Retail, Finance

Believe the Hype: Retail Redux

ICSC crowd in Las Vegas.

“Nobody goes there anymore. It’s too crowded.”—Yogi Berra, possibly talking about the cabana parties in Las Vegas at ICSC.

Approximately 36,000 real estate professionals attended the ICSC annual convention in Las Vegas this May. That number is more like 50,000 when you count the people who came simply to attend the private parties held at Read More


Capital Requirements Cast a Shadow Over Latest Construction Boom

Buoyed by record-high prices for core assets, commercial real estate construction is on the rise in markets around the country. Nowhere is the tide of building more visible than in New York City. Across the five boroughs, cocksure developers with ambitious plans are promising to recast entire neighborhoods before the cycle’s end. As they make progress on those commitments, construction costs are rising alongside inventories and overall spending. The New York Building Congress reports that local construction spending increased by 26 percent in 2014 to $36 billion across public and private projects. Read More


$821M in 2005 Loans on Houston Galleria Mall Prepaid

The Galleria in Houston, Texas.

The Galleria, a 2.3 million-square-foot mall that is Houston, Texas’ most visited attraction, has prepaid $821 million in debt at the start of an open prepayment period, Mortgage Observer has exclusively learned.

The CMBS loan that constituted a hefty portion of the debt—$290 million—was conservatively underwritten, with a 47.5 percent loan-to-value ratio and debt service coverage ratio of nearly 2.73, according to data from Trepp.

Indeed, in January, the CMBS data service had warned that “if this loan can’t refinance, the entire CMBS market will be licking its wounds in 2015,” as the “Wall of Maturities,” approached. Read More


Reneging on Retail: Traditional Shopping Centers’ Future Looks Bleak

Last year, Mortgage Observer and others reported that lenders and investors had turned their eye to a new belle of the ball: retail. As the multifamily sector became overly competitive, many looked to the next most stable asset class and in their minds retail was that.

But that was before the bankruptcies of major retailers, such as RadioShack, that anchor a certain strata of shopping center. Following financial troubles for both J.C. Penney and Sears, malls across the nation have been met with foreboding appraisal reductions. Two major shopping centers— Indian River Mall & Commons, in Vero Beach, Fla., and Village at Main Street Shopping Center, near Portland, Ore.—fell into special servicing this week alone, according to data from Trepp. Read More


What the Wall of Maturities Means


With an anticipated $350 billion in real estate loans set to mature each year for the next three years, the so-called Wall of Maturities has finally arrived.

Panelists at CREFC’s High Yield and Distressed Realty Assets Summit, held this week in New York, were mostly celebratory about the impending flood of maturities, which they say will create opportunities for the right (i.e. smart) lenders.  Read More


The State of Banks in 2015

Sam Chandan

The American banking system enters 2015 on its most stable footing since before the financial crisis. Bank assets have climbed to record highs over the last year and strains from problem loans, restructured debt, and real estate owned have eased substantially. While the outlook for bank profits is mixed, the tally of qualified borrowers continues to grow in tandem with an improving domestic economy and property fundamentals. Geopolitical and economic instability almost everywhere else in the world is a potential threat to financial system’s health in the United States but has shown few signs of spilling over thus far. On the contrary, by reinforcing the perception of an American safe haven, global conditions are fomenting greater risk-taking by domestic investors and lenders. Read More

Mortgage Observer, CMBS

Life Companies Now: Higher Volumes, Lower Standards

Sam Chandan.

The commercial real estate debt landscape has become considerably more crowded of late. The resulting contest to fund deals, along with historically low cost of capital, has contributed to higher real estate prices and taken an inevitable toll on underwriting standards.

The latter trend is most easily observable in the information-rich CMBS market, but is also present in the competitive overlaps between lenders. A range of indicators, from historically low debt yields to falling amortization, shows us the direction of understanding standards even if it does not tell us our exact position in the risk cycle. Read More


Life Companies: What Riskier Lending Could Mean in the Next Cycle


“I’ve seen more people fail because of liquor and leverage … You really don’t need leverage in this world much. If you’re smart, you’re going to make a lot of money without borrowing.” —Warren Buffett

Numerous articles are devoted to the CMBS industry and its effect on the larger real estate landscape. With total CMBS lending at $99 billion in 2014, this capital flow has helped buoy the market and keep cap rates low ever since the dark days of 2009. However, it is the life insurance companies that are the rock that large loan deals are built on. Behemoths like Prudential and MetLife individually lend over $4 billion annually, through good times and bad, going back to the 1980s, before CMBS was even a thought.  Read More


Q&A: Herbert Kolben, Senior Vice President at Ullico

Herbert Kolben

Herbert Kolben, a 30-year industry veteran, helms real estate investment and lending for Ullico, a Washington, D.C.-based pension and life insurance company. He recently told Mortgage Observer about the provisions borrowers are demanding today, lending on projects that create union jobs and what kind of due diligence is involved in building an animal terminal at JFK airport. Read More

Mortgage Observer, CMBS

Northern Exposure: A Look at Canadian CMBS


There are a lot of differences between Americans and our gentle neighbors to the north. We’ve chosen different parliamentary systems. We feel differently about gravy on fries. And one of us (hint: not the U.S.) was recognized for having the most stable banking system in the world following the 2008 financial crisis. This was likely for a reason—a totally different ethos surrounds lending for real estate in Canada.

Few things make it more clear how differently the lending communities in the two countries behave than a panel on the Canadian CMBS business at the recent Commercial Real Estate Finance Council conference in Miami Beach did. Read More

Refinance, CMBS

Hotel Giraffe Refinanced With CCRE

Hotel Giraffe

Boutique lodge The Hotel Giraffe refinanced with a $39 million CMBS loan from CCRE negotiated by HKS Capital, Mortgage Observer has learned.

The 39-key hotel is owned by self-described “indie hotelier” Henry Kallan, who has been a client of HKS’ Jerry Swartz’s for more than a decade. Read More

Mortgage Observer, CMBS

Hotel REIT Takes $150M Unsecured Term Loan Facility

Publicly traded REIT RLJ Lodging refinanced outstanding CMBS debt to the tune of $150 million, the firm announced yesterday. The new unsecured term loan facility allows RLJ to resolve any questions about refinancing next year, when interest rates will likely be higher and a slew of loans will be due, potentially stretching lenders’ limits—the anticipated so-called “wall of maturities.” Read More