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SHOPPING CENTER LOANS

Commercial Investors need a company that specializes in navigating the complex requirements unique to financing shopping center properties. Ocean Pacific Capital has provided the best financing for shopping centers in the U.S. and abroad since 1977.

A pricing model has been developed over time for shopping center mortgages. This pricing model has significance for shopping center investors and buyers looking to determine the correct level of the loan to value ratio as a buydown on the interest rate to be charged. It is relevant for the shopping center lender for the equilibrium interest to be linear in the riskless rate, production costs, and the price of the default and reinsurance options. Once thesee options have been priced, the lender will then determine the interest rate. By pricing separately the components of the mortgage, they can be restructured into tranched securities, which introduces the possibility of securitization and increased liquidity.

The adjusted-for-risk rate of interest is dependent on short term riskless rates, with the movements in returns to shopping center investments, LTV ratios, and capital requirements at the lender. An option structure exists inside a shopping center mortgage. This structure includes an income security and two put options, one sold by the lender with a relatively high strike price for the borrower to default and the other bought by the lender with a relatively low strike price at which the lender may reinsure.

This structure has been applied to shopping center markets and their representative financing programs. It can be expanded to cover other forms of loans and to determine optimal reinsurance premiums. In reality, lenders and private investors are not often able to reinsure directly, except in the form of the ultimate put to deposit insurance.

Shopping centers involve relatively large loan sizes, and the conclusion that relatively high production cost lenders must charge disproportionately high interest rates may place pressure on their borrowers. Given relationship lending, it is difficult for borrowers to switch lenders after an unanticipated rise in production costs. Rather than carry a large risk on one borrower, the lender requires low loan-to-value ratios that appear onerous, but are consistent with optimal behavior.

The lower put price is for the reinsurance against lender default. If there were comlete coverage of all default risk by a third party, such as the federal government, as is the case with residential mortgages underwritten and reinsured by Ginnie Mae, then the mortgage rate would only include prepayment risk above a riskless rate. Observed mortgage rates must includea a premium for the default risk that cannot be laid off with a reinsurer. Hence commercial mortgage rates, including those on shopping centers, include pricing for default risk.


For more information on a commercial shopping center loan , please contact us. For a listing of our recent commercial construction loan closings, please click HERE.


Whatever your financing needs,
we will tailor a loan that's right for you.

 


Daily Oil & Gas and Wall Street Journal News
4/1/20

Trump Diplomacy Fails to Revive Oil Prices
Posted on Wednesday April 01, 2020

Oil was rooted near $20 a barrel as President Donald Trump's pledge to meet with feuding producers Saudi Arabia and Russia to support the market failed to bolster prices.

Oil Posts Worst Quarter Ever as Physical Market Cratered
Posted on Tuesday March 31, 2020

Oil posted the worst quarter on record after the coronavirus crushed demand and raised fears about overflowing storage tanks.

Some Refiners Benefiting From Crude-Price Drop
Posted on Tuesday March 31, 2020

America's biggest fuel makers are taking advantage of low oil prices to capture profits while slowing fuel production.

US LNG Giant Signaling It May Curb Production
Posted on Tuesday March 31, 2020

Cheniere Energy has tendered to buy six shipments for delivery to Europe later this year, rare for a company that's a seller of the fuel.

Saudis Make Good on Oil Wave Promise
Posted on Tuesday March 31, 2020

The first wave of crude oil is already on its way toward Europe and the US.

Putin, Trump Agree Sinking Oil Prices Not In Mutual Interest
Posted on Tuesday March 31, 2020

Vladimir Putin and Donald Trump agreed in a phone call Monday that "current oil prices aren't in the interests of our countries."

Ineos Producing Sanitizer to Help Combat Virus
Posted on Tuesday March 31, 2020

Ineos revealed Tuesday that it has started producing one million hand sanitizers per month to help combat the coronavirus outbreak.

BP Issues AGM Warning
Posted on Tuesday March 31, 2020

BP has outlined that it may not be possible to conduct its annual general meeting as usual this year due to the Covid-19 pandemic.

Neptune Prepared for Prices to be Lower for Longer
Posted on Tuesday March 31, 2020

Neptune Energy is prepared for prices to be lower for longer, its executive chairman and founder Sam Laidlaw has revealed.

Oil CEOs Back Plan to Cut Texas Output
Posted on Tuesday March 31, 2020

Two of the biggest drillers in America's largest oil-producing state have asked Texas regulators to consider a cut to crude output after a historic price crash.

Wall Street Journal
Commercial News

4/1/20

WSJ.com: US Business

Xerox Is Ending Hostile Takeover Bid for HP
Xerox is pulling the plug on its hostile bid to buy larger rival HP after the coronavirus pandemic undermined the copier maker?s ability to pull off the debt-laden merger.

Workers Return to China's Factories, but Coronavirus Hurts Global Demand
Chinese factory activity expanded in March, following sharp contractions in January and February, but sluggish demand, dampened hopes for a speedy recovery.

Apple Commits to Paying Contractors
The tech giant said it plans to pay its hourly contract workers after some janitors at their Silicon Valley campus were told their jobs were being suspended without pay.

Airlines Seeking Federal Aid Can't Share Flights
Initial rules governing airlines? access to federal aid require carriers to maintain certain levels of service and won?t allow any coordination that would violate antitrust strictures.

Amazon Struggles to Find Its Coronavirus Footing. 'It's a Time of Great Stress.'
The tech giant is dealing with mass absences and a restive workforce as it labors to keep up with a surge in demand. ?This isn?t business as usual,? said Jeff Bezos.

Fed Launches New Lending Facility for Foreign Central Banks
The central bank launched its latest lending program to alleviate market strains by allowing foreign central banks to convert their holdings of Treasurys into dollars.

Trump Calls for New $2 Trillion Infrastructure Bill
President Trump called for infrastructure investment to be a part of a fourth congressional coronavirus relief package, citing low interest rates.

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Charles Elfsten, President
Charles A. Elfsten
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