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Trends in the Various Lending Classes within Real Estate

In terms of safety and risk, what trends can be seen in the different lending classes? How are we comparing today with the relatively profligate times that we saw in 2006 and 2007? Tom Fink stated that he thinks credit standards have loosened over the last two to three years. As more money becomes available, one of the ways to be competitive is to give the borrower better terms and conditions. In a low interest rate environment like this, projects continue to be performed fairly well once underwritten.

Overall, Mr. Fink thinks across the board people are being cautious. In terms of the different property sectors, office is still suggesting a certain amount of challenge as companies continue to restructure. Retail still has to address the challenge of the internet and amazon. Large malls, particularly in mid-tier markets, are experiencing a lot of stress. In the hotel sector, he thinks the market is coming back very strong.

The bottom line is construction is taking place and there’s more competition for tenants; but, the fact of the matter is the balance of supply and demand. Landlords are still getting decent rents.


Transcript

Aaron Kaiser: Hello, I'm Aaron Kaiser, partner at EisnerAmper and Co-chair of our firm's Real Estate Practice. It's my pleasure today to introduce Tom Fink, Senior Vice President and Managing Director of Trepp LLC. Trepp was founded in 1979 and is the leading provider of information analytics and technology to the commercial mortgage backed securities, commercial real estate and banking markets. Welcome. Tom, in terms of safety and risk, what are we seeing amongst the different blending classes in terms of loan to value by type of property and the debt service coverage ratios as requirements of the lenders today. How do we see that trending and how are we comparing today would be a relatively profligate times that we saw in 2006-2007.
Tom Fink: I think it's safe to say, Aaron, the credit standards have loosened over the last two, three years and as more money, becomes available and is competing for debt.


Aaron Kaiser is an Audit Partner and member of the Professional Practice Group and a leader in the Real Estate accounting services group.

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International Question

After discussing New York, Tom Fink discusses markets around the world from an equity perspective and how there's an awful lot of money is still available for pursuing equity investments in real estates around the globe in terms of debt.


Domestic Findings

The New York real estate market is doing relatively well. How is New York doing compared to the country as a whole? Tom Fink illustrates by showing the nation sectioned into regions and shows the delinquency rate in each region.


Emerging Technology

When asked about the important emerging technologies in the marketplace, Tom Fink replies, “I think we still have a long way to go before technology is really a factor in the commercial real estate market space. But, I think it’s still an exciting time”.


Future Trends in the Real Estate Market

Tom Fink discusses the estimated upcoming commercial real estate debt maturities with annual maturities by lender type. The last 3 years have shown a continued erosion of the amount that’s due in 2016 and 2017 as people pre-pay loans.


Current State of the Market

The real estate industry has made a strong rebound since 2009 – it’s healthy, back on its feet and active. Rates continue to be at a historic low and there is still a huge amount of stimulus outstanding.