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/847000
CCIM.COM July | August 2017 37 CIRE : What are the challenges facing borrowers seeking commercial real estate fi nancing in your market? Braman: We see the biggest challenge as the wave of debt coming due out of the wall of maturi- ties. According to multiple sources, including the Federal Reserve, as much as $430 billion in loans were originated in 2006 and 2007 at a time when underwriting was fairly aggressive. Today many of these loans are coming due, and the CMBS market is not originating to the same levels. As a result, gap fi nancing is needed to take on the nexus between the outstanding loan amount and the capital available. We are addressing this gap with both preferred equity and mezzanine debt to reach 80 to 85 percent of current value. Matz: Many properties are overleveraged as a result of 80 percent, interest-only CMBS fi nancing loans, which were originated in 2007. Due to little equity growth since origination, these loans are dif- fi cult to refi nance without an equity infusion from the borrower. There is an abundance of overlever- aged loan requests, which do not have a clear path to stabilization. This, in turn, creates demand for high-yield bridge fi nancing. Olson: Most of the concern is focused on the gov- ernment changes and the Trump administration. Discussion revolves around GSE reform and HUD cuts, but there is no consensus as to what the changes would look like. With an impending, albeit slow, tax reform, we are seeing tax credit investors price their equity for affordable housing developments. These projects qualify for low-income housing tax credits up to 10 to 15 cents less than during 2016. As a result, some investors are pulling out of some markets altogether. Many investors are staying on the sidelines to fi gure out how the markets will react during the second quarter and even the third quarter of President Donald Trump's fi rst year. Davis: Equity is still a hot button. With new high-volatility commercial real estate rules, it's important that hard equity is put into a project, especially if it involves ground up construction. I would add the retail market as a lending challenge because of increased store closings. CIRE : How has your CCIM education and designation helped you as a lender? Braman: As a CCIM, I am always using all three of the basic tenets of the organization. I use technol- ogy every day to enhance my product offerings and delivery to commercial real estate clients. I use the education to assist in the proper review and analysis of solid real estate opportunities. I rely on network- ing to reach out to my CCIM connections to pro- vide supporting insight on local markets, as well as to recruit job candidates to work at our company. Davis: My CCIM education and networking has resulted in my ability to provide customers with swift, effi cient responses to their loan requests. It also demonstrates my credibility to the brokerage community and improves my opportunities to gain referrals. Olson: Participating in CCIM events has given me the opportunity to meet many multifam- ily developers and investors. I hope to help them achieve their fi nancing goals in 2017 and beyond. Matz: The CCIM designation has connected me with many mortgage brokers and other market industry participants. The expansive CCIM educa- tion curriculum has helped diversify my skill set as a real estate fi nance professional and helped broaden my knowledge and expertise within the industry. Samuel S. Moon is media relations manager at CCIM Institute. Total commercial/ multifamily debt Multifamily debt $2.96 trillion $1.14 trillion Commercial banks A gency and GSE portfolios and mortgage-backed securities CMBS, CDO, and other asset-backed securities Life insurance companies $1.2 trillion $420 billion $521 billion $459 billion Source: Mortgage Bankers Association 2016 Loans, 4Q16 Commercial/Multifamily Debt by Investor Group, 4Q16 Source: Mortgage Bankers Association