Mid Atlantic Real Estate Journal — August 16 - 29, 2013 — 19A


M ultifamily F inancing

By Mark Scott, Commercial Mortgage Capital Looser lending standards arise (But not necessarily for the best)


hilemany larger and regional banks were aggressive in the

nies is the lower stress envi- ronment they provide. There’s simply a greater certainty of

ing looks more like 70%. Indeed, many agency-fo- cused lenders are now build- ing up their life company networks with the ultimate goal of diversifying their debt sources, both to give custom- ers more choices and to pro- tect themselves against the uncertainty surrounding the GSEs’ lending requirements. In general, CMBS has be- come very aggressive and active - particularly in office, retail and industrial transac- tions below the $100 million mark. While life companies

are snapping up A-quality assets, CMBS lenders tend to acquire properties that are B-level and below. They are also being more conservative and operating off of existing cash flows and avoiding pro- forma. With themarket continuing to experience fluctuations, a seasoned mortgage broker can provide the best possible loan alternatives available. Mark Scott is president of Commercial Mortgage Capital. n

commercial real estate mar- ket. It also indicates that now is the time to start shopping

beginning of 2013, push- ing money out the door, there were also a hand- ful of smaller banks that were slower to allocate

With the market continuing to experience fluctuations, a seasonedmortgage broker can provide the best possible loan alternatives available.

execution when dealing with a life company. It’s also worth noting that while the Gov- ernment Sponsored Entities (GSEs) purportedly provide the most dollars, once they tack on a variety of under- writing items to the transac- tion, the 80% they were offer-

around for loans once again. However, using a strong bro- ker is key to navigating the current lending environment, which also includes a genuine resurgence in life insurance lenders and CMBS volume. Part of what is bolstering the popularity of life compa-

Mark Scott

dollars and have now low- ered their standards when it comes to building class and location. This has ultimately resulted in a string of lower quality financing deals get- ting done. There are currently a num- ber of larger lenders that have already hit their mid- year (and almost full year) real estate investment tar- gets, or are near this number, which have cherry picked many of the quality deals in the market, including well-lo- cated, well-sponsored, quality product, such as well-located transit-oriented multifamily properties. However, some smaller banks were less competitive on rates and have subse- quently lowered their lending standards. This has allowed for poorly designed (and lo- cated) buildings to crop up – particularly in suburban areas. In fact, we’ve noticed apartment buildings with center hallways – reminis- cent of the 1960s and 70s – which in this marketplace are unheard of. What’s even more unfathomable – espe- cially in a suburban location – is that banks would finance these assets. This part of the market cycle - in my 25 years of being a commercial mortgage banker - typically portends a near-term financ- ing market top. While there has certainly been up uptick in financing for lesser quality product in less than ideal locations, it would be remiss to assume that these buildings typify what is occurring in the marketplace, as the majority of lenders are currently well- capitalized and investing in the appropriate product channels and geographic regions. In fact, we have seen a pre- dominately liquid and fluid financing market that fa- cilitates and fosters a strong

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