Real Estate Journal — Financial Digest — December 9 - 22, 2016 — 7A
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M id A tlantic
F inancial D igest
By Brenner Green, Real Property Capital, Inc. The current commercial mortgage market
cently, and I am certain that I am not alone. Last month, it was a client tell- ing me that “65% is the new 75%” re- garding con- W
hat next? At least that’s where my head has been re-
tal availability coming in 2017. And that’s probably true, along with a decreased volume of investment sales transactions due to higher rates equaling pricing pressure. But on the other hand, and where I myself fall, there is a belief that we are slowly returning to some type of “normal.” Recently I attended the Urban Land Institute’s Philadelphia 2017 forecast, which was presented by Mitch Roschelle , of Price- waterhouse-Coopers . As an aside, if you have never had the opportunity to hear Mitch in person I would recommend it, he is both entertaining and
insightful. Among the varying themes that Mitch brought up was the idea of the real estate market “auto-correcting,” which is a concept that I found to be particularly interesting. While I don’t think that society has evolved quite to that point, and I am certain that most of the same mistakes that resulted in the financial crisis are destined to be repeated, I do find an element of truth in the concept. Clearly banks have tightened their purse strings on development lend- ing, and while it would be too easy to say that it is all a
product of the new regulatory environment, there seems to be an element of human com- mon sense involved in this turning of the tide. In other words, perhaps lenders notice when they are on their way to the office that there sure are a lot of cranes in the sky of every downtown in the Northeast, even though when they get to their desks there is a handy stack of market reports to tell them that there is tremendous underserved capacity for ur- ban housing. So, a modest rate increase and a little bit of decreased supply of the availability of
construction financing is, in the author’s opinion, not only not a cause for concern, but a reason to feel confident about the commercial real estate market. A modest cooling has the potential to increase the life of the current cycle that we have all been enjoying for the last several years (that may be my toast for 2017). R. Brenner Green is a 19- year veteran in commercial real estate finance and President of Real Prop- erty Capital, Inc., a full ser- vice commercial mortgage banking firm based in the Philadelphia suburbs. n
Brenner Green
struction financing leverage based on HIS expectations of what the market would bear, then it was the shocking elec- tion result and the immediate 60+ basis point increase in the ten-year treasury that fol- lowed (still rising by the way). Bear in mind this increase involved no action from the Fed (expect their relatively meaningless announcement of an increase to come at the next meeting Dec 14th), and now we head into the new year on the eve of yet another layer of bank regulation taking effect (I am sure you have read about risk retention at this point), while at this very moment there is an administration being formed that is working on repealing major parts of the Dodd-Frank Act if not the entire bill. Either way, the added regulation is not going to increase the availability of capital in the short term. So, one could look at the above data points and say that there are a lot of signs that there are is going to be a meaningful tightening of capi- Small businesses benefit from EDA programs TRENTON, NJ —Reaffirm- ing the State’s commitment to supporting small businesses and not-for-profits, the New Jersey Economic Develop- ment Authority (EDA) an- nounced the approval of financ- ing to encourage the growth of several organizations. From a Morris County agency that trains guide dogs, to a designer and printer of advertising in Camden County, and an in- staller of hardwood floors in Monmouth County, entities in a variety of sectors are taking advantage of EDA programs. “Projects presented at to- day’s meeting underscore the diverse nature of the State’s small businesses and the spec- trum of support offered by the State,” EDA chief executive officer Melissa Orsen said. n
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