Commercial Investment Real Estate is the magazine of the CCIM Institute, the leading provider of commercial real estate education. CIRE covers market trends, current developments, and business strategies within the commercial real estate field.
Issue link: http://cire.epubxp.com/i/143044
Midyear Financing 2013 Report Lenders strive to minimize risk and maximize yield. W an abundanc With an abundance of available capital, the frst half of 2013 abundanc u availab vailab s sh wed ple ty he thy com showed plenty of healthy competition to fnance commercial e l r re l estate. Will this trend continue? real estate Will th trend c tate i rend nd Unles Unless rising interest rates create signifcant market ture rest Unless ng intere rat interest a mo l projections from the Mortgage Bankers Association moil, p ons ons from the h moil, pr are opti opti i f reca in casti are optimistic, forecastin commercial mortgage originaforecasting t ons gr tions gr n y 11 perce p rce tions growing by 11 percent in 2013, to $254 billion by year's end. nd urren urrent lenders' plans for the rest of the year rent end. A look at current le flls in the details. by Elizabeth Braman, CCIM 34 July | August | 2013 Commercial Investment Real Estate Monty Rakusen/Glow Images Market Players Today's market reveals a new landscape, replete with opportunistic borrowers, new government regulations, and a strong lender emphasis on limiting risk and maximizing yield. CMBS. Last year saw a 48 percent increase in commercial mortgage-backed securities issuances from 2011, with 2013 expected to rise another 40 to 50 percent to $55 billion. While market watchers predict as much as $90 billion this year, recent market volatility has led some to drop their estimates by as much as $15 billion. CMBS origination already hit $19 billion in frst quarter 2013, about four times the volume of last year's frst quarter. Ten-year terms ofered at 70 to 75 percent loan to value are priced out today from 4.3 to 5.0 percent. Today's CMBS lenders are concentrating on a project's debt yield when making funding decisions. Debt yield is the net operating income divided by the proposed loan amount. To lenders, this fgure represents their cash-on-cash return on money lent if the commercial property is foreclosed immediately afer funding. A target 9 to 10 percent debt yield is currently standard, but these numbers are dropping in the face of ferce competition. Top CMBS players include Deutsche Bank, J.P. Morgan, Wells Fargo, Goldman Sachs, UBS, and Bank of America.