Remington Capital – Joel A. Nathanson

I think everyone from main-street to wall-street are starting to see signs that the recession is easing. In the commercial sector, your seeing money that was sitting on the sidelines through 09′, beginning to be deployed. This is a clear indicator that investors feel property values have bottomed out, stabilized, and will begin the upward trend. Still, the biggest issue facing commercial real estate is the $1.4 Trillion dollars that will be coming due in the next 3 years that will have to be refinanced. Unfortunately neither main-street or wall-street have figured out a viable solution for this.

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Due to the expected increase in vacancies in the “4 main food groups” (office, retail, industrial, multifamily) it is becoming even tougher for commercial propery owners to service the current debt on their property due to low cash-flow. These vacancies are expected to peak in late 2010 or early 2011 and we can expect during this time that there will be a large number of foreclosures unless the property owners can recapitalize the capital stack.

On new purchases, underwriting has become much more conservative. Lenders have gone back to old calculations to evaluate a potential property, and this calculation is called “the debt yield calculation”. Typically lenders are looking for a 11% – 14% debt yield. The debt yield is calculated by dividing the NOI by the loan amount.

Read more on the background article for this blog post here: http://www.mortgagebankers.org/Newsletters/MBA%20Newslink/Issues/Volume8Issue237_web#9560

We are continuing to help owners and brokers with the Distressed Owner Recapitalization Program.  Call me for me information.  Thank you – Joel Nathanson – Remington