9.15.17: ValueXpress to Exhibit at the 3rd Annual National Alliance of Commercial Loan Brokers Conference & Expo

ValueXpress will be exhibiting at the 3rd Annual National Alliance of Commercial Loan Brokers (NACLB) Conference & Expo at the Gaylord Palms Resort and Convention Center in Orlando, Florida. The conference begins on Tuesday, October 17 with an opening cocktail reception and concludes on Thursday afternoon, October 19.

ValueXpress will be available during the conference at its booth and during networking events. Dennis Suh, a veteran loan originator and Senior Vice President at ValueXpress, and Stan Siciliano, Director of Marketing at ValueXpress, will be fielding questions regarding the origination, underwriting and closing of CMBS conduit loans. “We will have a bunch of giveaways as well, so I encourage all attendees to stop by our booth, if only to grab a handful of ValueXpress logo’d golf balls for their next round,” Stan said.

“Having taught over 400 Commercial Capital Training Group (CCTG) graduates over the past few years, and now closing 3-4 CMBS conduit loan deals a month with graduates, this is an outstanding opportunity for ValueXpress to reconnect with experienced graduates and those just getting their feet wet,” commented Michael D. Sneden, Executive Vice President at ValueXpress.

CCTG and BoeFly have teamed up to organize this event. It will serve as a “Class Reunion” for CCTG graduates and current classmates, providing an excellent opportunity for them to network regarding their business strategies. For the complete conference agenda and to register, visit http://www.naclb.net.

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Posted in CMBS, CMBS Conduit Loans, Commercial Lending, Commercial Mortgage-Backed Securities, Commercial Real Estate Loans, Michael D. Sneden, News & Recent Closings, The Banker's Mortgage Conduit, Valuexpress | Tagged , , , , , , , | Leave a comment

9.12.17: CMBS Conduit Loan Rates Stable as CMBS Spreads Remain Steady

CMBS conduit loan borrowers are finding calm waters as spreads on CMBS securities have been stable at attractive levels for most of 2017 to date. In addition, the 10-year Swap rate, the benchmark index for setting interest rates on CMBS conduit loans, has remained in a relatively narrow range of roughly 2.10%-2.30% since April. It is currently 2.15%. Interest rates for CMBS conduit loans are set by adding the 10-year Swap rate and the loan spread, which is derived from CMBS securities prices. The two indexes are added together at loan closing to set the interest rate, which will remain fixed for the entire loan term.

On the CMBS securities side, long-term, super-senior AAA-rated securities continue to trade at under 100 basis points (bp) over swaps, having broken the barrier at the beginning of February 2017 for the first time since mid-2015, with the exception of one very high-quality offering in August 2016. The market for long-term, super-senior AAA-rated CMBS highly correlates to borrower interest rates for CMBS conduit loans. Four CMBS deals are currently being marketed with long-term, super-senior AAA-rated securities at 92-95 bp over swaps, right in the middle of the range for CMBS deals that have priced since February.

Market professionals point to relatively low CMBS supply keeping a check on increases in CMBS spreads. The industry appears to be on track to slightly exceed last year’s CMBS issuance total of $76 billion, but indications are the industry could absorb $100 billion annually. In addition, CMBS investors note that the loan quality is improving and leverage decreasing in transactions, reducing perceived risk in the bonds.

As a result of steady swap and CMBS securities prices, CMBS borrowers are seeing stable interest rates while loans are processed to closing, and therefore, loans are closing at rates close to levels indicated in their Term Sheets. Low-leverage CMBS loans are being closed in the 4.25% area and full-leverage loans are being closed in the 4.75% area. The rate is fixed for the entire loan term.

 

Posted in CMBS, CMBS Conduit Loans, CMBS Securities, Commercial Lending, Commercial Mortgage-Backed Securities, Commercial Real Estate Loans, Michael D. Sneden, News & Recent Closings, The Banker's Mortgage Conduit, Valuexpress | Tagged , , | Leave a comment

9.7.17: Small Balance Bridge Loans Now Available

We recently wrote about the benefits of bridge loans for transitional properties in which the assets can be eligible for CMBS conduit loans, but are temporarily underperforming. Typical situations are properties that may be in lease-up, perhaps in conjunction with a rehabilitation program that will make the property more appealing to new tenants, or a situation in which the property has lost one or two key tenants, but is well located in a strong market and is likely to re-lease quickly. The borrowers on these transactions would not want to lock in long-term CMBS conduit loan refinancing while the property is sub-performing because the property would qualify for a bigger loan once the property is stabilized and the cash flow is maximized.

Historically, bridge loans were available for only larger transaction — $10 million and up. Now the program minimum has been reduced to $3 million, allowing small balance transactions to qualify. This coincides with the typical minimum of $3 million required for a long-term, fixed-rate CMBS conduit loan.

“We recently had a situation in which a borrower requested a long-term, fixed-rate CMBS conduit loan secured by a neighborhood retail center in the amount of $4.5 million,” commented Michael D. Sneden, Executive Vice President at ValueXpress. “The center was 100% occupied, but one of the tenants occupying 20% of the space was in bankruptcy and the space had to be underwritten as vacant. Hence, the property cash flow was insufficient to support a $4.5-million CMBS loan. So the solution was a small balance bridge loan for $4.5 million until the space is released, at which time it is projected the cash flow will support a CMBS conduit loan of $4.8 million.”

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ValueXpress Arranges $6.2-Million CMBS Conduit Loan for the Refinance of a 69-Room Best Western Hotel in Houston, TX

ValueXpress has arranged a $6.2-million CMBS conduit loan for the refinance of a Best Western Hotel constructed in 2002. The three-story property is located near the Galleria section of Houston, Texas.

BW Galleria

The subject property was acquired by Fountainview BW, LLC in August 2014. The property was absentee owner-owned and was underperforming the market in terms of both occupancy and ADR. New ownership immediately embarked on an aggressive marketing plan to be followed by a capital improvement plan to begin in the first quarter of 2015. A portion of the loan proceeds was escrowed to complete the program, including an extraordinary opportunity to create additional revenue by placing 3 more guest rooms into service, thereby increasing the room count to 72. All permits and authorizations from the franchisor are in place to complete these rooms. The rooms are currently configured as 3 guest rooms similar to the balance of the hotel; however, they are being used for storage and require carpet, paint, case goods, and bathroom renovation.

The new CMBS conduit loan provides for a 10-year term with a 25-year amortization schedule and is non-recourse. The loan provided for cash-out proceeds, allowing the sponsor to recover excess equity as the bank loan utilized to purchase the property was low leveraged. Financing was provided by an active CMBS conduit lender that has an ongoing relationship with ValueXpress to arrange additional CMBS conduit loans.

 

 

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9.1.17: CBRE Reports on Cap Rates at Mid-Year

CBRE recently published its survey of capitalization rates (“cap rates”) for income producing commercial real estate (retail, office, industrial, multifamily and hotel) as of June 30, 2017. CBRE notes that cap rates were little changed in the first half of the year, with slight increases or decreases in pricing depending on asset type. The multifamily and industrial sectors registered small declines in cap rates, while the office and hotel sectors had modest increases. Retail cap rates showed larger increases overall, likely impacted by negative sentiment in the retail sector from the effects of Amazon.

CBRE says the general outlook for cap rates and returns on cost in the second half of 2017 is for stable pricing. However, the sentiment of survey participants varied by property type, segment and metro-tier grouping. The consensus is that if rates do change in the second half of 2017, they are more likely to increase modestly.

Summary of Cap Rates – 6/30/17 vs 12/31/16

Property Type Sector Cap Rate (%)
    6/30/17 12/31/16
Office CBD 6.66% 6.63%
Suburban 7.83 7.75
Industrial All 6.66 6.73
Retail Neighborhood 7.23 7.12
Power 7.31 6.92
High Street 4.50 4.37
Multifamily Infill 5.27 5.32
Suburban 5.66 5.73
Hotel CBD 7.98 7.91
Suburban 8.49 8.44
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8.29.17: Tanger Factory Outlets Stock Takes a Beating

In order to make prudent commercial loans in the sector, many lenders are trying to sort out surviving retailers that will continue to be successful in brick-and-mortar retail stores. Some results are easy to see. Class B and C malls pretty much cannot be financed on a non-recourse basis, and they are struggling to borrow even on a recourse basis. On the other hand, neighborhood retail centers with good grocery stores or service-oriented tenants appear to be reasonably safe loans if leverage is not stretched.

The sector of retail property that has industry pros scratching their heads is factory outlet shopping centers. One the positive side, the thinking goes that the sector is safe because there are no department stores in any outlet shopping center. In addition, the majority of the tenants are clothing related and shoppers still prefer to try on clothing. To thwart the “try it on and if it fits buy it online” mentality, the outlet price, in theory, would provide enough discount to warrant an immediate purchase.

But investors in outlet shopping centers appear to think the future of outlet centers is not bright. Tanger Factory Outlet Centers, Inc. (NYSE: SKT) operates as a Real Estate Investment Trust (REIT) and is the only “pure play” REIT that owns solely outlet centers. The North Carolina-based company owns 44 outlet centers in the United States (22 states) and Canada. The company commenced operations over 34 years ago in Burlington, North Carolina, when the outlet industry was unknown. The company and its stock has performed very well, rising from roughly $20 per share prior to the financial crisis to over $40 per share in the fall of 2016. Coinciding with all the store closings, retail bankruptcies and related concerns, the stock price has plummeted, hitting a 52-week low of $23.03 during trading on August 30, down 50% from its 2016 peak. Clearly, investors are concerned about the outlet center sector.

 

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8.23.17: Airlines and Resort Development – Perfect Together?

Bloomberg recently reported that Allegiant Travel Company wants to add real estate development to its list of corporate activities. The company is embarking on an audacious plan to build a 22-acre resort compound with a hotel, condominiums, bars and restaurants on the Florida Gulf Coast in Port Charlotte. The real estate offshoot, called Sunseeker Resorts, will have a 75-room hotel, along with about 720 condo units, ranging in price from $650,000 to $1.1 million based on the size of the unit. The property, scheduled to be completed in late 2019 or 2020, will also include North America’s largest private-resort swimming pool.

Longer term, Allegiant wants to tout its success with the Sunseeker property as a bid to begin managing other leisure-destination hotels for fees, further diversifying its revenue, according to company President John Redmond. It also sees lucrative opportunities in developing new food and beverage brands and restaurants it can use at other locations. In addition, it will offer meeting and banquet space, a marina with boat slip leases, and the ability of owners to rent their condos as part of the hotel operation.

All this new business development is, of course, far afield from the core operation of running an 88-jet airline with nationwide, less-than-daily service from small burgs to leisure destinations in Florida, Las Vegas and Phoenix — a model that has proved wildly profitable. The airline is simultaneously working this summer to improve its operational reliability, which suffered earlier this year, while also shifting to an all-Airbus fleet by 2020.

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