Commercial Real Estate Loans

Many borrowers are surprised to learn that life companies are one of the most traditional sources of commercial mortgage financing in the business and have been for decades. Historically they focused on trophy type project ie with minimum loan amounts above $10,000,000 up to a billion or more. Due to the credit crisis many life insurance lenders have lowered their minimum loan amounts to a $1,000,000 and a few to as low as $500,000.

But what are the positives and negative of this type of financing? That’s what this article is about.
One of the best features of this type of financing is long term fixed rates. 5, 10, and 15 year fixed rates are available. As of this writing rates are competitive compared to conventional bank loans, ranging from 5% – to 6% (The longer the fixed period the higher the rate) often only 30 basis points higher than bank financing.

Also, because life companies are not banks they do not they do not have the same underwriting standards and typical limitations that banks do. This is not to suggest that they are not conservative, which they are. For example most of them are capped at 65% loan to value and 1.3 to 1.35 debt coverage ratios and only like general use properties such as retail, office or industrial. But still they can and will do things that banks cannot. Such as “cash out refinances”, which is currently nonexistent with banks in this market.

Another benefit includes that they do mostly investment properties loans which is still difficult to get done with most banks. The underwriting process is also simplified as life companies normally lend their own money and hold onto and service loans over their life, rather than pooling them and selling them on Wall Street. So for the borrower this means that they don’t have to perfectly fit into a restrictive “Box”. Continue Reading

The recent recession that has hit the United States had adversely affected the values of commercial real estate. This has made for a challenging situation for realtors who have been trying to move commercial property. There is a bright spot in the future, as The National Association of Realtors has put a positive spin on next year, saying that there looks to be some improvement in the situation.

Commercial rest estate has a natural habit of falling behind the rest of the economy during tough times. The troubled economic times during the past two years has caused a negative impact on sales and rental of units throughout the country. It is looking, at least in the near future, to cause continued lower occupancy rates in various properties that have been hard to advertise and move.

The upside may come from an increase in consumer spending and their confidence in the economy. With more consumers out spending, more entrepreneurs will be likely to open business doors and get into the retail market. This should translate into more rental properties being leased and increased income for property owners. This may be due to more families moving from homes to apartments.

Another vital area that may help the slumping commercial property market is bank activity. Banks are becoming more open to extending commercial credit to business owners in 2011, which will be a vital part of recovery in this area. The situation is also helped by the Federal Reserve’s Asset-Backed Loan Facility. This helps to support lenders to give longer terms those who already have commercial loans. With the extensions, many business owners can stay in business and keep renting valuable commercial property. Continue Reading

Global commercial real estate investment is on the path of improvement since March 2011 by an estimated 10-12 percent. Asia Pacific experienced record highs, while growth in South American region has slowed down a bit. Though compared with previous year’s global property investment portfolio, the volume has exceeded a total of $180 billion.

It is considered as a steady progress for commercial property markets all over the world. In markets like India, commercial property in Gurgaon has seen an increase even though the property volumes are still well below the levels. In the metropolitan cities of India, commercial property is witnessing continual investor demand. People still look at property as one of the strong core assets; but due to lack of market guidance, it hinders direct investment volumes. As more and more developers barge in the industry with their products, investment is projected to increase.

Meanwhile, the South American region experienced a 27% decline in commercial real estate investment volume in the third quarter, amounting up to $12 billion. Considerable declines occurred in Brazil, Mexico, Colombia, Peru and Chile but Argentina saw some increase in volumes.. In spite of everything, on comparing the results of the same quarter last year, volume in the South America region was up by 25% over 2010, where investment reached $17 billion. For the South American market, first half of the year posted somewhat stronger increases in the commercial property arena over the corresponding periods of the last one decade. Continue Reading