1.5.18: Meet ValueXpress at the MBA CREF Conference in San Diego, CA

On February 11-14, 2018, Michael Sneden and Dennis Suh will be representing ValueXpress at the Mortgage Bankers Association Commercial Real Estate Finance (CREF)/Multifamily Housing Convention & Expo at the Marriott Marquis in San Diego, California. The conference is expected to attract over 3,000 commercial and multifamily professionals who will be networking with industry leaders and listening to professionals share their views on the direction of the industry.

“Dennis and I have been attending CREF for over 15 years, and it is by far the best opportunity to meet our colleagues to share our past, current and future views on the commercial real estate lending markets,” said Michael Sneden, Executive Vice President at ValueXpress. “Last year was a great year for ValueXpress and the CMBS conduit loan volume of $88 billion easily exceeded predictions for $75 billion. We expect more growth in our originations for 2018 and expect the overall CMBS market to be strong as well.”

“With the expected growth in CMBS conduit lending, I am looking to meet with my contemporaries who want to participate in the rewards of CMBS conduit lending. I want to see if there is a way we can work together,” said Dennis Suh, Senior Vice President at ValueXpress. “We expect to increase our loan origination by 25% in 2018 and we would like to work with more colleagues as we reach our goal.”

Mike and Dennis will be in San Diego from Sunday, February 11 through Wednesday, February 14. If you want to get together for a drink or to chat between session presentations, please email Mike at msneden@valuexpress.com or Dennis at dsuh@valuexpress.com.

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1.2.18: CMBS Loan Volume in 2017 Exceeds Predictions

U.S. CMBS origination volume totaled $88 billion in 2017, up 17% from 2016’s $76 billion and far surpassing the average prediction of $75 billion by market professionals. Industry predictions for 2018 are for $75 billion of U.S. CMBS conduit originations.

The expected decline in 2018 is based partly on lower volume of 10-year loans maturing in 2018, which could reduce refinancing activity. The past two years, in contrast, saw a significant wave of 10-year CMBS loans mature from the boom years of 2006-2007, in which record amounts of 10-year CMBS conduit loans were closed. Many of these loans refinanced into new 10-year conduit loans.

Nevertheless, CMBS conduit loan originations will be bolstered from other sources. Interest rates for CMBS conduit loans are very attractive, in the 4.25%-4.50% area, and will attract borrowers with floating rate loans and bridge loans, in which the “value-add” strategy is complete and borrowers are finding rates trending upward with the upward movement of the federal funds rate. In addition, commercial banks are beginning to nudge their fixed-rate offerings higher in sympathy with rising short-term rates, making CMBS conduit loans even more competitive on rate.

 

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12.23.17: Trepp: CMBS Delinquency Rate Drops Sharply in October

Marking the sixth straight monthly decline, the Trepp CMBS delinquency rate dropped sharply in December. The delinquency rate for U.S. commercial real estate loans in CMBS is now 4.89%, down 29 basis points from the November level. That is the lowest reading since September 2016. One year ago, the overall 30-day delinquency rate was 5.23%. The delinquency rate had been climbing consistently for more than a year as loans issued in 2006 and 2007 reached their maturity dates and were not paid off via refinancing. In the 16 months between March 2016 and June 2017, the delinquency rate moved up 13 times. However, now that the dreaded “wave of maturities” has passed, delinquency levels have receded as well.

Delinquency reached a multi-year low of 4.15% in February 2016. The all-time high was 10.34% in July 2012.

In the beginning of summer 2017, Trepp noted that further rate declines were possible in the following months as the Wall of Maturities passed. Delinquencies have now fallen in each of the last six months, and further reductions could occur for 2018.

Delinquency by Property Type, December, 2017

Sector December
2017
December
2016
BP Change
Industrial 5.30% 5.46% -16
Lodging 3.01% 3.10% -10
Multifamily 2.98% 2.00% -2
Office 5.69% 6.66% -93
Retail 5.82% 6.09% -8

Source: Trepp

 

 

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ValueXpress Obtains $1,550,000 Loan for a Mixed-Use Property in Brooklyn, NY

ValueXpress has arranged a $1,550,000 loan for the refinance of a mixed-use property located in the Bushwick neighborhood of Brooklyn, New York. The property consists of 5 apartment units situated above a ground floor commercial space leased to a dry cleaner. The property was purchased in 2007 with financing provided by ValueXpress. The refinancing was provided by Country Bank, an affiliate of ValueXpress.

162 St Nicholas Ave Brooklyn NY162 St Nicholas Ave, Brooklyn, NY

The loan was originated by Gary Unkel, a senior loan originator at ValueXpress. The borrower, a long-time client of Unkel’s, has completed roughly ten transactions over the past 10 years with ValueXpress.

“The transaction should have been relatively easy, as initially the loan was to be closed through a Fannie Mae or Freddie Mac small balance execution to obtain the best terms for the client,” said Gary Unkel. “But the Environmental Site Assessment (Phase I) came back with a concern regarding trace levels of perchloroethylene (aka PERC), and after completing a Phase II that required a remediation, the agency lender would not close until the remediation was complete.”

“The timetable to close did not work for the client,” said Unkel. “The existing loan was maturing and all sorts of fees were to be incurred if the loan went past maturity.  Luckily we have our affiliate bank, Country Bank, to step into these situations, and Country Bank closed the loan immediately.”

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

12.22.17: SBA 7(a) Hotel Borrowers Scramble to Refinance into CMBS

The SBA 7(a) loan program is an excellent way for hoteliers to obtain acquisition financing for hotel properties. Since the lending market considers hotels riskier than other commercial assets, the SBA loan guarantee helps mitigate loan loss risk on defaulted loans and encourages commercial banks and commercial non-bank lenders to make construction and permanent hotel loans that they would not otherwise consider. In essence, 75% of the loan amount is guaranteed by the U.S government. In the event of default and a loss on disposition of the collateral securing the loan, the SBA will reimburse the lender for 75% of its loss.

The rub for borrowers is the vast majority of SBA 7(a) loans is floating rate, tied to the prime rate. The margin is typically 2%-2.75% over prime. From 2008 until December 2015, the prime rate was 3.25%, and SBA 7(a) borrowers enjoyed no rate adjustments during that seven-year period. However, in 2015, the Federal Reserve signaled it was going to begin increasing the federal funds rate, which directly impacts the prime rate. As a result of federal funds rate increases in December 2015, December 2016, March 2017, June 2017 and December 2017, the prime rate is now 4.50%. With two to three increases anticipated in the federal funds rate for 2017, the prime rate could reach 5.0% and SBA 7(a) loans priced at Prime plus 2% would reach 7.0%.

“With interest rates for $3-million to $10-million 10-year fixed-rate CMBS conduit loans for franchised hotels in the 5% area, we are receiving many requests to refinance SBA 7(a) loans and non-SBA floating rate loans into fixed-rate CMBS conduit loans,” commented Michael D. Sneden, Executive Vice President at ValueXpress. “The economics for refinancing into a fixed-rate CMBS conduit loan is very compelling right now.”

To obtain a fixed-rate CMBS conduit loan quote from Mike, contact him at msneden@valuexpress.com.

Posted in CMBS, CMBS Conduit Loans, CMBS Securities, Commercial Mortgage-Backed Securities, Commercial Real Estate Loans, Michael D. Sneden, News & Recent Closings, SBA, SBA 7(a), SBA Loans, The Banker's Mortgage Conduit, Valuexpress | Tagged , | Leave a comment

12.18.17: Tell the Truth, Please – CMBS Conduit Loan Disclosure Tip

One of the many benefits of CMBS conduit loans is the ability to get loans approved in which the owner of the property has derogatory credit history. Examples of prior credit issues that could negatively impact a loan approval decision are loan defaults and modifications, personal or property bankruptcies, foreclosures, crime convictions and lawsuits. Often other commercial lenders will not consider a loan in which the owner has disclosed any of these items.

But in CMBS conduit lending, the majority of the credit decision for loan approval is based on the income-producing ability of the real estate asset. Derogatory credit information related to the owner can often be structured around to get the loan approved.

However, an issue arises when the owner believes the lender will not find out about the derogatory history and the owner chooses not to disclose the matter. In almost every instance, the matter is discovered and the loan is immediately declined.

The right way for an owner to approach derogatory credit matters is to provide full disclosure up front. Credit searches today are very detailed. All issues will turn up in searches. The process starts at the beginning of a transaction with the owner completing a 25-question certification asking whether the owner has ever had loan defaults and modifications, personal or property bankruptcies, foreclosures, crime convictions and/or lawsuits. It is imperative that the questions be answered truthfully by the owner. The CMBS conduit lender then gives the owner an opportunity to provide a detailed explanation of the matter(s). A thorough and complete explanation, often drafted by an attorney, with supporting documentation frequently results in a loan approval.

So please tell the truth to avoid a lot of wasted time and money if you have credit issues on a CMBS conduit loan.

 

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12.12.17: Mall Giant Westfield to be Sold to French Real Estate Firm

USA Today reported that Westfield, which owns malls stretching from Palm Desert, California, to Paramus, New Jersey, is being bought by a European shopping-center company at a time when malls are struggling to cope with intense competition from online shopping.

Purchaser Unibail-Rodamco said that its $15.7-billion purchase of the U.S.- and U.K.-focused Westfield will create a collection of 104 properties that spans 13 countries and draws 1.2 billion visits a year.

Garden State Plaza, the biggest shopping center in New Jersey, is among the U.S. malls currently owned by the Sydney, Australia-based Westfield. It would become part of the Unibail-Rodamco family. Some other Westfield properties that would come under new ownership include the Palm Desert in Palm Desert, California, the Galleria at Roseville near Sacramento, California and the Countryside in Clearwater, Florida.

The pending deal comes at a time when traditional malls are having to reinvent themselves. Malls have begun to offer unique attractions and experiences to draw visitors as one-time anchors like Sears and J.C. Penney close stores and struggle to compete with Amazon and other e-commerce sellers.

 

 

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