Socal Multiunit Real Estate

COMMERCIAL REAL ESTATE LENDING SNAPSHOT

edited by Jodi Summers

Allow us to present a really interesting synopsis of current commercial loan trends from a variety of banks, from an article on CoStar.com. The information is from first quarter, but it gives an idea of the ebb and flow of the commercial loan marketplace. Banks are presented in alphabetical order…

* Citigroup — In March, new commercial real estate loan commitments increased more than tenfold to $1.4 billion, compared with $132.4 million in the previous month. Loan renewals increased to $112.1 million, from $25.8 million in February. Average total CRE loan and lease balances rose to $23.8 billion, up from $23.3 billion in February.

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* Comerica Inc. — Commercial real estate renewals increased in March from February 2010. The increase was concentrated in the Western states and Texas markets, partially offset by a decrease in the Florida market. Commercial real estate new commitments decreased.

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* Fifth Third Bancorp — Average CRE balances decreased by approximately 0.7% in March 2010 compared to February 2010. New CRE commitments originated in March 2010 were $288 million, compared to $102 million in February 2010. Renewal levels for existing accounts increased in March 2010 to $964 million versus February 2010 at $392 million. Payments and dispositions of troubled CRE outpaced the volume of renewals and new originations in March causing the overall balances to continue to decline. As commercial vacancy rates continue to increase, Fifth Third continues to monitor the CRE portfolios and continues to suspend lending on new non-owner occupied properties and on new homebuilder and developer projects in order to manage existing portfolio positions.

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* KeyCorp — There was no change in loan demand trends in the CRE segment during March. The CRE market outlook continues to be weak. KeyCorp continued to extend and modify existing credits given the lack of liquidity and refinancing options available in the CRE market. Renewal volume doubled from the February level to $560 million and is comparable to levels experienced in April and May 2009. Three-fourths of the renewal volume, totaling $420 million, was related to performing development projects for which refinancing options remain constrained. For CRE development projects, KeyCorp created a fixed-rate 3-5 year loan program to modify and extend qualifying loans for existing customers.

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* Marshall & Ilsley Corp. — Construction and development concentrations continued to decline in-line with its goal of reducing credit exposure in this sector. Average CRE balances are expected to continue contracting due to portfolio amortization.

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* Regions Financial Corp. — The focus in commercial real estate lending continued to be on renewing and restructuring real estate loans with existing clients versus active pursuit of new real estate loans. Renewal activity includes loan restructuring, remargining and repricing, based on the current credit quality of the sponsor, the performance of the project and the current market.

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* SunTrust Banks Inc. — Average Commercial Real Estate loans decreased $192 million, or 0.9%, compared to the February average. Total CRE renewals and originations in March increased $252 million, or 77.5%, compared to seasonally low February activity. The majority of originations were associated with large commercial or corporate businesses.

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Thank you, http://www.costar.com/News/Article.aspx?id=359D8A406145159176A40807B924DC84

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NEW MULTIFAMILY REAL ESTATE LOANS TO EXCITE YOU

By Jodi Summers

Investors know, multifamily properties have been one of the most desirable real estate 

purchases throughout the downtown. GRMs are down, and properties now have an 

impressive amount of upside potential because of recent rent concessions. Problem

has been that the loan market being what it’s been has not made getting a loan easy.

Thankfully, that’s all starting to change.

A variety of multifamily small loan packages are coming to market. Globest.com 

suggests Chicago-based Aries Capital, through subsidiary Aries Multifamily; Alliant 

Capital in Anaheim, CA; and New York City-based Centerline Capital, through its 

agency lending group. All of these companies have opened small lending programs

during the past year. It is reported that the debt typically is up to $5 million, and is 

sometimes obtained through the agencies' small lending products. 

 Prudential Mortgage Capital Co. has a unique program that addresses debt for 

unstabilized properties. Known as the Agency Gateway program, it caters to 

apartment owners looking to refinance or buy assets that currently don't 

qualify for Fannie Mae or Freddie Mac financing. Apartment properties that 

would qualify include well-located, completed or renovated properties that have 

not yet reached stabilized occupancy levels. 

"The improving economy and upward growth in employment are positives for

Multifamily properties," observes Ted Hopkins, a PMCC principal and portfolio 

manager of Agency Gateway. "We feel it's time to get in there and help multifamily 

properties get stabilized." 

Ranging in size from $5 million to $25 million, the Agency Gateway loans run for 

terms of six to 24 months, until the property is stabilized. 

The deals are considered on a case-by-case basis and Hopkins not that the 

pricing is "very competitive. That is one factor that we rely on, plus the fact that

 we know multifamily product very well. Each loan is tailored to the individual property." 

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MAYOR VILLARAIGOSA’S 30/10 INITIATIVE WILL BRING MORE HOUSING OPPORTUNITIES TO LOS ANGELES

By Jodi Summers

What causes the most pollution in Los Angeles? Vehichles. How do we solve that issue? Better mass transit. Mayor Antonio Villaraigosa’s latest solution for greening Los Angeles is the 30/10 initiative - the mass transit financing method that the mayor proposed to the federal government so that Los Angeles can build their 30-year mass transit model in 10 years’ time.

Montiel believes that the 30/10 initiative can transform public housing by creating projects such as Jordan Downs, a 700-unit, 103-building public housing apartment complex in Watts, and one of 14 sites citywide that have potential for improvement through transit-oriented and vertical development.

The 30/10 proposal would allow Metro to construct the full Westside extension, but also two easterly extensions of the Gold Line, two new branches for the Green Line, several busways in San Fernando Valley, a link along I-405, and new light rail lines downtown, along Crenshaw Boulevard, to Santa Monica, and via the West Santa Ana branch corridor. The West Santa Ana branch corridor would be served by commuter rail. All by 2020. Green multiunit complexes would dot the new transportation lines.

“We are trying to define density not as a bad word, but as a word that can have elegance to it, and be green, and be smart,” the mayor said. “Yet the city needs to change even more, and the 30/10 plan is one of the routes to that change.”

The 30/10 proposal that went to Washington looks something like this:

o Current long-range transportation plan assumes $18.3 billion in transit expenditures over 30 years. 65% of funds would come from Measure R, with 23% from New Starts and 12% from other sources.

o The 30/10 Initiative would allow total expenditures to be reduced to $14.7 billion because of avoided inflation, since projects would be completed in ten years, twenty years ahead of schedule. More cost savings could also be possible because of a cheaper construction market.

o Of that $14.7 billion, $5.8 billion is expected to be available from existing sources, with around $8.8 billion still necessary, which could be provided through a loan from the federal government.

o Measure R would then pay back its $8.8 billion in debts for projects completed between 2010 and 2020 with $10.4 billion in tax revenue received between 2020 and 2040.

In Washington, Mayor Villiarigosa got support Oregon Democratic Representative Peter DeFazio, who chairs the House Subcommittee on Highways and Transit. California Democratic Senator Barbara Boxer also supports the effort. Secretary of Transportation Ray LaHood signaled that he was open to the opportunity in a meeting in Los Angeles

“Four years ago, when I talked about the subway to the sea, people laughed,”

Villaraigosa recalls. “But we are going to build it. All of these transit plans will happen.”

Initiatives like the 30/10 plan are part of a way of thinking that cities must pursue in order to remain successful, the mayor concludes. “Continue to think through what cities need to do to be more sustainable, to develop their assets, and to leverage the many important components of what a livable city should be like.”

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GUEST POST - VA LOAN OPPORTUNITIES

GUEST POST - VA LOAN OPPORTUNITIES

by Jay Buerck

Veterans and their families in Southern California can take advantage of one of the country’s most affordable and flexible home loan programs. The Veterans Administration’s home loan program was created specifically for the needs of those who have served our country.

VA loans offer veterans an almost unmatched degree of flexibility. The VA guarantees loans from commercial institutions. That security gives lenders the ability to offer competitive rates and favorable loan terms for qualified borrowers.

VA loans come with myriad financial benefits. Borrowers can purchase a home without spending a penny on a down payment or monthly private mortgage insurance. The VA has loan limits that vary from state to state. Some borrowers can qualify for 100 percent financing. Currently, VA loan limits for San Diego County is $593,750. In Orange County, the loan limit is $737,500. USe a VA Loan Calculator to determine the loan limit for your home purchase.

The VA has multiple loan options. Veterans must first obtain a Certificate of Eligibility (COE) before moving forward with the application process. The COE ensures that a prospective borrower meets the program’s initial requirements.

Any military member who has served 181 days on active duty during peace time or 90 days during war time may be eligible, along with those who have served at least six years in the Reserves or National Guard. Spouses of service members killed in the line of duty may also be eligible.

Not everyone who meets the basic criteria will qualify for a loan. But veterans with poor credit can still qualify for a VA loan. So can those who have filed for bankruptcy or faced foreclosure.

Southern California veterans who currently have a conventional home loan can also benefit from a VA loan. Qualified borrowers can now refinance up to 100 percent of their home’s appraised value through a VA loan.

COMMERCIAL REAL ESTATE FINANCE TAKES A HIT

COMMERCIAL REAL ESTATE FINANCE TAKES A HIT

by Jodi Summers

Those involved in commercial real estate are feeling confident that the marketplace won’t take anywhere near as hard a hit the residential real estate market…but the fallout has certainly begun. Some companies, such as Anthracite Capital, may not survive to benefit from the Federal Reserve’s effort to resurrect the U.S. financial markets with cash.

Forbes.com, the rock for reliable statics and information, reports that BlackRock-managed Anthracite Capital invests in high-yield (read: junk) bonds and loans that finance commercial real estate. Recently, the company announced a mammoth fourth-quarter loss - financial problems ranging from busted loan covenants to unpaid margin calls - and a warning by its auditors that its demise may be imminent.

The experts perceive that when times are tough and market conditions are deteriorating, banks behave differently. As markets deteriorate, bank loan portfolios erode in value putting pressure on bank capitalization ratios.

“Undercapitalized banks shift their attention to short-run capital preservation rather than long-run profit maximization, and this change in goals has several undesirable effects,” observed Eric S. Rosengren, president and CEO of the Federal Reserve Bank in Boston. “Perhaps the most undesirable is that undercapitalized banks, finding it difficult to raise additional capital, are forced to improve their capital ratios by shrinking assets.”

“Since loans are usually the bank’s most significant asset, lending becomes more restrictive,” he said. “And, because undercapitalized banks seek to shrink without incurring additional losses, the specific form the asset shrinkage took could be perverse. For instance, some banks would support troubled borrowers in an effort to avoid loss recognition, while reducing credit to more creditworthy borrowers with whom the bank could curtail credit without incurring a loss.”

Anthracite’s Problem goes back to the company’s business model, which call for a steady stream of outside funding. Issue is, the company has been shut out of the financial markets by the subprime-spawned disaster, and this issue subsequently affected the company’s commercial sector. Anthracite Capital reported a loss of $3.49 per share, miles below the 25 cents per share gain Wall Street had expected. Sales meanwhile were only $26.3 million, 69.6% below the $86.5 million consensus forecast. During the 2007 fourth quarter the company earned 24 cents per share.

In response, It lost half its value on March 18th, closing at 40 cents. The shares began to falter in the middle of 2007, when the subprime crisis started to freeze up credit markets; the stock traded above $12.50 at the time and spun off an annual dividend of about $1.20.

Forbes.com concludes: “Anthracite is a perfect example of what can go wrong with real estate-related businesses. As financing for the sector evaporated, it caused prices to drop, leading to reduced demand for the securities and loans in which Anthracite dealt.”

Original content @

http://www.forbes.com/2009/03/18/anthracite-capital-blackrock-markets-equity-commercial_print.html

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