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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 nearly 30 year of experience in providing the best financing for shopping centers anywhere in the world.

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
6/23/17

Oil in Bear Market Declines for Fifth Week as Supply Climbs
Posted on Thursday June 22, 2017

"It's becoming bearish mania," said one analyst.

Greece Approves Offshore Applications by Total-ExxonMobil, Energean
Posted on Thursday June 22, 2017

Greece approved applications submitted by a consortium of Total, ExxonMobil and Hellenic Petroleum, its energy ministry said.

Argentina's YPF Says Technology Lowering Its Shale Costs
Posted on Thursday June 22, 2017

Loma Campana is the first productive field in Argentina's Belgium-sized Vaca Muerta shale formation.

US Drillers Add Oil Rigs for Record 23rd Week in a Row -Baker Hughes
Posted on Thursday June 22, 2017

U.S. energy firms added 11 oil rigs in the week of June 23, Baker Hughes said Friday.

Kemp: Oil Market Flashes Warning About Stock Levels in 2018
Posted on Thursday June 22, 2017

The emergence of a large contango implies many hedgers and speculators now expect stocks to remain higher than before.

Petrobras Revives Plan for IPO of Fuel Distribution Unit
Posted on Thursday June 22, 2017

Petrobras' CEO said the company is reviving an initial public offering of its fuel distribution unit to cut its debt.

Russia's Novatek Aims Topple Qatar from LNG Top Spot
Posted on Thursday June 22, 2017

Qatar and Russia have long been rivals in global gas markets.

Gazprom Smells Opportunity as UK's Biggest Gas Store Shuts
Posted on Thursday June 22, 2017

While Britain's import needs are mostly met by Norway, it also receives Russian fuel indirectly through pipelines.

Four of Canada's Biggest Banks Are Key Trans Mountain Lenders -Filings
Posted on Thursday June 22, 2017

Energy infrastructure projects in Canada have faced opposition from environmental groups and aboriginal communities.

China, India, Japan Hamper Asia Oil Demand Growth
Posted on Thursday June 22, 2017

Faltering demand growth in key Asian crude importers is further hampering efforts to restore market balance.

Wall Street Journal
Commercial News

6/23/17

WSJ.com: Commercial Real Estate

Excuse Me, You're Blocking My Sun
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1031 Exchange Real Estate Tax Break Faces Extinction
A much-loved tax advantage in the commercial real-estate industry is on the chopping block even as chances dim for the passage of a broad federal tax overhaul this year.

Mall Tenants Play Hardball In Lease Negotiations
Retailers, food and beverage operators and department store chains looking to renew their leases have been asking for more allowances from mall owners.

Mall Project Denied on Former Shea Stadium Site
New York?s highest court on Tuesday blocked the development of a billion-dollar shopping mall on a Citi Field parking lot in Queens, affirming a ruling that the project needs legislative approval to proceed.

New Jersey Landlords Sweeten Perks With Ride-Hailing Subsidies
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McCourt Global Puts Money Into Modular Construction
One of New York City?s most prominent investors is betting on modular construction. McCourt Global led a group of investors in a $6 million round of funding for Brooklyn company FullStack Modular LLC.

Owners of Two Connected Midtown South Buildings Refinance Property
The owners of two connected Midtown South Buildings have secured $430

BRE #:00619059
Charles Elfsten, President
Charles A. Elfsten
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