B — November 8 - 21, 2013 — Financial Digest — Mid Atlantic Real Estate Journal


L ender ’ s D irectory By Mark Scott, founder and president, Commercial Mortgage Capital Looser lending standards arise (But not necessarily for the best)


hile many larger and regional banks were aggressive

string of lower quality financ- ing deals getting 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 sma l l er banks were less competitive on rates and have subsequently

lowered their lending stan- dards. This has allowed for poorly designed (and located) buildings to crop up – par-

unfathomable – especially in a suburban location – is that banks would finance these assets. This part of the mar-

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 commercial real estate mar- ket. It also indicates that now is the time to start shopping 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 com- panies is the lower stress environment they provide. There’s simply a greater certainty of execution when dealing with a life company. It’s also worth noting that while the Government Spon- sored Entities (GSEs) pur- portedly provide the most dollars, once they tack on a variety of underwriting items to the transaction, the 80% they were offering 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 customers more choices and to protect themselves against the uncertainty surrounding the GSEs’ lending require- ments. 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 the market continuing to experience fluctuations, a seasoned mortgage broker can provide the best possible loan alternatives available. Mark Scott is the founder and president of Commer- cial Mortgage Capital . n

i n t he be - g i nn i ng o f 2013, push- i ng money out the door, there were also a hand- ful of smaller banks that were slower

“Using a strong broker is key to navigating the current lending environment, which also includes a genuine re- surgence in life insurance lenders and CMBS volume.”

ticularly in suburban areas. In fact, we’ve noticed apart- ment buildings with center hallways – reminiscent of the 1960s and 70s – which in this marketplace are un- heard of. What’s even more

ket cycle - in my 25 years of being a commercial mortgage banker - typically portends a near-term financing market top. While there has certainly been an uptick in financing

Mark Scott

to allocate dollars and have now lowered their standards when it comes to building class and location. This has ultimately resulted in a

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