boston - The Real Reporter

6LENDINGTHE REAL REPORTER 2013 SUMMER REVIEWInvestors Banking on Financing255 State St., Boston MABY MIKE HOBANBOSTON — With the recession fading in therear view mirror in Greater Boston and othercore markets around the country, the lendingenvironment for commercial realestate has now rebounded to thepoint where investors in Boston properand Cambridge can find financingfor just about any deal, says JeffBlack, commercial debt/equity specialistand VP at ColliersInternational’s Capital Markets group.“It’s just a matter of what it’s going tolook like,” he tells the Real Reporter.“But there’s no shortage of high-yielddebt for any project you can think of.”And while the availability of financingis not expected to change any timesoon, it is going to cost a bit more thanthe rates available in the first fewmonths of 2013, says Black.“Something that folks should be payingattention to would be that on May 2nd, a 10-year U.S. Treasury yield was at 1.62 percent, andas of (last week), we’re at 2.53. So in the past 60days, the benchmark that most life companiesMICHAEL LINDGRENJULIA ANN SLOMand portfolio lenders appraise off of—the cost ofbaseline funds—has jumped 35 percent, andthat has substantially impacted the market.”Which means that 60 days ago, a deal that couldhave been priced at 360-370 basispoints (all-time lows) will now be a 450BPS rate, which fundamentally willchange the economics of some of thedeals that are being done, Blackreports.The financing expert predicts that“the new normal” will settle in at the2.5 to 2.55 percent range for at leastthe next few months, which from anhistorical perspective is still quite low,but the change is already being felt.CMBS lending, which made a hugecomeback in the last year, will definitelyfeel some upheaval. “Up until May,CMBS pricing was so competitive thatthey were winning core institutionaldeals that would have typically beengoing to life companies, because the pricing wasso compelling you couldn’t ignore it,” saysBlack. But with CMBS pricing so closely tied tothe treasuries, the advantage has gone back tothe life companies as CMBS rates (which cannotbe locked in until the deal is signed) are now risinginto the 5.0 percent range and above.And while CMBS is typically not a big playerin the core markets of Greater Boston (due tothe high barriers to entry erected on thestrength of the local banking sector), it has beenuseful getting deals done in New England’s tertiarymarkets like Portland, ME, and Portsmouth,NH, where life companies generally will nottread. Colliers, whose Capital Markets group hasclosed $1.1billion in debt/equity deals year-todate,arranged financing on two such deals withGoldman Sachs: a $7.8 million, 10-year, fixedrateleasehold mortgage for a Courtyard byMarriott at the Portland Airport in Maine and a$23 million office property in Burlington, VT.Colliers also arranged financing in April via a15-year CMBS deal in Denver, securing $72 millionin refinancing for eight separate but simultaneoustransactions with Principal Life (PREI)for grocery-anchored retail for ConnecticutbasedAmCap and a state pension fund.Cantor Commercial Real Estate Lending, thenation’s third largest CMBS lender, has alsocontinued on page 48