Real Estate Forum - April 2011

cantly, lenders are more optimistic as they assess the income stream of properties, says Adam Davis, executive vice president and group head of Wells Fargo Real Estate Capital Markets in New York City.

“There hasn’t been a change in mini-
mum requirements or standards,” he
says. “Rather, fundamentals have
improved in markets and lenders feel
more confident that the worst is over.
We’re not making as many negative
adjustments to property-level cash flows
as we did when we were heading into a
declining market. Lenders always adjust
downward with their projections on
cash flow. But at least now they are
more reflective of in-place cash flow
because NOIs have fallen.”
Some lenders are doing 9% or better
on debt yields, reports J. Tyler Blue, exec-
utive vice president at Walker & Dunlop,
in Bethesda, MD, where he is responsible
for the operations of the capital markets
group. It is not atypical to see debt service
coverage ratios at 125, he adds.

And where shortfalls do arise in leverage, equity appears willing to step up, RockBridge’s Benowitz says. “We are seeing more bridge financing, more willingness on the part of investors to slide into

Lenders are
really
underwriting
the sponsors. They have to
like the real estate too, of
course, but the sponsors
are key.”

GARY KAUFMANN

Prudential Real Estate Investors

the preferred-equity role.”
In this environment, adds Blue, “a value-
add scenario like Shorenstein is pushing
in San Francisco has a lot more creditabil-
ity today than it would have had 18 months
ago.”
Then there is the Shorenstein name. In
general, lenders are also more willing to
give a borrower the benefit of the doubt if
the sponsor is top-quality, he relates. “They
have a wonderful reputation and lenders
are going to assume that the business plan
has been thought out.”
None of this is to suggest that lenders
have completely relaxed their guard. The
availability of financing, especially now, is a
zero-sum game, CBRE Investors’ Menifee
says. In other words, there’s capital to lend
only because it hasn’t been dished out
elsewhere. “Lenders are still recycling cap-
ital. They’re not raising new capital to
lend,” he says.

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C DI
Commercial
Developments
International, Inc.

Is pleased to announce CDI’s return to the
Dallas Metroplex with its recent acquisition
of the Bluffview Towers, a 196,356-square-
foot, class A office complex located in the
Preston Center submarket.