MARKET INSIGHTS

The U.S. Federal Reserve lowered its benchmark rate by 25 basis points to 2% – 2.5%, signaling the first downward adjustment of interest rates since the 2008 financial crisis. Federal Reserve Chairman Jerome Powell said the move is “not the beginning of a long series of rate cuts” but the Fed kept their options open by saying they will “act as appropriate to sustain the expansion.” While it doesn’t directly impact commercial real estate loans that aren’t Prime based, it does signal that this low-interest rate environment may continue.

David Hamilton is a Principal in PSRS’ San Diego office and joined PSRS in 2013 after attending the University of San Diego for his undergraduate studies, where he received his Bachelor of Finance degree and graduated Cum Laude. Mr. Hamilton began working part-time for PSRS after some real estate courses at USD piqued his interest, and he decided to pursue a career in real estate with PSRS upon graduating.

An interest rate swap is a contract in which two parties are trading a fixed-rate and variable-interest rate. Essentially, this contract converts a variable-rate loan into a fixed-rate loan. Click to read more:

PSRS recently spoke with Jared Schlosser, Loan Officer at Voya Financial, and asked him a few questions about his thoughts on interest rates and the market in the next couple of years. He also spoke about were Voya is currently winning deals. Read below to take a look at some of the other questions that he answered for us:

Seth joined PSRS in 2009 and became a Principal in the Santa Barbara office in June 2017. Seth attended Wake Forest University for his undergraduate studies, where he received a Bachelor of Art in Spanish. Prior to joining PSRS in 2009, Seth worked in the hospitality industry, but his upbringing in Santa Barbara to a real estate conscious family piqued his interest in pursuing a career in commercial real estate.

The return on an investment in U.S. government debt obligation, such as a bill, note or bond is referred as to as the Treasury Yield. Essentially, it can be thought of as the interest rate the government pays to borrow money for various time lengths.

PSRS made their way down to the MBA CREF Convention this past week in San Diego, CA and outlined a few takeaways from the conference:

PSRS recently spoke with Austin Moore, Realty Investment Specialist at Southern Farm Bureau, and asked him a few questions about his thoughts on interest rates and the market in the next couple of years. Read below to take a look at some of the other questions that he answered for us:

Real estate is a relationship business. Trusting your mortgage banker and relying on their advice can provide you with several benefits including access to valuable long-term relationships, the ability to solve complicated problems, and extensive experience with various lenders, loan scenarios, and structures. Below are a few points of consideration for borrowers in the market for a commercial loan:

In the market today, we see that corporate bond rates have been rising even though index rates have been falling, causing spreads to increase. The reason life insurance companies do mortgages is to augment their bond portfolios. Mortgages provide stable cash flows similar to bonds but return better yields due to their lack of liquidity.

Kostas Kavayiotidis joined PSRS in 2006 and currently holds the title of Principal. Mr. Kavayiotidis attended the University of Southern California where he received his Bachelor of Science degree in finance. Prior to joining PSRS in 2006, Kostas worked in the commercial insurance industry in the offices of Marsh & McLennan. During his time with PSRS, he started in loan production, and he was invited to become a partner in 2011. In his spare time, he enjoys golfing and spending time with his three young children and his wife. He is affiliated with the ICSC and the NAIOP.

As a borrower, the decision to execute a loan with either a bank, life insurance company, CMBS, or a debt fund can take some research and time to review the different terms and rates. Read more and we will outline who executes recourse and non-recourse loans:

There are many advantages that a full-service mortgage banking company like PSRS can provide. Below are just a few that you will receive by working with us:

PSRS recently spoke with Mike Morey, Vice President & Managing Director at The Standard, and asked him a few questions about his forecast and thoughts on interest rates in the next few years. Read below to take a look at some of the other questions that he answered for us:

Our PSRS in Los Angeles is currently hiring seasoned producers and junior level analysts. We are looking for individuals with aptitude and drive! We are a strong, privately-owned, regional mortgage banking shop with a $5.6 billion servicing portfolio and a long standing track record in the industry. Forward this email along to anyone who is seeking a position in the industry. We are growing our business!

Michael Davis attended the University of Southern California for his undergraduate studies, where he earned a Bachelor of Science degree in Business Administration with an emphasis in Entrepreneurial Studies. Prior to joining PSRS in 2007, Mr. Davis worked for RE/Max Commercial in apartment brokerage before switching to a residential mortgage banking firm. Throughout his time at PSRS, Mr. Davis has been involved in nearly $1 billion in financing across the country, ranging from single-tenant buildings and small apartments to power centers and multi-property portfolios.

CMBS lenders are known to offer a significant amount of interest only in the current market while life companies, on the other hand, are usually known to provide long, fully-amortizing loans. Many might not be aware that life companies have been offering interest only, particularly in lower leverage situations. The need for interest only on a loan no longer precludes life companies, particularly for lower leverage requests.

Due to most loans not being set up with a fully amortizing schedule, a lump sum payment to an existing lender, called a balloon payment or a bullet, is paid when that loan matures. The following are a number of important details that a borrower should be aware of as their loan matures:

Choosing the right lender for your loan requires the knowledge of an experienced mortgage banker who understands the lending market and can pair your loan with the correct lender. Listed below are four different lender types that we handle that can best fit your loan:

We recently sat down with our Loan Closer, Linda Thai, who has successfully closed over 150 loans since 2016, to discuss the top roadblocks we can encounter when closing a loan. Continue reading below to find the most common ones that Linda encounters:

Say there is a well-located retail property with very high vacancy and below market rents because the property has been mismanaged by owners who don’t get along or don’t have the money to bring in quality tenants. A bridge loan would give a new buyer the funds to acquire, renovate, and re-tenant the property without the same debt coverage constraints of a traditional lender.  Perhaps there is an opportunity to change the use of a property from a low rent/sf industrial facility to a much higher rent/sf self-storage facility.  A bridge lender can provide the borrower with the capital to convert the existing structure to the new use and see the business plan through. These bridge loans are provided by banks, debt funds, private lenders, and more recently, life insurance companies.

Small balance loans are defined as a loan made between $1-10 million. Borrowers typically do not think of life companies as contenders for loans of these sizes, as the perception is that the life companies focus primarily on loans from $5 million and up. Those loan requests then find homes with CMBS lenders, banks, or credit unions, who simply cannot offer some of the value that you will find through life company execution. As it turns out, life companies have a significant appetite for your loan requests from $1 million and up.

We recently sat down with PSRS Loan Officers Kostas Kavayiotidis, Mike Davis, and Trevor Blood to discuss the current state of the construction loan market. The following is a discussion of the comparisons of working with life insurance companies vs banks on construction loans.

We are pleased to present Mutual of Omaha as one of the newest lenders on our PSRS platform! Recently, we sat down with Tim Ulbrich, Investment Officer at Mutual of Omaha, for a quick Q&A on where they are winning deals.

The process by which capital is provided by a mortgage banker is in many ways similar to that of a mortgage broker. However, the primary difference between the two is the mortgage banker’s access to exclusive programs and funds through a correspondent network of lenders.

Michael Tanner joined PSRS in 2003 and currently holds the title of Executive Vice President and Principal. Mr. Tanner attended Brigham Young University for his undergraduate degree where he received his Bachelor of Arts in Economics. During his time with PSRS, Mr. Tanner has worked as an analyst and gone into production on his own, and in 2006, he was awarded Rookie of the Year by Standard Insurance. Mr. Tanner is credited with over more than $1 Billion in loans originated. Below is a Q&A on Mr. Tanner’s recent take on rising interest rates:

Commercial real estate loans funded by life insurance companies are some of the most advantageous you can find for large commercial real estate investments, offering some of the lowest interest rates and best terms against comparable options.

Commercial real estate loans funded by life insurance companies are some of the most advantageous you can find for large commercial real estate investments, offering some of the lowest interest rates and best terms against comparable options.

While being a successful mortgage banker is about experience and the number of deals done, it’s also about the arrows in your quiver, according to PSRS Principal Kostas Kavayiotidis. Access to life insurance money is a distinct advantage in the PSRS quiver.

Negative headlines and store closures have scared some lenders away from the retail sector. Are the headlines a true reflection of opportunity in retail? PSRS believes there is still opportunity having completed $235,000,000 in loans on retail properties so far in 2017. However it’s important to work with a knowledgeable partner

Sometimes, our clients require financing that may be better suited for lenders outside of life companies. When this situation arises we will often turn to the Commercial Mortgage Backed Securities (CMBS) market to see what is available for our clients.

While self storage facilities may not have the sex appeal of other retail or office properties, they are still a solid investment representing more than 50,000 facilities in the US. These non-descript warehouses that hold the belongings that don’t fit anywhere else are worthwhile investment consideration.

PSRS closed an $11‐million‐dollar loan for Oak Hills Medical Plaza in West Hills, CA. Originally built in 1985, the 55,246-square-foot center is home to 21 medical-related tenants and is conveniently located adjacent to West Hills Hospital, providing a nice advantage for doctors who visit patients at the hospital. PSRS arranged a cash‐out refinance of an existing CMBS loan, on a 10‐year interest-only basis.

New stricter standards are being required by some lenders for the Probable Maximum Loss (PML) report. This report is a commonly-used tool by real estate investors, lenders and insurers to assess worst-case scenario of a building damage from a seismic event.

With the Federal Reserve approving the second 2017 increase of the Federal Funds rate today by .25% to 1.25% we are taking a closer look at how this will effect the economy and commercial real estate markets.

We sat down with a Senior Mortgage Loan Officer at Standard to see how they are responding to current market demand:

In decades of advising borrowers of all shapes and sizes, one topic that comes up repeatedly is the best practice for a borrower to terminate an interest rate swap when the underlying loan is paid off early.

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