Real Estate Information Header

Commercial Real Estate Industry - Is the Condo Craze Over, or Just Gaining Steam


Over the last two years there has been so much condo activity that many commercial real estate lenders are starting to express concern over the future stability of condo markets. Some lenders have recently found themselves over allocated in condominiums as a result of the recent activity and have therefore become wary of all but the best opportunities.

While the best opportunities (typically in Florida, Southern California and select destination markets) are still attractive, developers in smaller markets are finding condos much more difficult to finance in recent months.

The reality is that many of the lenders expressing concern over the current state of affairs in the condo market are the lenders that have been the least active and have less knowledge about the asset class. Lenders familiar with the condo market are not as concerned about the opinions of their peers, but rather with the fundamentals of the projects and sponsors they underwrite.

Projects that demonstrate that they underwrite according to the following guidelines should be able to find financing even with the caution currently being expressed by some in the lending community:

  • Sponsor Suitability: Sponsors that have a successful trackrecord of developing other condo projects will be looked upon more favorably than those who are building their first project. Having net worth and liquidity in reasonable proportion to the project size always helps as well.
  • Capital Structure: Projects that have a sufficient sponsor equity contribution will receive more interest than those projects looking to move aggressively up the leverage curve.
  • Entitlements: Projects that are fully entitled and permit ready will attract more interest than early stage projects.
  • Market Feasability: How many units are you building vs. how many competitive units are currently available for sale. How many competitive units are coming online during the time period that your project is being built and how many units does the market absorp each year? What are your per square foot sales prices, how do they compare to the market, and is your location, construction quality and ammenity package in line with that of comparably priced projects?
  • Marketing: Who is going to sell your units and do they have a strong track record of selling condos within the market you are building in?
  • Presales: What type of presales have you been able to generate? The higher the percentage of presales, the more are lender interest you will attract.

    The bottom line is that good projects from good sponsors will always receive interest from the capital markets.

    Mike Myatt is Executive Managing Director of Pacific Security Capital, a leading commercial real estate investment banking firm providing commercial real estate loans, structured finance, investment sales and advisory services. Contact Pacific Security Capital at 1-800-844-6085 or by visiting the company website at http://www.PacificSecurityCapital.com


    MORE RESOURCES:

    BBC News

    CEO of embattled Hypo Real Estate to step down
    BusinessWeek - 5 hours ago
    The embattled German lender Hypo Real Estate AG announced Tuesday that its chief executive, Georg Funke, was stepping down, following intense pressure from ...
    Video: Wall St.'s worst week in 7 years ReutersVideo
    Hypo Real Estate Chief Quits, Succeeded by Wieandt (Update1) Bloomberg
    UPDATE 1-Hypo Real Estate names Wieandt as new CEO Reuters
    Monsters and Critics.com - Bloomberg
    all 1,273 news articles


    ING Clarion Global Real Estate Income Fund and ING Clarion Real ...
    MarketWatch - 6 hours ago
    ... costs than the current default rates being paid on the ARPS," said Ritson Ferguson, Chief Investment Officer of ING Clarion Real Estate Securities. ...


    Inland Real Estate Corporation Announces Date of Third Quarter ...
    MarketWatch - 6 hours ago
    Inland Real Estate Corporation is a self-administered and self-managed publicly traded real estate investment trust that owns interests in 146 neighborhood, ...
    NorthStar Realty Finance Announces Third Quarter Earnings ... FOXBusiness
    all 31 news articles


    Washington Post

    LRG Capital Real Estate Partners I Fund Purchases California ...
    MarketWatch - 10 hours ago
    LARKSPUR, CA, Oct 07, 2008 (MARKET WIRE via COMTEX) -- LRG Capital Real Estate Ventures, a subsidiary of LRG Capital Group, is pleased to announce that the ...
    Value Added: Federal Capital's $230 Million Fund Washington Post
    LRG Capital Real Estate Partners I Fund Purchases California ... PR-USA.net (press release)
    all 9 news articles


    Reuters

    CEO of embattled Hypo Real Estate to step down
    International Herald Tribune, France - 15 hours ago
    AP BERLIN: Embattled German lender Hypo Real Estate AG says its chief executive George Funke is stepping down. The announcement Tuesday by the Munich-based ...
    Hypo Real Estate chief resigns Monsters and Critics.com
    German officials in talks to save Hypo Real Estate MarketWatch
    Solution found for Hypo Real Estate - BaFin chief Reuters
    Bloomberg - Forbes
    all 327 news articles


    Seligman LaSalle International Real Estate Fund, Inc. Adjourns ...
    MarketWatch - 10 hours ago
    Investments in real estate securities may be subject to specific risks, such as risks to general and local economic conditions, and risks related to ...


    US Stocks Drop, Led by Banks, Real-Estate Investment Trusts
    Bloomberg - 8 hours ago
    Banks and real-estate companies then led the market lower as the S&P 500 Financials Index slumped below its lowest closing level since 1997 even after Fed ...
    US Stocks Drop; S&P 500, Dow Post Worst Retreats Since 1937 Bloomberg
    US Stocks Decline, Dow Industrial Average Falls Below 10000 Bloomberg
    US Stocks Decline, Dow Industrial Average Falls Below 10000 Bloomberg
    all 46 news articles


    Mercury Multimedia Wins Platinum PR Award for Real Estate TV Show
    MarketWatch - 10 hours ago
    At one point in the fall, Virtually Open House scored a 6.0 Nielson rating, an unprecedented high for a local real estate television program. ...


    New York Times

    International Real Estate For Sale in ... Belize
    New York Times, United States - 3 hours ago
    Belize’s real estate market has exploded over the past five years. On average, prices have risen about 55 percent during that time, according to Macarena ...


    Boston Globe

    Real Estate Examiner
    Examiner.com - 6 hours ago
    Michele Lerner has been gathering expertise about real estate for the past two decades, writing for regional, national and international publications for ...
    Bank of America announces rescue plan for Countrywide borrowers San Jose Mercury News
    The Great Bank Bailout Boomers-Bank
    Mortgage relief by Countrywide is a small step in solving national ... Medill Reports
    Sacramento Bee - San Francisco Chronicle
    all 1,418 news articles

    Real-Estate - Google News

  • General Real Estate Information HomeHome ContactContact
    Real Estate Information © 2006