8A — February 12 - 25, 2016 — Financial Digest — M id A tlantic

Real Estate Journal


F inancial D igest

By Brenner Green, Real Property Capital, Inc. The current commercial mortgage market


ast week the annual Mortgage Banker’s Association conference

the conference is always a good barometer of the capital markets and this year was

bank and non-bank, disrup- tion in virtually all sectors of financial markets and

the OCC issued a joint state- ment that included a “forceful warning” to banks on “loosen- ing underwriting standards” on commercial real estate and stated that they will “pay special attention” to commercial real estate loans issued by banks in 2016. All of this collective good news has caused mortgage spreads (the premium over treasury bonds that lenders charge to make a loan) to balloon to levels not seen since the real estate recovery began in 2010-2011. Some lenders have decided not to quote loans until fur-

ther notice and a few have formally exited the market. Meanwhile, many borrow- ers seem to think that it is 2006 and that capital is ev- erywhere. Currently, anyone who sees that as the case is staring at a mirage that is about to disappear. This per- ception may be a result of the fact that things were in fact getting pretty loose over the last twelve to eighteenmonths, but whatever the reason there is a disconnect between cur- rent expectations and reality. I predict that by Memorial Day we will see the effects of this divide start to play out in the market. Developers and buyers are going to find out that they cannot get the kind of financing that they thought they could, and the market as a whole is going to be affected. Look for non-banks and life insurance companies to take a bigger role in 2016, while CMBS and bank lenders to write substantially fewer loans than in 2015. Non-bank CMBS lenders are going to be hamstrung by the lines of credit that they rely on to pool loans for sale and the sentiment of the lenders that provide those lines. Look for more CMBS lenders to close their doors this year based on this and their lack of ability (balance sheet) to deal with the regulation requiring them to hold the bottom 5% of each securitization that they issue. To be clear, this is not a pre- diction of “gloom and doom” but rather a statement that there is going to be a realign- ment in the CRE lending landscape this year. This type of shift is inevitably going to lead to many promises made that cannot be delivered on by lenders and brokers. Often times, when a borrower does not like what he hears from a trusted source, he or she will talk to more sources until receiving the answer desired. It is a good time to beware of things that sound too good to be true and to seek good ad- vice from someone you trust to guide you through what is sure to be a turbulent year. R. Brenner Green is a 15 year veteran in com- mercial real estate finance and President of Real Property Capital, Inc., a full service commercial mortgage banking firm based in the Philadelphia suburbs. n

was held in Orlando, for wha t ma y be the last time (I real- ly enjoy the shorter trip t o Fl o r i da over the long slog to San

“Look for non-banks and life insurance companies to take a bigger role in 2016, while CMBS and bank lenders to write substantially fewer loans than in 2015.”

no exception. But the mood was starkly different than the near euphoric tone of last year. A combination of factors including the long- anticipated implementation of recession-era legislation concerning the regulation of financial institutions, both

ongoing concern about the underlying strength of the world’s largest economies have roiled debt markets and caused lenders to take a more cautious stance. In late December three main U.S. regulatory agencies, the Fed- eral Reserve, the FDIC and

Brenner Green

Diego where the conference is held on the odd numbered years and now for the next five years, but it appears I am in the minority). Anyway,

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Real Property Capital is a Philadelphia based full service commercial mortgage banking firm with a regional focus and national capabilities. Our business model emphasizes client satisfaction through a high-touch, analytical approach that distinguishes us from the competition. Learn more about our distinct approach and proven track record of success at www.realpropertycapital.com. FOR MORE INFORMATION: R. Brenner Green, President 75 East Butler Avenue • Ambler, PA 19002 • 610-456-9644 • bgreen@realpropertycapital.com

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