a cyclical peak in 2010, at 4.07 percent). The low default rate was aided by both improving property fundamentals and values and healthy CMBS issuance during 2015.

So far this year, however, new issuance has not lived up to expectations. Year-to-date in 2016, U.S. CMBS issuance has totaled $19.0 billion, according to Commercial Mortgage Alert, an industry newsletter. That’s almost a 30 percent decrease from the issuance volume that was recorded during the same period in 2015. This is happening as approximately $211 billion in loans are scheduled to come due between now and year-end 2017, according to research firm Trepp LLC.

The Fitch Ratings team “expects term defaults to tick up slightly in 2016 as the current credit cycle matures. Maturity defaults may also see an increase in the next few years as peak vintage loans, many of which are over-levered, mature. The cumulative default rate, currently at 13 percent, is predicted to increase slightly in 2016 as defaults begin to increase and issuance declines somewhat.”

View entire article here in National Real Estate Investor

Commercial Property Sales Plummet In February

March 23, 2016 by Randybaconin Real EstateLeave a Comment

The roller coaster of the current real estate cycle might be topping off, even if we’re not headed for a plunge anytime soon. Commercial real estate sales tanked in February with $25B in sales, compared to $47.3B in the same month last year. “Clearly there has been a plateauing,” Jonathan Gray, Blackstone’s global head of real estate, tells the Wall Street Journal. In January sales were $46.2B. Prices and commercial property values are also beginning to level off.

Is The Cycle Coming To An End? Commercial Property Sales Plummet In February

An index of hotels tracked by Green Street Advisors was off 10% last month year-over-year, and Green Street’s broad valuation index in February rose 8.7%, a drop from March ’15’s 11% surge. It’s not clear yet whether February is an anomaly or a sign of the new normal, although other developments seem to favor the latter. Brandywine Realty Trust sold off $765M of property this year, for example.

Read more at: https://www.bisnow.com/national/news/commercial-real-estate/february-slump-could-be-first-sign-of-a-plateau-57755?rt=11595?utm_source=CopyShare&utm_medium=Browser

To discuss an opportunity contact Liberty at http://libertyrealtycapital.com/contact-liberty/

CMBS Conduit Lenders Slow Activity to Trickle

March 15, 2016March 15, 2016 by Randybaconin Commercial Mortgage Lending, Real EstateLeave a Comment

CMBS conduit lenders, facing extremely inhospitable market conditions, have slowed their lending to a trickle.

With CMBS spreads widening to levels not seen in years, it has become extremely difficult to generate any sort of profit from the practice of originating loans, warehousing them, structuring them as CMBS and selling the resulting bonds. As a result, conduit lenders not tied to banks with balance-sheet capacity, have sharply reduced their lending. And those tied to banks have substantially increased their loan spreads, which are used to determine loan coupons.

CMBS Conduit Lenders Slow Activity to Trickle

Meanwhile, loan coupons, which conduit lenders typically had been setting well before a loan was actually securitized, are now being set at closing. That means a borrower typically won’t know the exact rate they’ll be charged for their loan until it’s funded. And many conduit lenders, all of which are in risk-mitigation mode, are insistent on closing loans as close to the time of securitization as possible.

So far this year, the weighted average coupon of loans included in conduit deals has ranged from a low of 4.55 percent to a high of 4.79 percent. That compares with an average of 4.40 percent for all of last year’s issuance.

View entire article in Commercial Real Estate Direct.

To find out more on CMBS financing visit us at http://libertyrealtycapital.com/commercial-real-estate-mortgage/

Real estate’s ticking bomb: Who gets hurt

March 11, 2016March 11, 2016 by Randybaconin Real EstateLeave a Comment

Commercial real estate had a banner year in 2015, and the fundamentals of high demand and low vacancies are still driving rents higher. There is, however, a catch that could cool the market quickly, at least when it comes to financing. Investors are insisting on high yield, and the bonds backing commercial mortgages are not giving them that, so they are moving on to other products, leaving a big crack in commercial financing.

“I think cracks is a little bit of an understatement for where the market has been for January and February, where, for all practical purposes, the market was frozen,” said Willy Walker, chairman and CEO of Walker & Dunlop, a real estate finance firm.

Commercial real estate, which includes apartments, shopping malls, offices and warehouses, are backed by nearly $3 trillion in mortgages, according to the Mortgage Bankers Association (MBA). The lenders include big banks, which are the largest, insurance companies and commercial mortgage backed securities (CMBS), which are bonds sold to investors. That last one is where the problem lies. It is the second-largest source of commercial real estate debt, and during the last boom, back in 2005, CMBS was very popular.

CMBS tends to have a 10-year life span, at which point the debt matures and real estate owners have to refinance the loans. These maturities are expected to surpass $400 billion annually this year and in 2017, according to CBRE, a real estate services firm. That is $100 billion more than last year. CBRE “conservatively” estimates that 18 percent of loans this year and 29 percent of loans next year could have problems refinancing, due to lack of investor demand for the bonds. This translates into about $43 billion in potentially troubled loans over these two years.

“We think some of these are going to be remonetized through asset sales, but some will certainly hit the foreclosure list and end up on the special services list of loans to be worked out,” said Brian Stoffers, who oversees the debt and structured finance practice at CBRE.

View entie article here at CNBC.COM

If you would like to find out more about commercial real estate financing contact us at Liberty Realty Capital Group.

U.S. Commercial Property Prices Drop for First Time in Six Years

March 8, 2016 by Randybaconin Real EstateLeave a Comment

commercial property prices drop

U.S. commercial real estate prices dropped in January for the first time since 2010, a sign of weakening demand by investors after a six-year rally that pushed values to records.

The Moody/RCA Commercial Property Price Index slipped 0.3 percent from December, Moody’s Investors Service said in a statement Monday. The decline was led by office and industrial buildings, which each had a price drop of more than 1 percent.

“This is a significant milestone that signals that a shift in sentiment among commercial-property investors is under way,” Moody’s said in the statement.

Volatility in financial markets may be hurting real estate demand. Rates of return are falling and it’s “very difficult” to bundle and sell real estate loans, hindering debt financing for transactions, Jon Gray, head of real estate for Blackstone Group LP, said at a conference last week. His company is the largest private equity property investor, with about $94 billion under management in real estate.

The Moody’s index has almost doubled since its January 2010 trough and is about 17 percent higher than its previous peak, as low interest rates and rebounding economic growth fueled property demand. Prices have jumped the most for office buildings in top cities such as New York and San Francisco, more than tripling since the market’s bottom

View post here on Bloomberg.com

To find out more about Liberty and our commercial mortgage financing reach out to us here: http://libertyrealtycapital.com/commercial-real-estate-mortgage/

Fastest Growing Fast Food Restaurants

March 6, 2016 by Randybaconin Real EstateLeave a Comment

There’s a sleeper fast-food chain that is suddenly becoming a huge threat to McDonald’s and Burger King

Nearly 60 years of history, 3,500 drive-in locations, and more than 3 million customers a day — why aren’t more people talking about Sonic?

Sonic Drive-In is the fourth-largest burger chain in the US, after McDonald’s, Burger King, and Wendy’s, with $4 billion in sales in 2015.

However, the carhop chain is often left out of the national discussion of the fast-food industry, in part because Sonic isn’t quite like any other chain around.

The most obvious differentiator is that Sonic utilizes a drive-in model.

As opposed to most quick-service chains, which are walk-in and drive-thru, nearly all Sonic locations allow customers to pull up and park at the drive-in (though many also offer sit down and drive-thru options). Then, carhops deliver food directly to the cars, either on foot or roller skates.

View the entire article here in Business Insider.

To learn more about small commercial real estate financing visit us at http://libertyrealtycapital.com/small-commercial-real-estate-financing/