Stop the Bitchin': Positive Outlook for Commercial Real Estate Investors

Share Article

In its most recent podcast "Stop the Bitchin'," the firm encourages real estate borrowers to stop longing for the halcyon days of 2007 and the era of free money. Instead, the time has come to explore opportunities that will enable them to execute new projects with accessible and affordable financing.

News Image
With a shorter-term loan, you'll have the money you need to survive the current turmoil in the credit market

In an effort to provide developers and investors with the information they need to transact business efficiently and profitably, Richmond-based John B. Levy & Company is producing a series of podcasts on trends and issues that affect the commercial real estate market. These podcasts, available at http://www.jblevyco.com, address issues such as strategies for improving liquidity in a tight market and the impact of slowing loan originations on the commercial real estate industry.

In its most recent podcast "Stop the Bitchin'," the firm encourages real estate borrowers to stop longing for the halcyon days of 2007 and the era of free money. Instead, the time has come to explore opportunities that will enable them to execute new projects with accessible and affordable financing.

"When will the 2007 market return? No time soon," says John Levy, founder of John B. Levy & Company. "We look back on 2007 as an aberration, not the norm. But rather than hold a funeral for the passing of the glory days," Levy continues, "it's time to stop the bitchin' and take a look at what works. It's a case of glass half-empty or half-full, and we see it as half-full."

Clearly, 2008 is off to a rugged start. And when comparing this year with 2006 and even 2005, volume is anemic by nearly every standard: new originations, sales, and CMBS production. Yet it is interesting to note that in the first four months of 2008, the market is at the same level it was in 2004, and that turned out to be a solid year.

To execute deals in this challenging environment, Levy first recommends that borrowers focus on interest rates rather than spreads. "While spreads are high, interest rates are what you pay," Levy says, "and money today costs in the 6 percent to 6.5 percent range. By historical standards, that's just cheap."

Levy also recommends that borrowers choose a 3- to 5-year loan if they are worried about lacking leverage and locking in a rate for the long term. "With a shorter-term loan, you'll have the money you need to survive the current turmoil in the credit market," Levy says. "And if you decide to prepay, the prepayment will be modest."

Finally, Levy states, there is an abundance of mezzanine debt, preferred equity, and joint ventures. These resources can provide borrowers with just the leverage they need.

"Looking ahead, I wouldn't encourage anyone to wait for lower rates," Levy says, "because today's rates are cheaper than they will be in the near or intermediate term. The glass is definitely half-full, and now is a good time to act."

Firm Background
John B. Levy & Company, Inc. is a real estate investment-banking firm headquartered in Richmond, Virginia. Since John Levy founded the company in 1995, the firm has structured over $3.5 billion in financing for developers and owners of commercial and multi-family projects nationwide, often investing its own proprietary funds into transactions with its clients. Mr. Levy is an expert on commercial real estate financing and the effects of interest rates on commercial real estate markets. He is the originator and author of the Barron's/John B. Levy & Company National Mortgage Survey, a monthly survey of more than 30 of the country's largest institutional investors, as well as buyers and sellers of commercial mortgage-backed securities, which Barron's published for over 23 years. Mr. Levy is also co-creator of The Giliberto-Levy Commercial Mortgage Performance Index (sm), the first and pre-eminent index to measure and analyze the performance of investments in the commercial mortgage industry. Additionally, he is a member of the Board of Directors of Anthracite Capital Inc. (NYSE: AHR), a New York Stock Exchange REIT managed by BlackRock, Inc and a former director of Value Property Trust.

For more information about John B. Levy & Company, please visit the firm's website at http://www.jblevyco.com or call Andrew Little at 804-644-2000, extension 260.

###

Share article on social media or email:

View article via:

Pdf Print

Contact Author

Julia Grant
Visit website