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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
9/25/18

OGCI Sets First Collective Methane Target
Posted on Monday September 24, 2018

The Oil and Gas Climate Initiative has set its first collective methane target for member companies.

Oil Advances as Traders Turn Bullish
Posted on Monday September 24, 2018

Oil extends gains near the highest level in almost 4 years.

Shell Exec Says Canada Pipeline Debacle Won't Affect LNG Decision
Posted on Sunday September 23, 2018

Shell-led LNG Canada proposes to export as much as 26 million tons per year to Asia.

Golden Years Over for Oil Traders
Posted on Sunday September 23, 2018

It's a stark reversal from the long period of big returns that was ushered in by oil's crash in 2014.

WTI, Brent Gain at Cusp of Tight Market
Posted on Sunday September 23, 2018

"The market is starting to realize that strong global demand and the lack of spare production capacity is going to lead to one of the tightest markets we've seen in a long time," said one analyst.

Deepwater's Happy Days Almost Here Again
Posted on Sunday September 23, 2018

Deep-sea oil drillers are once again riding the wave of investor enthusiasm that next year will be better for profits.

Lower for Longer's Days May Be Numbered
Posted on Sunday September 23, 2018

The commitment to live with "lower for longer" oil might not last that long after all.

Byron Energy Expands Footprint in Gulf of Mexico
Posted on Sunday September 23, 2018

The company has been notified by the BOEM that its bids for three GoM blocks were accepted.

Offshore Namibia Dud Dims Outlook for New Play
Posted on Sunday September 23, 2018

Tullow Oil Plc said an exploration well off Namibia was a dud, damping enthusiasm over a frontier area that's attracted renewed interest amid oil's recovery.

Uganda Expects to Miss Target for First Oil
Posted on Sunday September 23, 2018

Uganda said it expects to miss its 2020 target for the East African nation's first crude production.

Wall Street Journal
Commercial News

9/25/18

WSJ.com: Commercial Real Estate

CBRE Global Investors Buys Stake in Three GGP Malls
One of the world?s largest real-estate asset managers has purchased a 49% stake in three malls in a deal that values them at more than $1 billion and shows that investors still have an appetite for top-tier retail property.

FAO Schwarz Is Returning to New York
A dominant presence in Midtown Manhattan for decades before its closure in 2015, the toy store is coming to life again with a new, 20,000-square-foot Rockefeller Center location.

Sportswear-Maker Puma to Open New York Flagship
Germany?s Puma has signed a lease deal to creating a marquee location on Fifth Avenue that will be the first of its kind for the company in North America.

Kushner Cos., Brookfield Near a Deal for Stake in 666 Fifth Ave.
The real estate arm of Brookfield Asset Management is in advanced talks with Kushner Cos. to buy roughly a 50% stake in 666 Fifth Ave. and invest hundreds of millions of dollars in the Manhattan office tower, which has been at the center of a controversy over possible conflicts of interest involving Jared Kushner, President Donald Trump?s son-in-law and adviser.

Sign of the Times: New Office Space Created in Retail's Tumult
Normandy Real Estate Partners? $133 million deal for the upper portion of ABC Carpet?s flagship store is an example of office space edging into territory that once was retail?s domain.

Want to Buy a Luxury Hotel in the U.S.? Try China's Insurance Regulator
When Chinese regulators seized control of Anbang Insurance, they took ownership of more than a dozen luxury U.S. hotels. Now, as the government looks to sell, it faces a problem: The buildings likely are worth less than what Anbang paid only a couple of years ago.

New York's Commercial Property Slump Shows Signs of Slowing
After a two-year plunge, brokers are optimistic that more deals will take place in 2018.

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