Panel: Where to Find Financing? (Panel Members: ING, Wells, American Momenum Bank, Mercantile Capital)
- Typical financing terms: 30 year amortization/3-10 year terms; 65% LTVs; 1.35-1.5 DSCR; Avg deal size of $25M ($2-200M) - Debt Yield of 10-12%.
- Turning Points - typically when there are high or low liquidity levels
- Focused on primary markets - competition is high in these markets
- CRE is off the lows but still has a long way to recover with many potential pitfalls along the way.
- Active in CMBS market - they are putting together their first CMBS issue ($750M) directly
- High quality deals for the right people
- Underwriting is the new/old method - everything goes back to borrower and asset quality
- Debt Yield requirements minimum of 10%
Ammercian Momentum Bank - Personal attention with creative loan structures in today's environment.
Mercantile Capital - SBA 504 Loans
- Blended rates of 5.5%
- Can use for refinancing
- Potential to refinance an upside down borrower (up to 125% LTV) if there is other collateral
Panel - Ken Riggs and KC Conway
- Keep expectations low - Warren Buffett
- 2007/2008 was casino money
- "Things ar so bad now that they can't get any worse" - New Optimist Definition
- If asset has been repriced, they have seen a 6% increase in value
- It took 18 months to reset (NCREIF) - last time took 6 years
- "Betting against the US has no worked since 1776" - Warren Buffett
- If USA started creating jobs at a rate of 170k/month, it would take until 2014 to replace all jobs lost
- charge offs don't peak until about 1 year after recession has ended andwill remain elevated for 3-4 years
- CMBS has to come back
- 3 special servicers control 70% of the market
- Worst state for CMBS = AZ
- $12T in residential loans compared to $3.3T in commercial (a) Commercial was $800B before run up (b) 24% of all residential mortgages have negative equity (c) trulia.com great info source
- Nationwide - 6 year land supply of finished/vacant lots
- Cash flow correction is still coming (Cap Rates rising to historical norms has already begun)
Let me know if you have any questions about notes! I hope they help you!