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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
10/20/17

US Coast Guard: Crude Oil Barge Explodes Off Texas, Two Missing
Posted on Thursday October 19, 2017

Two crew members were missing from a barge that caught fire and exploded while carrying crude oil to a refinery early Friday.

Cash-Poor Alaska Eyes Foreign Capital To Jump-Start Energy Projects
Posted on Thursday October 19, 2017

Alaska is pursuing foreign investors for its oil and gas industry, hoping to advance recent discoveries.

How to Prepare for an Interview as a Drilling Consultant
Posted on Thursday October 19, 2017

From technical questions to soft skills, Rigzone shares tips on what drilling consultant job candidates can expect during their interview.

Chevron Approves New Tech Investment To Raise Output At North Sea Field
Posted on Thursday October 19, 2017

Chevron approves an investment to increase output from its Captain oilfield by using a new water-injection technology for the first time in the North Sea, the company says.

Schlumberger, Baker Hughes Warn Of N. America Slowdown
Posted on Thursday October 19, 2017

Schlumberger and Baker Hughes warned of a slowdown in North America and a challenging year ahead.

BP Chairman Svanberg to Retire; Search Starts for Successor
Posted on Wednesday October 18, 2017

BP's Chairman Carl-Henric Svanberg to retire.

Statement: Indonesia To Extend Inpex's Masela LNG Contract By 27 Years
Posted on Wednesday October 18, 2017

Indonesia has agreed with Inpex to extend the company's contract to operate the Masela natural gas field by up to 27 years.

Eni Looks To Strengthen Ties With Rosneft, Maybe In LNG
Posted on Wednesday October 18, 2017

Eni is keen to strengthen ties with Rosneft and could forge a partnership in the LNG sector.

Oil Drops More Than 1% On Profit Taking After 4 Days Of Gains
Posted on Wednesday October 18, 2017

Oil prices fell more than 1%, breaking four days of gains.

Juncker: No EU Unity For Russia Nord Stream 2 Talks
Posted on Wednesday October 18, 2017

The European Commission says that despite a lack of unity among member states over Russia's plans for a new gas pipeline to Germany, it would press ahead.

Wall Street Journal
Commercial News

10/20/17

WSJ.com: Commercial Real Estate

'Little India' Thrives in Central New Jersey
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NYC's Pearl River Mart Will Expand to Chelsea Market
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Office Spaces Focusing More on Communal Areas
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Chocolate Giant Ferrero to Look for Innovation at Cornell Tech
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Shortage of Industrial Space on Long Island Squeezes Tenants
Long Island?s shrinking industrial space has placed expanding tenants in a tough spot, forcing them to look east to Suffolk County and off the island entirely, according to real-estate services firm JLL.

Supermarkets Face a Growing Problem: Too Much Space
A massive build-out by retailers has left the country piled up with grocery shelves as consumers shift from big weekly shopping trips to more snacking and to-go meals.

Excuse Me, You're Blocking My Sun
Australia?s rapid embrace of rooftop panels?now installed on one in four homes in some areas?has collided with another hot spot of investment, construction of apartments and homes.

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