By Michelle Napoli
Newport Beach, CA—Mortgage brokers are not seeing signs of a thaw in the frozen credit markets, in general or for single-tenant properties specifically. In fact, they say the markets are tightening further. “It’s going the other way--it’s freezing more,” says Bruce Krall, managing director in the Newport Beach, CA office of Cohen Financial. “It’s arctic.”
“It’s tight right now,” agrees David Akeman, Oklahoma City, OK-based director of Stan Johnson Co.’s capital markets team.
With the CMBS market still dead in the water, local and regional banks and life companies are the only lenders still lending. Though banks were still doing some deals in November, most life companies were finished for the year, mortgage brokers report. “They are out of money now so they’re a non-factor. But they will come back,” Krall says.
What’s more, many life companies have yet to come out with their 2009 real estate lending allocations. They're essentially saying, "'we’re not exactly sure yet what we’re putting out’,” Akeman tells NET LEASE forum. “I think there are a number--50%, 70%--that will probably come back into the market in some form.”
However, Akeman says some of the life companies could likely have reduced allocations for real estate lending. Krall agrees life company allocations could be lower, given the decline in the value of life companies’ other assets.
There are, of course, some deals getting done, even if they are few and far between. Christian Marabella of Carlsbad, CA-based Marabella Commercial Finance recently arranged a $3.6-million loan for a Walgreens drugstore in Colorado. The 10-year loan represented just 36% LTV (though that was dictated by the borrower’s 1031 exchange requirements, not the lender’s terms) and the borrower took on full recourse in exchange for a better rate.
The deal, funded by a national bank, was relatively easy because the low leverage, investment grade tenant and a geographic location that suited the lender’s parameters made it “a sweetheart deal,” Marabella says. For lesser credits, franchise deals or other relatively unfavorable transactions, though, getting financing today is “real hard,” he adds.
