Its a great time to be in the commercial real estate market

HKS has had an incredible first 18 months and we feel only optimism going forward. On a personal level, it has been a tremendous ego boost to grow from three founding partners to a company of 16 of which most of the eight brokers added were drawn to the company by my reputation and 40 plus years of experience. Their learning experience here is paying off for them as well as the company. There is no question of the improved commercial real estate market adding to our growth. Construction leaders have increase three fold since our inception and long term rates have been extremely cooperative driving property acquisitions with cap rates as low as 3.5% in general. We are currently arranging a $40 million, 50% loan to acquisition structured residential transaction purchased at a 2.5% cap rate because of the huge upside value add. We are still seeing a number of note acquisition financings including DPO purchases by existing mortgagors which in the early days of my career was a bank non-starter. The reality in today's financial world is it makes more sense to sell at a market-to market price to the current borrower to save the cost of foreclosures, bankruptcy and large legal fees. Because of the recent crisis we have seen borrowers vetting increased to the point where the old real estate credo of, "location, location, location" has been replaced with, "credibility, credibility, credibility" on the part of the borrowers financial strengths both pre and post-closing, their hard as opposed to "soft" equity and development, construction and management capabilities. Construction lending is getting more creative in our ability to arrange commitments with no personal guarantees of repayment and still give comfort to the lending institution. We have seen a return to 10, 15 and even 20-year terms on cash flowing permanent loans based on LTV and the previously mentioned borrower profile as well as some interest only and floating rates with the ability to fix anytime for the remainder of the loan term. Lastly, the equity funds both domestic and foreign have greatly increased and are anxious to put dollars into the market. All in all it is a great time to be in the CRE market. Gerald Swartz is a partner at HKS Capital Partners, New York, N.Y.