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Caldera Newsletter • November 2009

Featured Professional

Bright Spots exist in the
Multifamily Debt Markets

John Bray
Managing Director,
Primary Capital, Atlanta

Lack of transaction volume is the order of the day from both refinancing and acquisition standpoint. The majority of multifamily sales that have taken place thus far in 2009 have been distressed sales by lenders or special servicers. For instance, Atlanta has had only 14 non-distressed investment sales close through October of this year. This compares with over 100 market rate sales for the same period last year totaling $1.5 billion. .....

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REO Property Dispositions:

Bill Shippen
Apartment Realty Advisors, Atlanta

From 2006 through most of 2008, Value-Add was the buzz word that brought investors flocking. Equity and debt were cheap and plentiful and everyone believed that we were on the verge of a huge run up in rents. All an investor had to do was swap out some hardware, add an accent wall and justify his low going in cap rate with an aggressive pro forma. Unfortunately, the rents never materialized and cap rates have rocketed up 40% to 60% in the past 6 months alone ....

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Getting construction loans off banks’ books
Where will the new equity come from?

By Michael Kelly
President of Caldera Asset Management

The construction loan market from 2000 to 2007 was extremely profitable for banks. Loans spreads were strong, opportunities were plentiful, and there was no shortage of buyers for finished properties. The permanent loan markets, including commercial mortgage-backed securities (“CMBS”), government sponsored agencies (“GSE”) and life insurance companies were all aggressive and accommodating for the buyers. Defaults were virtually non-existent. Even poorly executed deals were bailed out by the ever-growing needs of real estate investors.

When the real estate transaction world slowed to a crawl in mid-2008, the pain started for permanent loan holders of CMBS, mezzanine and whole loans as values dropped and holders were forced to take markdowns on their financial statements. The slowdown in transactions and falling values will have an even greater impact on the banks that originated construction loans between 2005 and mid-2008 as these loans were based on ever-increasing rent rolls and even lower cap rate exit assumptions.

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Caldera in the News:

Will New FDIC Rules Help or
Harm Commercial RE?

REITs Hold Competitive
Advantage Over Private Mkt

The Health of
Commercial Real Estate

Capital Markets: Weathering
the Next 18 Months

More Losses on Multi-Family
Home Investments

Multifamily Misery

Diamond District:
More Real Estate Woes