Q&A with June Fish of Ashworth Mortgage Corp.

What are some positives you see in the current commercial real estate financing market? There are several things which we are seeing occurring in the commercial real estate market that are very positive and hopefully are signs ushering in better days ahead. More entrepreneurial real estate investors are beginning to enter the commercial real estate market, giving the market some needed momentum, aside from the purely institutional players who have been the recent dominant force. With more sales beginning to occur, the appraisal market has a greater index of real estate comparables, making appraisal values more realistic than they have been in the past couple of years. Rate indexes continue to remain low and floors are continuing to be realistic. CMBS now more in the market and is so with spreads reduced some 75-100 basis points from the time when they initially entered the market. While CMBS continues to want deals in the $10 million arena, they are able to fill and sell their pools well on the secondary market with this criteria. Loan to Value Ratios have crept to the 70-75% levels, depending upon the lender. Capitalization rates are moving downward. While recently the strongest cap rates seemed to be reserved for stabilized multi-family properties, we now see strong credits, including retail, obtaining lower cap rates, as well as those office and industrial properties with strong and long leases. More headlines recount financings/re-financings for properties other than with the agencies. Debt yields are beginning to lower. Recourse continues to be a part of commercial real estate financing transactions, but with lenders being a bit less demanding due to the perceived increasing leasing and sales market along with the stronger real estate financial markets in general. Life companies continue to be least demanding of recourse, however the Loan to Value ratios in their underwriting remains conservative, but for some property types such as MFH and well-leased, well located industrial which command very favorable rates. Banks continue to remain in the market with internal demands to put out money on strong transactions with strong sponsorship. Send your questions to info@ashworthmortgage.com. June Fish is a commercial real estate broker with Ashworth Mortgage Corp., Newton, Mass.