Commercial Real Estate Loans & Investment Sales

Mike Myatt To Moderate Structured Finance Session at Multi-Housing World 2005

Pacific Security Capital, Executive Managing Director, Mike Myatt, will moderate a session at the upcoming Multi-Housing World conference. 

"Structured Finance: Strategies for Effectively Bridging the Gap"
Tuesday, September 13, 2005
9 am - 10.15 am
San Diego Convention Center, CA

Register for Multi-Housing World at http://mhw.com/mhw/registration/index.jsp

For more information about Pacific Security Capital's structured finance offerings, please visit www.pacificsecuritycapital.com or call 1-800-844-6085.

Commercial Real Estate Investment Bank Overviews How to Choose a Capital Provider and Navigate Commercial Capital Markets

Beaverton, OR, August 23, 2005 -- http://www.pacificsecuritycapital.com -- Pacific Security Capital (“PSC”), a leading commercial real estate investment bank, headquartered in Beaverton, Oregon, explains how to best navigate the commercial capital market to choose a capital provider.

Financing a commercial real estate transaction is no longer a simple matter. Now, there are many considerations that must be evaluated when selecting a capital provider.

Mike Myatt, executive managing director with Pacific Security Capital, explains that “in order to increase project velocity, improve operating efficiency, conserve internal capital, increase leverage and lower the overall cost of capital, it is essential that a sponsor develop an integrated capital formation strategy surrounding acquisition/refinance/development initiatives.”

Among the many things those commercial real estate borrowers in today’s marketplace need to address when seeking capital are:
- The selection of the appropriate capital provider;
- Level(s) of the capital structure to be addressed;
- Operating considerations;
- Control provisions;
- Rate, term, pricing and structure;
- Closing time frame;
- Third party requirements;
- Certainty of execution;
- Recourse provisions;
- Exit and pre-payment options;
- Inter-creditor or other multi-party agreements;
- Post closing servicing issues;
- The effect of the capital acquired on tax, balance sheet, future projects or portfolio considerations, and;
- A whole host of other value-added considerations.

The first thing that borrowers must understand is that all capital providers are not created equal. There is a definite hierarchy within the world of capital providers and understanding the value-ads offered by different capital providers is important in choosing a relationship.

Myatt adds that “while many borrowers believe financing to simply be a commoditized offering, the selection of a capital provider, should take into account far more than rate and term considerations. In choosing a capital provider, the goal of any borrower should be to develop a close relationship with the firm that can provide not only the broadest access to capital, but more importantly a firm that offers best-in-class subject matter expertise, certainty of execution and as many value-added benefits and services as possible. Capital providers can most easily be broken-down into three groups:

Direct Lenders – Those that lend their own funds
- Commercial real estate investment banks
- International, national, regional and local banks
- Life Insurance Companies
- Agencies (Fannie, Freddie, FHA)
- Pension Plans
- Real Estate Investment Trusts (REIT)
- Mutual Funds, Hedge Funds, Opportunity Funds
- Credit Companies
- Private Lenders

Indirect Lenders – Those that place funds on behalf of others
- Financial Intermediaries
- Investment Advisors
- Syndicators
- Mortgage Bankers
- Mortgage Brokers

Hybrid Lenders – Those that do both of the above
- Certain Investment Banks
- Certain Investment Advisors
- Certain Banks
- Certain Credit Companies
- Certain Financial Intermediaries

Once a borrower has selected the appropriate capital provider, it is essential that the capital provider be engaged as early on, and at as high a level as possible. Experienced sponsors realize the benefit of getting their capital provider involved early on in the planning process. Waiting too long to involve your lender will typically lead to a project built with less leverage and at a higher cost of funds. By including your capital provider in the beginning of the project planning process you will end-up with a project plan that is built around optimizing capital formation leading to greater project profitability.

Effectively utilizing the entire capital structure, to maximize leverage while achieving the lowest blended cost of funds and isolating risk, is essential to the creation of a solid capital formation strategy. In general, the farther you move up the leverage curve utilizing more leverage in the senior position the lower the overall cost of funds will be. Conversely, the deeper you move down the capital stack utilizing mezzanine or equity instruments the more expensive the cost of capital.

Selecting the appropriate capital provider and engaging them properly will aid in the streamlining of the borrowing process. If borrowers will focus on capital formation as a priority at the early stages of project planning the likelihood of increasing profits in a risk managed environment is high.

For more information about Pacific Security Capital commercial real estate investment bank, please visit www.pacificsecuritycapital.com or call 1-800-844-6085.

Vibrant Hotel Market Reported

Article by Colleen Corley Via Commercial Property News

Good times are ahead for buyers and sellers in the hotel industry, according to a mid-year report on hotel transactions by Jones Lang LaSalle Hotels. Activity reached a record $8.4 billion for the first half of 2005, with a total of $15 billion projected for the year.

Plentiful debt and compressed interest rates--two factors that led to a near-doubling of transactions in 2004--have continued this year at a robust pace. The amount of capital in the market has increased significantly, with large private equity funds raising real estate opportunity funds from $5 billion to $10 billion.

See full article here.

To learn more about Pacific Security Capital’s commercial real estate loans or its preferred borrower program, PacificElite(TM) please visit www.PacificSecurityCapital.com or call 1-800-844-6085.

Commercial Real Estate Investment Bank - Pacific Security Capital - Appoints James R. Kean as Managing Director Chief Investment Officer

Commercial real estate lender, Pacific Security Capital, continues to expand its capital markets and investment practice by hiring new Managing Director Chief Investment Officer.

Beaverton, OR, August 4th, 2005 --http://www.pacificsecuritycapital.com - Pacific Security Capital (“PSC”), a leading commercial real estate investment banking firm providing commercial real estate loans, structured finance, investment sales and advisory services, announced today that it is continuing to expand its capital markets and investment practice by hiring James R. Kean as its Managing Director and Chief Investment Officer.

Kean, who has extensive experience in capital formation and investment analysis, graduated with a B.A. in international business from Lewis and Clark College and received his MBA from the Tuck School at Dartmouth. Prior to joining Pacific Security Capital, Kean held a variety of principal, executive level and senior finance positions for companies such as Salomon Brothers, Alloy Ventures, Weyerhaeuser, and WebMD.

"We are very pleased to have acquired the services of such a well respected capital markets and investment professional,” said Mike Myatt, Executive Managing Director of Pacific Security Capital. “In addition to managing principal initiatives and balance sheet investments, James will also support the investment goals of our institutional clients.”

Pacific Security Capital’s capital markets and investment practice is growing at a very rapid pace, which can be attributed to the company’s international platform and vertically integrated solutions.

"In today’s competitive market, we can only continue to maintain our leadership position in the commercial real estate industry by recruiting best of breed talent like James Kean,” said Myatt.

To learn more about Pacific Security Capital’s commercial real estate loans or its preferred borrower program, PacificElite(TM) please visit www.PacificSecurityCapital.com or call 1-800-844-6085.

About Pacific Security Capital
Pacific Security Capital is a leading commercial real estate investment banking firm providing commercial real estate loans, structured finance, investment sales and advisory services. The combination of direct lending, advisory, intermediary, corporate and professional services, syndication, investment sales and development services consistently allow PSC to rank among the leaders in the industry. PSC is headquartered in Beaverton, Oregon with other offices in major markets in North America and Europe. More information about the company can be found at www.PacificSecurityCapital.com.

For information about Pacific Security Capital's Capital Markets and Investment practice contact us at 1-800-844-6085

Commercial Real Estate Lender Evaluates Whether the Condo Craze Over or is Just Heating Up

Pacific Security Capital, a leading Commercial Real Estate Investment Bank, has noticed that over the past few years condo activity has been hot, however many lenders are now concerned about the future stability of the condo market.

Beaverton, OR, August 8, 2005 -- http://www.pacificsecuritycapital.com -- Pacific Security Capital (“PSC”), a leading commercial real estate investment bank, headquartered in Beaverton, Oregon, has noticed that over the last two years there has been so much condo activity that many commercial real estate lenders are starting to express concern over the future stability of condo markets.

Mike Myatt, executive managing director with Pacific Security Capital explains that “some lenders have recently found themselves over allocated in condominiums as a result of the recent activity and have therefore become wary of all but the best opportunities.”

Myatt adds, “While the best opportunities (typically in Florida, Southern California and select destination markets) are still attractive, developers in smaller markets are finding condos much more difficult to finance in recent months. Additionally some of the recent trends in the commercial real estate market do suggest some legitimacy surrounding concerns being voiced by underwriters. The single greatest concern is the extremely high prices being paid by condo converters for existing multi-family projects. When a sponsor purchases apartments at a price that won't allow the property to operate as a stabilized for rent property any negative change in market conditions could see conversion speculators being underwater in their properties.”

Warning signs aside, the reality is that many of the commercial real estate lenders expressing concern over the current state of affairs in the condo market are the lenders that have been the least active and have less knowledge about the asset class. Lenders familiar with the condo market are not as concerned about the opinions of their peers, but rather with the fundamentals of the projects and sponsors they underwrite.

Projects that demonstrate that they underwrite according to the following guidelines should be able to find financing even with the caution currently being expressed by some in the commercial real estate lending community:

1.    Sponsor Suitability: Sponsors that have a successful track record of developing other condo projects will be looked upon more favorably than those who are building their first project. Having net worth and liquidity in reasonable proportion to the project size always helps as well.

2.    Capital Structure: Projects that have a sufficient sponsor equity contribution will receive more interest than those projects looking to move aggressively up the leverage curve.

3.    Entitlements: Projects that are fully entitled and permit ready will attract more interest than early stage projects.

4.    Market Feasibility: How many units are you building vs. how many competitive units are currently available for sale. How many competitive units are coming online during the time period that your project is being built and how many units does the market absorb each year? What are your per square foot sales prices, how do they compare to the market, and is your location, construction quality and amenity package in line with that of comparably priced projects?

5.    Marketing: Who is going to sell your units and do they have a strong track record of selling condos within the market you are building in?

6.    Presales: What type of presales have you been able to generate? The higher the percentage of presales, the more are lender interest you will attract.

The bottom line is that good projects from good sponsors will always receive interest from the capital markets.

About Pacific Security Capital
Pacific Security Capital is a leading commercial real estate investment bank providing commercial real estate loans, structured finance, investment sales and advisory services. The combination of direct lending, advisory, intermediary, corporate and professional services, syndication and acquisition services consistently allow PSC to rank among the leaders in the industry. PSC is headquartered in Beaverton, Oregon with other offices in major markets in North American and Europe. More information about the company can be found at www.PacificSecurityCapital.com

For information about Pacific Security Capital apartment loans contact us at 1-800-844-6085

Commercial Real Estate Loans and the Impact of Rising Interest Rates on Commercial Real Estate

Pacific Security Capital, a leading commercial real estate investment bank, addresses the impact of rising interest rates on commercial real estate loans.

Beaverton, OR August 1, 2005 -- http://www.pacificsecuritycapital.com -- Pacific Security Capital (“PSC”), a leading commercial real estate investment bank, headquartered in Beaverton, Oregon, addresses the impact rising interest rates could have on commercial real estate loans and the commercial real estate market overall.

There has been no shortage of conversation surrounding the topic of rising interest rates in the commercial capital markets over the last two years. Mike Myatt, Executive Managing Director of Pacific Security Capital explains that “the reason for all the column fodder is that interest rate movement has a direct impact on the state of capital markets supply and pricing and can have a very real impact on the overall commercial real estate market.”

As a baseline for a deeper analysis it is useful to have a macro-economic understanding of what happens to property level supply and demand drivers and the resultant impact on Net Operating Income (NOI) in a rising interest rate environment. As a general economic principal when interest rates rise the cost of new construction increases thereby slowing the number of construction starts and depleting new supply of product coming online. This scenario in turn causes an increase in overall market absorption rates and creates a “landlord’s market” environment.

Myatt adds that “the environment which favors the landlord creates an opportunity for property owners to increase rents thereby allowing NOI growth to keep pace with any escalation in interest rates. While this scenario is favorable to existing property owners and making the rise in interest rates less of a concern, the impact to developers and tenants is detrimental and can have a negative overall impact on the economy if a high interest rate environment lasts for any length of time.”

At a more micro level some of the major issues surrounding the impact of increasing interest rates on commercial real estate loans and commercial capital markets are addressed below:

Flow of Funds: In a low interest rate environment real estate provides a reasonable investment alternative to other low yielding asset classes. With rising interest rates the supply-side availability of capital marked for commercial real estate will constrict. The aforementioned contraction will be due to a combination of reduced demand for new supply as weaker developers are weeded out of the market and alternate investment opportunities in other asset classes begin providing a better yield while being perceived to have less risk when contrasted to commercial real estate investments.

Loan Pricing, Sizing and Cost of Funds: The overall blended cost of capital will increase dramatically. This dramatic increase will come not only as a result of rising rates across underlying indices but moreover as a result of lower advance rates in the senior position shifting a higher percentage of the capital structure up in the leverage curve. The reduction in LTV and LTC advance rates will cause a borrower to rely more heavily on mezzanine and equity financing resulting in shift from the current “borrower’s market” climate to a “investor’s market” environment.

Investment Sales: Sales of investment grade properties will slow rapidly as many of the buyer’s in today’s low interest rate environment will move to the sidelines. Institutions and REITS will remain active buyers while many of the individual investors will be forced from the investment sales market. Default rates will climb and more distressed property will come onto the market as investors who leveraged up on floating rate debt during the low interest rate environment will have a hard time keeping control of property as their debt service obligations increase.

Commercial real estate owners who believe that interest rates will rise substantially and will remain elevated for any period of time should be looking to refinance short-term commercial real estate loans, floating rate debt with long-term fixed rate debt. Buyers looking to acquire investment property should look for assets with upside potential for NOI growth through improved management and upside pop in leasing opportunities.

About Pacific Security Capital
Pacific Security Capital is a leading commercial real estate investment banking firm providing commercial real estate loans, structured finance, investment sales and advisory services. The combination of direct lending, advisory, intermediary, corporate and professional services, syndication and acquisition services consistently allow PSC to rank among the leaders in the industry. PSC is headquartered in Beaverton, Oregon with other offices in major markets in North American and Europe.

For information about Pacific Security Capital commercial real estate loans contact us at 1-800-844-6085.