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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
8/17/17

Nigeria State Oil Firm Says Its Production Costs Cut To $23 A Barrel
Posted on Tuesday August 15, 2017

Nigeria's production cost per barrel of crude oil is down to $23, the state oil company says.

Oil Slides Despite Steep Draw In US Crude Stocks
Posted on Tuesday August 15, 2017

Oil prices fell more than 1% even though US crude stockpiles declined by the most in a year.

Gadfly: Energy Transfer Offering Exposes Pipeline Parent Trap
Posted on Tuesday August 15, 2017

Investors gave a thumbs up to Energy Transfer Partners LP's decision to raise as much as $1.16 billion by issuing new units.

Ecuador's Esmeraldas Refinery In 'Critical' Situation Despite Overhaul
Posted on Tuesday August 15, 2017

The situation at Ecuador's state-run Esmeraldas refinery remains 'critical,' including problems with the catalytic cracking unit.

Trump Push for Natural Gas Exports Opposed by Manufacturers
Posted on Tuesday August 15, 2017

President Trump's effort to boost US energy is facing push back from manufacturers who say exporting more natural gas may undercut his 'America First' jobs focus.

IOC: Malaysia's Petronas Eyeing Stake In Indian LNG Import Terminal
Posted on Tuesday August 15, 2017

Petronas is looking to buy a stake in Indian Oil Corp's Ennore LNG import terminal, the Indian firm's chairman says.

Thai Oil Buys 1 Million Barrels North Sea Crude To Replace Mideast Oil
Posted on Tuesday August 15, 2017

Thai Oil PCL has bought 1 million barrels of North Sea Forties crude to be delivered in November

Woodside Sees Qatar Targeting New LNG Buyers With Supply Surge
Posted on Tuesday August 15, 2017

Woodside expects rival Qatar to target the emerging markets of India and Pakistan with a new wave of supply next decade and not cannibalize traditional Asian buyers.

Russian Watchdog Says Schlumberger-Eurasia Drilling Deal 'Has Big Problems'
Posted on Tuesday August 15, 2017

The acquisition of a 51% stake in Russia's EDC by Schlumberger 'has big problems' in the current political situation.

Saipem to Build Pipelines for Kuwait Refinery Project
Posted on Tuesday August 15, 2017

A unit of Kuwait Petroleum Corp. has awarded Saipem an approximately $850 million contract tied to KOC's Al Zour refinery project.

Wall Street Journal
Commercial News

8/17/17

WSJ.com: Commercial Real Estate

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.

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
Food trucks and fitness centers are among the amenities that New Jersey office landlords have been using to attract tenants.The latest perk: Subsidies for digital ride-hailing services such as Uber and Lyft.

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