The commercial real estate finance industry has entered 2014 with a renewed sense of confidence. The incautious tone at the first quarter’s outlook conferences belies the industry’s recent history and the losses incurred on precrisis lending activities. Instead, heady predictions of higher lending volumes are being proffered as unequivocally positive signs of better days ahead. More is better in the mundane calculus, and the next year will undoubtedly see more lenders in more places enabling investment by a wider range of borrowers. We are hard-pressed to show serious evolution in our approaches to credit risk measurement. But as long as we ignore that capital flows and the cost and capacity for leverage influence prices and risk-taking, there is no cause for a more prudent analysis.
By Sam Chandan 1/08 3:56pm
The United States banking system enters the new year on solid footing. While higher interest rates have weighed on residential mortgage activity, pulling bank revenues lower, other measures of performance show the sector drawing further away from the legacy of the financial crisis. Read More
By Sam Chandan 11/27/13 8:30am
The initial recovery in commercial real estate investment activity has been rewarding for life company lenders. Absent robust competition to originate mortgages to institutional borrowers, life companies have expanded their share of the secured debt market while working to hold the line on underwriting standards. It has not been a volume game. The enhanced liquidity from life company lending has been narrowly focused, with the lion’s share of the benefits accruing to a privileged class of well-heeled borrowers. In this segment of the market, life companies offer their most competitive terms. As debt market conditions improve, they are butting up against other lenders. For life companies, this more crowded landscape is a counterweight to improving economic projections and growth in the number of qualified borrowers.
By Sam Chandan 6/04/13 10:30am
This week marks Sam Chandan’s final column for The Commercial Observer, but fear not—Mr. Chandan will continue publishing his insights on the economy and finance in New York City and abroad each month in the pages of The Mortgage Observer.
The Commercial Observer was a gamble. The country was still in recession when the paper Read More
By Sam Chandan 5/29/13 6:00am
The Bank of Japan’s campaign of shock and awe is approaching its half-year anniversary. Early results are mostly according to plan. The economy expanded at a relatively brisk pace in the first quarter. Though it’s purportedly not the goal, the yen has fallen 20 percent against the dollar. The Nikkei’s broad stock indices are up sharply, even after last Thursday’s 7 percent dive. Retail sales data due this week could get a lift from a modest wealth effect. Read More
By Sam Chandan 5/21/13 6:00am
The CMBS market is on the rebound, and for retail property investors that means a substantial improvement in access to financing.
As of early May, nearly 40 percent of this year’s conduit loans were backed by retail properties, ranging in size from less than $1 million to $600 million at the extreme. Terms on those Read More
By Sam Chandan 5/17/13 9:00am
The inflation hawks were sent packing again last month when reports showed prices falling. The latest Economist poll of forecasters pegs inflation below 2 percent until at least 2015. That’s not far removed from the local view. As part of its expectation-setting exercise, the Fed sees its preferred measure—the personal consumption expenditures price index—holding below 2 percent now and over the long run. Read More
By Sam Chandan 5/14/13 9:56am
Construction lending has registered a marked improvement over the last six months, in top-rung metro areas and increasingly in secondary markets as well. During the financial crisis and for most of the period that has followed, development financing has been reserved for the most rarefied opportunities. With the exception of the apartment sector, the search for new projects has generally brought us back to New York and the other cardinal metros. Eager developers chancing upon opportunities elsewhere have found themselves hamstrung by hesitancy among potential anchors, reluctant banks and skeptical regulators. That is changing. Read More
By Sam Chandan 5/08 10:00am
The Senate has taken up the Marketplace Fairness Act, which would upend the overlong tax holiday for Internet commerce.
It’s not that online purchases have been tax-free. Unless you are in one of the few jurisdictions with no sales tax, your opportunity for a good-citizenship declaration of online purchases comes every April 15. Predictably, only a tiny share of American taxpayers seizes the chance. Read More
By Sam Chandan 4/24/13 10:00am
The events in Boston last week offered a harrowing reminder of our mortal condition. However durable, our peace is fragile. We can guard against acts of inhumanity, but we can never escape their possibility. We can agree that we are unbowed, but we are still changed. Read More
By Sam Chandan 4/17/13 10:00am
Ask someone if there’s a problem with American infrastructure and there’s a good chance he’ll point at the nearest bridge.
It needn’t be a grand structure. As a generation of Wharton alumni will confirm, crossing the Schuylkill by way of the modest South Street overpass was a risky proposition until just a few years ago. In its dying days, the bridge was closed to heavy vehicles but open to daredevil and presumably light-footed Penn students. The long-deferred move to replace the 1923 bascule bridge began in 2008, which happened to coincide with city engineers’ declaration it would not survive another winter. Read More
By Sam Chandan 4/11/13 10:00am
It’s been clear since long before the Great Recession that something is amiss in the labor market. Unbeknownst to the most recent crop of college graduates, this is not our first “jobless recovery.” That term was introduced to the popular lexicon in the early 1990s. It was revived in 2003; more than a year into that recovery, the turnaround in employment had never been weaker. In retrospect, those were halcyon days when compared with our current run.
What’s gone wrong? Read More
By Sam Chandan 4/04/13 10:00am
There are good reasons to envisage a refresh of Midtown Manhattan’s office inventory.
A prolonged lull in construction has left us with an abundance of heirlooms but few modish buildings. As a global center of finance, Midtown East’s built environment compares especially poorly with its peer markets. Average rents are much higher in London, but the premium over Midtown is less pronounced when comparing our small basket of best apples with theirs. Rezoning with an eye to new construction has its winners and losers. As new properties come online over the next decade, incumbents saddled with older buildings may find their highest and best use takes them outside the office sector altogether. Read More
By Sam Chandan 3/27/13 9:00am
Is the office obsolete?
The argument has been going on since before the Internet, when its antecedents were limited to connecting university research labs to the Department of Defense. The adoption of new technologies may afford smaller server rooms and fewer filing cabinets, but the location of people dominates everything else when it comes to office space utilization. At least on the margins, the data show we are using less office space for every employee. We cannot assume that reflects the impact of technology, but it’s not an unreasonable hypothesis. Read More
By Sam Chandan 3/21/13 10:00am
A run on the banking system is one of the surest paths to a credit crisis. The mechanics are simple: worried that their banks might fail or otherwise endanger their savings, consumers shift to their mattresses as preferred storehouses for cash. The expectation fulfills itself. In a fractional-reserve banking system, mass withdrawals drive institutions to insolvency. A failure of one bank raises the possibility that others could also fail. And so the process cascades. Read More