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Report: Troubles Ahead for Commercial Real Estate Loan Refinancing By Damian Ghigliotty

Posted by on 9:54 pm in Financing Strategies, Industry News | 0 comments

With an estimated $1.4 trillion in commercial mortgages due to mature between 2014 and 2017, lenders and investors may be in for a flood of refinancing that could present new challenges for the market, according to a December 2013 year-end Trepp report. Northeast states, including New York, New Jersey and Connecticut, contain the greatest volume of loans due to mature between 2014 and 2017 at a total near $100 billion. The Northeast region represents 30 percent of all maturing loans, followed by the Pacific and Southeast regions, each with close to 20 percent. The Midwest, Southwest and Mountain regions each represent less than 15 percent of maturing loans, according to the Trepp report. CMBS loans make up one fourth of the total, with $346 billion in CMBS loans due to mature before 2018. The Outlook by Asset Class Retail borrowers looking to refinance in the next few years may face the greatest uphill battle, with loan-to-value ratios for loans maturing between 2014 and 2017 consistently higher than those of recently originated loans. Additionally, continuing economic volatility and heavier taxes have taken a toll on the country’s retail sector, which may impact lenders’ willingness to refinance maturing loans. In almost every region of the United States, retail borrowers looking to refinance may have the hardest time meeting current LTV requirements. Office borrowers are likely to see a steady rise in LTV ratios between 2014 and 2017. As a result “refinancing troubles could emerge in 2015, barring significant property value appreciation or a loosening of underwriting standards,” the report states. By 2017, office borrowers in the Midwest region will face the greatest challenges, followed by borrowers in the Northeast, Southeast and Mountain states. Industrial borrowers too may begin to face their biggest refinancing problems come 2015. Many of those borrowers will be well positioned in 2014 with LTV ratios for maturing loans comparable to those for recently originated loans. In the following years, however, LTV ratios will likely peak, exceeding 75 percent in 2016, making it harder for industrial borrowers to refinance. Hospitality borrowers are relatively well suited this year and next. Borrowers looking to refinance loans for lodging properties should have little trouble meeting LTV requirements in 2014 and 2015. Come 2016 and 2017, “those borrowers may need to inject more equity to meet current underwriting standards,” partly due to the hospitality sector’s potential for instability, according to the report. Multifamily borrowers looking to refinance in the next few years may have the least concern. On average, multifamily loans carry higher LTV ratios than other commercial asset classes, and recent loans for rental properties have been issued at “LTV ratios that exceed those of maturing loans originated between 2004 and 2007,” the report states. That points to a strong refinance environment for the well-performing multifamily sector. However, multifamily loans in Northeast states may become problematic in 2016, while Pacific and Southeast states could begin to see challenges in 2017....

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7 Keys to Raising Joint Venture Equity

Posted by on 4:39 pm in Financing Strategies | 0 comments

Finding Joint Venture Equity has always been one of the most difficult things to do. To help you along with this process, we thought we would share an article that was written by one of our strategic partners. Article by, Brent Virkus of Find the Capital Look we all know raising joint venture equity is not easy. This is actually a good thing. Because if it were easy, everyone would raise capital and start a business, buy commercial real estate as an investment, etc. Competition would be ferocious. For this article, I’m going to focus on raising joint venture equity for your business. So to better help you with this process I’ve put together the 7 things you must know to raise joint venture equity today.   First…and Most Importantly Have “Thick Skin” When raising joint venture capital, be prepared for a lot of “no’s.” Using my Google example, even when Google was ready for venture capital, the majority of venture capitalist said “no.” When an joint venture capital says “no,” it doesn’t necessarily mean that your venture is not a good one. It simply means that the venture is not a good investment fit for them. You must have “thick skin” and be able to bounce back from lots of “no’s” and persevere. When failing over and over again to create the light bulb, Thomas Edison famously said, “I have not failed. I’ve just found 10,000 ways that won’t work.” Have the same mentality with investors. That is, think, “I have not failed. I’ve just found 100 investors that aren’t a good fit.”   Second…Make Sure you do a Business Plan and Keep it Current One of the most important things to show in your business plan is what you’ve accomplished in your business to date. And ideally, every month you are accomplishing more. So, be sure to update your plan with this progress.   Third…Always be a Master Marketer of your Deal In raising money, the best company doesn’t always win. Rather, the guy that knows how to best market his opportunity wins. That is, the entrepreneurs that are best able to market their companies to lenders and investors are the ones who raise the money.   Fourth…Understand That Funding Doesn’t Take Place All At Once No matter how great your project or idea is, you are probably not going to get a $20 million check right away. Rather, you will typically raise several “rounds” of capital. You start with a smaller round or amount of funding. Then, as your business grows, you are eligible for larger rounds of funding. This is because your business proves itself over time and your valuation rises as you grow. This enables you to you to raise larger sums of money.   Fifth…Choose the Proper Source(s) of Capital Funding Choosing the right source of funding is the key to Find the Capital’s success at raising joint venture equity. Some forms of funding are much easier to raise than others. And based on your stage of development, different forms of funding are more relevant. To be specific, the funding sources available to a pre-revenue startup are very different than the sources available to a 3-year old company generating $1 million in annual revenues. For example: Google initially failed when it tried to raise money...

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5 Benefits to using a Mortgage Broker

Posted by on 4:15 pm in Financing Strategies, Industry News | 0 comments

5 Benefits to Using a Mortgage Broker Article by John Csaszar, November 7, 2013 Are you thinking about buying a new commercial property, multi-family property or looking to refinance your existing loan? Have you started exploring your financing options for the project? There are many different types of loans available to select from, but one of the first things you will need to determine is whether you want to work with a Commercial Mortgage Broker or with a bank or a single lender. Here’s a look at some of the benefits associated with working with a Broker rather than a bank. Benefit #1: A Broker Works for You One of the greatest benefits to working with a Commercial Mortgage Broker rather than a bank is the fact that the Broker works for you. When you go to a bank or a lender to secure a mortgage loan, the bank specialist is solely concerned with the interest of the financial institution. The Mortgage Broker, on the other hand, is looking out for your best interest and can provide hundreds of different, creative options for you to use in financing a property. You truly benefit because Mortgage Brokers are not employees of a particular bank or lender, but instead have a working relationship with dozens of these institutions. Benefit #2: Choose from a Wider Variety of Institutions When you go to a bank to inquire about a mortgage loan, the bank specialist is only representing one financial institution. When you work with a Mortgage Broker, he or she works with a wide variety of different institutions. As a result, you have a broader range of loan options to select from. Not only can this help you to get the best rates, but it also increases your chances of obtaining approval even if you have poor credit. Benefit #3:Brokers are Highly Trained When looking for funding, it is vital to secure the best financing available. Every borrower is unique and every lender has its own rules and programs. The difficulty most people have in shopping for their own loan is they don’t know all the right questions to ask. Adding to that difficulty is the fact that most lenders have only two or three programs to offer so their job is to sell you what they have rather than find the program that fits your needs. Many times clients go to banks and they get offered one rate but get re-traded down the road and the program changes. A good Mortgage Broker will do their best to make sure the quotes you are getting are the most current and aggressive the market has to offer and they will get quotes from the lenders directly to insure accurate quotes. They will underwrite the deal up front and make sure the lenders have a full package. The more information they receive and put together, the more accurate the quote can be deliver. It is the brokers business to know the financing market and call their lending sources daily to make sure the rates and programs they offer the client are the most accurate and aggressive in the industry. Be sure to find a broker that does not charge up-front fees. Paying any upfront fee to a broker or to list your business-financing request with...

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It looks like interest rates are going up. It may be time to Refinance.

Posted by on 4:39 pm in Capital Markets, Financing Strategies | 0 comments

  Submit Capital Request   Federal Reserve Chairman Ben S. Bernanke is putting investors on notice that the central bank is prepared to begin phasing out one of the most aggressive easing programs in its century-long history later this year. The Fed will probably taper its $85 billion in monthly bond buying later in 2013 and halt purchases around mid-2014 as long as the world’s largest economy performs in line with Fed projections, Bernanke told reporters yesterday in Washingtonafter a two-day meeting of the Federal Open Market Committee. “The vast, highly unprecedented, highly accommodative monetary policy stance that’s been so supportive of the recovery has begun to turn,” said Michael Gapen, senior U.S. economist for Barclays Plc in New York and a former economist in the Fed’s Division of Monetary Affairs. “The markets for the next several years or more will have to deal with the withdrawal of that support.” Stocks and Treasuries tumbled at the prospect of a wind-down in bond buying that’s swollen the Fed balance sheet to a record $3.41 trillion in an attack against the worst joblessness since the Great Depression. While citing waning risks to the economy, Bernanke said curbs to bond buying hinge on gains in the labor market and a pickup in growth. The yield on the benchmark 10-year Treasury (USGG10YR)note rose 3 basis points, or 0.03 percentage point, to 2.39 percent at 10:11 a.m. New York time after earlier climbing as high as 2.47 percent, the highest since August 2011. The yield jumped 17 basis points yesterday, the most since October 2011. Yields Surge Bonds across the Asia-Pacific region fell, with Japan’s 10-year yield climbing 4 basis points to 0.86 percent. The yield on 10-year German bunds rose 9 basis points to 1.65 percent. TheMSCI Asia Pacific Index (MXAP) of shares slumped 3.9 percent and the Stoxx Europe 600 (SXXP) Index slid 2.6 percent. The Standard & Poor’s 500 Index (SP1) fell 1.4 percent. Gold fell below $1,300 an ounce to the lowest in since September 2010. The conclusion to record stimulus may take years to complete as the Fed’s forecasts showed most officials don’t expect to begin raising the benchmark lending rate out of its lowest-ever range of zero to 0.25 percent until 2015. Bernanke, 59, whose second term as chairman ends on Jan. 31, warned investors against viewing the policy makers’ plans as inflexible, saying their decisions are not “deterministic.” Labor Market “If the incoming data are broadly consistent with this forecast, the committee currently anticipates that it would be appropriate to moderate the monthly pace of purchases later this year,” Bernanke said, referring to the FOMC’s outlook for “moderate” economic growth, further labor-market gains and inflation accelerating toward the Fed’s 2 percent goal. If such gains are maintained, “we would continue to reduce the pace of purchases in measured steps through the first half of next year, ending purchases around mid-year,” he said. A “strong majority” on the FOMC now expects it won’t sell mortgage-backed securities as part of their exit strategy. The chairman’s description of the end of quantitative easing indicates that Fed officials see the economy finally healing from a burst credit bubble that deflated housing prices by 35 percent over almost six years, left one in 10 American workers unemployed in October 2009 and prompted the biggest overhaul of financial regulation since the 1930s. The U.S. central bank began its third...

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Promote Structures of the Most Active Real Estate Funds

Posted by on 3:36 pm in Capital Markets, Financing Strategies, Industry News | 0 comments

Promote Structures of the Most Active Real Estate Funds

When negotiating with a private equity fund to provide you financing, it’s important to know what the funds internal hurdles are. This article highlights ten of the most active high yield real estate funds internal promote structure to help you with negotiating the best deal on your next real estate opportunity.

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Super Towers…The Next Big Thing in Luxury Housing

Posted by on 7:08 pm in Industry News | 0 comments

Super Towers…The Next Big Thing in Luxury Housing

The residential tower under construction at 432 Park Avenue in Manhattan will have plenty of opulent amenities to draw the moneyed crowd: The units, which start at $7 million, feature private elevator landings, 12.5-foot ceilings, separate servant entrances, heated bathroom floors and the option to buy additional climate-controlled wine cellars and guest apartments. The building will have a 75-foot-long pool, a private restaurant for residents, room service and catering, even chauffeur service. But for all of the over-the-top features of the Rafael Vinoly-designed tower, the one sure to get the most attention will be its height. 432 Park Ave will jut 1,396 feet into the air over midtown Manhattan upon completion in 2015. At that lofty height, the building, developed by CIM Group and Macklowe Properties, will be New York City’s third-tallest behind One World Trade Center and the Empire State Building. It will also become the Western Hemisphere’s tallest residential tower, eclipsing the 870-foot rental tower New York by Gehry in Lower Manhattan, Midtown’s up-and-coming 1,004-foot One57, and Chicago’s 1,389-foot (spire included) Trump International Hotel and Tower. “People want views. This will be a game-changer for the upper echelon of New York,” asserts Jarrod Guy Randolph, a luxury real estate broker with CORE in New York who has toured the sales center, which has been kept under wraps since its discreet opening in March. Gallery: The World’s New Wave Of Tallest Residential Towers 432 Park Ave is the latest example of a race skyward among luxury residential developers. With the housing market in recovery mode, developers are taking multifamily buildings to staggering new heights, vying for the title of tallest tower and the prestige that translate into larger returns on investment while delivering the breathtaking views buyers are seeking. “What developers are looking to do is set themselves apart,” notes Randolph. “They are doing this because they can build that tall and capitalize on the land.” In the past, most of the world’s tallest buildings were erected to provide office space, like Chicago’s Willis Tower and the Empire State Building. The shift toward high-rise dwelling started about 15 years ago, according to the Council on Tall Buildings and Urban Habitat, as interest revived in living in city centers. The 9/11 attacks dampened the nascent trend – but only for a time. As the housing bubble inflated, dozens of residential high rises began popping up in major U.S. cities. New construction ground to a near-halt as the bubble burst and recession ensued, but now, as developers begin to bring projects back online, their buildings – commonly luxury and super luxury condo towers geared toward cash-flush global buyers — are getting even taller. In New York City, where a finite amount of land and a huge population have made vertical living common, the race to build the highest homes has heated up. For every tall residential tower that begins construction, another boasting more stories at higher feet enters the approval process. Once finished, the glass megalith One57 will become the city’s tallest residential tower with a penthouse encompassing the 89th and 90th floors that is in contract for more than $90 million. One57 will snatch the tallest title from New York by Gehry, where the top units of the 76-story rental building go for $45,000 per month. 432 Park Ave...

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Broadway Partners – $234 Million

Posted by on 7:05 pm in Recent Closings | 0 comments

Broadway Partners – $234 Million

Background: The investment unit provided approximately $234 million of bridge equity to Broadway Partners in order to facilitate the purchase of two New York City office towers. Problem: The investment unit expected to be syndicated out of its equity position within nine months of the closing of the transaction. When market conditions made this impossible, the investment unit commenced negotiations to restructure the deal to make it more appropriate for the risk that it was taking as a longer-term equity holder. Strategy: The investment unit used its contractual right to force a sale of both assets plus certain contractual claims it had with respect to the Broadway Partners fund manager as leverage to improve its economic and structural positions in the two assets. Result: The investment unit achieved a restructuring that (1) put it in a senior position to Broadway Partners on the asset that needs more time to recover its value, (2) modified its interest in the other asset into a security that would be saleable in the secondary market, and (3) gave it a disproportionate economic share of any proceeds from a sale of such other...

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DIAMOND DECISIONS, INC: (DDI) – $4.5 Million

Posted by on 7:01 pm in Recent Closings | 0 comments

DIAMOND DECISIONS, INC: (DDI) – $4.5 Million

OWNER AND OPERATOR OF PRIVACY WEAR COLLECTION Background: DIAMOND DECISIONS, INC., owner and operator of PRIVACYWEAR COLLECTION had the opportunity to take advantage of a national promotion, which was led and marketed by one of the country’s leading retailers. However, due to the double-digit growth the company had experienced over the past twelve months, their existing credit facility was fully extended and could not be expanded in time to capitalize on the opportunity. The client needed to secure a preferred equity and or mezzanine credit facility, which would not violate their existing loan covenants, which created a very unique situation, which CCP had to work within. Problem: The transaction was time sensitive and had to have a firm commitment by year-end 09. Strategy: Working quickly with one of its private investors, CCP arranged the commitment within two weeks of being engaged by the client, which allowed the sponsor the option to take advantage of a time sensitive opportunity. Result: CCP arranged a $4.5 million preferred equity, convertible to mezzanine, financing commitment for...

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Pasadena Apartments – $2 Million

Posted by on 6:59 pm in Recent Closings | 0 comments

Pasadena Apartments – $2 Million

Background: The investment unit originated a 2.0. million senior credit facility in order to facilitate the purchase of a Detroit apartment tower. The acquisition was a distress CMBS purchase that had a hard closing date, which if not met would cause the loss of the sponsor’s hard deposit and the property would be auctioned as part of a pool of non-performing assets. Problem: Due to liquidity constraints caused by closing deadlines the sponsor needed a 100% loan to cost transaction. Strategy: CCP evaluated the closing deadlines as well as the financial requirements to facilitate a closing by the required date. We chose to structure the transaction leveraging other liquid and non-liquid assets within the sponsor Portfolio to fill the equity requirements of the Fund. CCP coordinated internal due diligence, internal, external, and sponsors legal, as well as title to facilitate the closing. Although this approach posed legal cost exposure to the sponsor it was the best means to achieve the desired end results. Result: The loan was funded in less than thirty days start to...

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Tanglewood – $18 Million

Posted by on 6:58 pm in Recent Closings | 0 comments

Tanglewood – $18 Million

Background: The investment unit originated an $18 million senior loan secured by a mortgage on 500 acres of entitled commercial land partially developed with a strip mall anchored by a Super Walmart located in Elizabeth City, NC and by a personal guaranty from the developer. This investment was funded in conjunction with D.E. Shaw, para pursue on a 90/10 split with Fund I. The investment unit originated an $7 million senior loan secured by a mortgage on 220 acres of entitled commercial land located across from the above referenced property and secured further by a senior mortgage on the sponsors personal residence, as well as a senior mortgage on two water front lots and a personal guaranty from the developer and his wife. This investment was funded as a clubbed transaction in conjunction with a MI entertainment & beer distribution group and further with a MI wine distributor. Problem: A maturity default occurred. Strategy: The investment unit presented several creative forbearance proposals to the borrower that would have extended the loan’s maturity. When those negotiations stalled, the investment unit began to enforce its rights and remedies under the mortgage and the personal guaranty pursuant to an aggressive legal strategy, creating significant pressure on the borrower. Result: The loan was repaid in full, including default interest and penalties resulting a 33% ROI on the initial loan and a 31% ROI on the second...

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