Mid Atlantic Real Estate Journal — Spring Preview — April 26 - May 9, 2013 — C
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C ommercial M ortgages By Brenner Green, Real Property Capital, Inc. The current commercial mortgage market
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s many of us recently focused on our taxes last week, I can’t help
do with the ballooning bank reserves. So if you believe that the Fed will continue to pull le- vers to keep rates low through 2014 it would appear to make a lot of sense to get your deals done sooner than later. The notion that investors are paying attention to the Fed’s signals portends well for the amount of transaction vol- ume that should be expected over the next 24 months. What happens after that is obviously anyone’s guess, but the risk is fairly significant
for those who are left out after rates rise. I am going to choose not to worry about that right now as I am always reminding myself not to over- think things, especially when times are good. *** Last week I attended the Interface Student Housing Conference in Austin, TX. Student Housing has clearly been anointed and institu- tional investment class of commercial real estate and is an industry on top. Three years ago I attended the
same conference in NewYork and number of attendees has grown three fold since, but the big surprise wasn’t the number of new players but the number of large institu- tional firms descending on the sector. Some of the largest com- mercial real estate compa- nies in this publication’s trade area, such as SL Green and Prudential, are jumping into the space with both feet. Despite this proliferation of capital, great opportunity remains inmany college mar-
kets nationally. So let the good times roll for as long as they last, but don’t lose sight of the great opportunities that are out there today, because we all remember (don’t we?) that it is not going to last forever. R. Brenner Green is a 15 year veteran in commer- cial real estate finance and president of Real Property Capital, Inc., a full service commercial mortgage banking firm based in the Philadelphia suburbs. n
b u t t a k e pause and reflect that the higher capital gains rate and the 3.8% surtax don’t appear to have any no t i c eab l e
R. Brenner Green
effect on the investment sales business as many had pre- dicted. Transactional volume continues to rebound across the board for commercial real estate sales of all prop- erty types with multifamily leading the way. Two years ago most mortgage bankers’ pipelines were likely 95% (or more) refinance assignments. These days it’s more like 70- 75% as buyers and sellers continue to more frequently find a common ground. On the refinance side, the availability of capital is allow- ing many deals to work again where the numbers hadn’t previously been “financeable” for a period of years. This is very good for our industry. Further, the ability to lock in a record low interest rate for ten years, or more in some cases, is allowing borrowers to increase their debt service coverage through refinance which not only insulates them from future demand side fundamentals (an im- portant consideration with multifamily starts at their highest level since 2006) but also creates available capital to make further investments. The capital fueled through Fed policy is a new form of “trickle-down economics” that appears to be having the desired effect. According to an article published on Bloomberg. com last week, excess bank reserves parked with the Fed grew from $1.7 billion about five years ago to $1.7 trillion today with the potential to reach $2.4 trillion by the end of 2014 assuming the Fed keeps the federal funds rate at its target of 0-.25% through the same period. The fact that some level of in- terest is being paid on these deposits, a policy that began as an additional tool utilized during the financial crisis, certainly has something to
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FOR MORE INFORMATION: R. Brenner Green, President 75 East Butler Avenue • Ambler, PA 19002 610-456-9644 • bgreen@realpropertycapital.com www.realpropertycapital.com
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