CoreNet speakers present a lender's eye view of the current market

"Capital Markets Commercial Real Estate Financing" was the timely topic of CoreNet's March 20 meeting. Shawn Rosenthal of the Ackman-Ziff Real Estate Group moderated a three-member panel of financing experts: Craig Koenigsberg, principal, CLK Properties; Jim Carpenter, senior V.P., Community National Bank; and Ron Gaither, senior V.P., Arbor Commercial Mortgage. The bottom-line message was that although lending volume has dropped radically, and many of the Wall Street lenders have left the scene, money is available. Some lenders, in fact, see the current situation as offering opportunity. However, lenders are considerably more conservative in the terms they offer. The market is very different than it was a year ago, all agreed. "Since August of last year we see a reality check," said Carpenter. "Now the amount of financing available is not the same and the market is getting used to that. Owners are seeing they need more cash." One changed factor is loan size--"it's very difficult to syndicate a large loan now," Rosenthal said. Loans of $30 million or less are obtainable, Koenigsberg said, which works on Long Island where most properties trade below that. "The key to lending in this market is to lend against cash flow," he said. Terms tend to be shorter; five to seven-year loans are more common than 10-year loans. Koenigsberg noted that a lot of real estate is in the hands of long-term owners who "are feeling stressed but not distressed enough to sell yet." However, on Long Island and around the country, he finds owners seeing five bidders instead of 25 bidding for a property. While prices have not fallen, he said, "Gradually sellers must be more flexible on price. In the next nine months there'll be a big cooling off period and thinking about what a property is worth." With office space, being in the best locations--like the 110 corridor or Expressway--is important, while secondary locations can be negotiated, Koenigsberg said. Occupancy is in the 95% range and there is no softening in rents yet. Deals are primarily for five years, or 10 with the opportunity to renegotiate after five. Are buyers surprised when they learn of current financing terms? "The conversations can be tough," Gaither said. "To lenders what's happening feels like it was coming for a long time, but for the borrower, it feels like it happened overnight." The Long Island Chapter meets on the third Thursday of most months 8-9:30 a.m., at the Milleridge Inn in Jericho.