Good news for the commercial real estate market in 2011 is the resurgence in the commercial mortgage backed securities market. The activity in February alone was over 60% of all CMBS deals offered in all of 2010. The increased volume in CMBS loan origination is a welcome sign that liquidity is returning to the markets.
Whitestone Realty Capital has brokered commercial loans for over 20 years, and has strong relationships with a cross-section of lenders including banks, hedge funds, and insurance companies. Whitestone reports an increased willingness to lend across a broadening spectrum of sources. It’s not surprising that increased lending activity is motivated by a stronger market interest by investors in CMBS to raise portfolios yields, according to Whitestone’s Executive Director, Michael Zukerman. That isn’t to say that lending standards have been relaxed. Coming out of the recent commercial real estate decline, lenders are focusing on deals that meet stringent LTV ratios and debt service coverage requirements.
As of mid 2011, signs are positive that the CMBS market is coming back — something that is a positive sign for owners who are looking to refinance existing financing. To be sure, there’s lingering distress out there, but the increased interest in CMBS will likely help pave the way for clearing some of those distressed issues.
CMBS originators are broadening their lending criteria as the market stabilizes, seeking quality loans just outside the comfort zone of the larger insurance companies. Whitestone Realty Capital analyzes each loan to maximize its potential for owners while providing an attractive offering to capital markets. The result is to provide CMBS originators with quality loans having strong risk adjusted yields and owners with a non-recourse option with higher loan-to-value ratios.
As the pace of the economy increases, more originators will enter the market, so it is likely that the number of CMBS issuances will grow. That also means the competition to loan will grow, with commercial property owners benefiting from Whitestone Realty Capital’s extensive relationships with loan originators.
As the number of participants in CMBS lending continues to increase, so will the competition for new CMBS deals. Although insurance companies and even the healthier large banks will lend on the best properties in desirable markets, Whitestone Realty Capital forecasts that property owners will see expanded lending as CMBS originators increasingly compete among themselves for the leftovers, broadening lending standards overall.
Liquidity also seems to have returned to the apartment development business. There are lenders who are willing to make construction loans to strong and experienced apartmentdevelopers. There are also private equity investors willing to invest alongside of experienced and strong developers. Whitestone Realty Capital has extensive experience in putting together equity and debt financing for development of apartment deals.
Mike Zukerman in Scotsman Guide
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Michael Zukerman is the Managing Director and CEO of Whitestone Realty Capital, LLC. Whitestone Realty Capital, Inc (“WRC”) is a developer and real estate investment banking firm.
Marv Eisen is a Director of Whitestone Realty Capital (WRC). Prior to joining WRC, Mr. Eisen was a Vice President in his family’s manufacturing business that specialized in apparel for the military, police and fire departments as well as producing metal stampings for General Motors and Ford. A mechanical engineering graduate of the University of Pittsburgh, Mr. Eisen’s responsibilities included oversight of manufacturing operations in 3 plants, supervising 160 direct employees in the firm’s manufacturing operations. The company owned two buildings, and Mr. Eisen was instrumental in building acquisitions and utility infrastructure. Mr. Eisen’s responsibilities at WRC include transaction origination; underwriting due diligence; active participation in lender/investor sourcing and negotiations; and ongoing account management.