Real Estate Forum - January 2012

“In the old
days, every-
one could
find a
reasonably
priced
package. You really had to
be a problem child to go
to the hard-money
lenders.”

DAN GORCZYCKI

Savills

Borrowers will find the greatest shortfall in the 5% to 6% money range even with the CMBS market in active mode, says Jimmy Board, Houston-based senior vice president with Jones Lang LaSalle’s Capital Markets team. “There’s a 150-basis-point delta of missing money that used to solidify the secondary markets,” he says.

It’s those secondary markets—that is,
any market outside of the traditional gate-
way cities of New York, Boston, Chicago,
San Francisco, Los Angeles and Washington,
DC—where a shortage of funding will be
most apparent. That trend had started to
reverse at the beginning of 2011, with lend-
ers becoming more open to second-tier
markets. The sovereign debt issue, though,
has had a chilling effect. Right now, Dykstra
says conduits are lending in these markets,
but he’s hardly counting on them being
there at any given point through the year.

Haves and Have Nots

This will be yet another year of ‘haves’ and ‘have nots’ in the real estate community— only the distinction will be even more stark, Gorczycki says, especially if the conduits shut down again. “A minority of companies would get funding from a life insurer or a bank like Wells Fargo at a 5% to 5.5% interest rate. Others will have to deal with the specialty lenders, which now want Libor plus 650, or equity and mezzanine players, with an interest rate in the mid-teens. Maybe a bank could provide 5% money, but it will be with recourse.”

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