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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
4/24/17

South Sudan Says Talks Over Blocks B1 And B2 End, Seeks New Partners
Posted on Sunday April 23, 2017

South Sudan says Blocks B1 and B2 are open for direct negotiation after talks with Total, Tullow Oil and the Kuwait Foreign Petroleum Exploration Company break down.

HSBC Wins Mandate On $100B Saudi Aramco IPO
Posted on Sunday April 23, 2017

HSBC Holdings Plc has been formally mandated as an adviser on the initial public offering of Saudi Arabia's national oil giant Aramco.

Chevron to Sell Bangladesh Companies, Workforce Implications Unknown
Posted on Sunday April 23, 2017

Chevron Corporation's wholly-owned subsidiary, Chevron Global Ventures Ltd., enters into an agreement to sell the shares of its wholly-owned indirect subsidiaries operating in Bangladesh.

Genel Energy Appoints New Chairman
Posted on Sunday April 23, 2017

Genel Energy plc appoints new non-executive director and chairman with immediate effect.

Petronas Awards 'Key' Offshore Contract
Posted on Sunday April 23, 2017

Petronas Carigali Sdn Bhd (PCSB), a subsidiary of Petronas, awards a "key contract" to Perbadanan Urusan Kejuruteraan dan Limbungan Brooke.

Oil Falls Below $50 as Surging US Output Undermines OPEC Cuts
Posted on Thursday April 20, 2017

Oil dropped below $50 a barrel as investors lost faith.

Baker Hughes: US Drillers Add Oil Rigs For 14th Week In A Row
Posted on Thursday April 20, 2017

US drillers added oil rigs for a 14th week in a row, extending an 11-month recovery.

US Will Not Issue Drilling Waivers To Russia Sanctions
Posted on Thursday April 20, 2017

The US will not make an exception for American companies seeking to drill in areas prohibited by US sanctions on Russia.

Texas Adds Thousands of Oil, Gas Jobs in March
Posted on Thursday April 20, 2017

Thanks in part to increasing crude oil prices and exploration and production activity in onshore basins, Texas adds more than 3,000 jobs in March.

US E&P Budgets Rebound, Grow For First Time Since 2014 Downturn
Posted on Thursday April 20, 2017

US CAPEX and rig counts to drive production growth of 5% this year; drilling and completion spending to increase by 58% this year, according to Fitch Ratings' modeling.

Wall Street Journal
Commercial News

4/24/17

WSJ.com: Commercial Real Estate

New Jersey Office Market Slump Worsens
New Jersey office leasing for the first quarter hit a multiyear low, as tenants avoid dated corporate campuses and demand proximity to transit and urban amenities.

Israel's Gazit-Globe Sets Sights on New York
Global retail landlord Gazit-Globe is planning to open a private U.S. subsidiary to invest in real estate in New York and other major metropolitan areas, the company said.

Office Market Swings in Tenants' Favor
The seven-year expansion in the U.S. office market slowed in many big cities in the first quarter.

Malls Deploy Technology to Lure---and Keep---Shoppers
Mall landlords faced with declining sales and disappearing stores are deploying smartphones, social media and other technology to lure customers?and then keep them spending.

New Shopping Centers, More Than the Web, Kill Old Malls
Internet retailing is eating into mall revenue, but competition from newer shopping centers was the most common cause of death for malls over the past decade, according to a recent study.

Nashville Mall Turns to Madame Tussauds to Draw Crowds
Simon Property Group is hosting the nation?s first Madame Tussauds in a shopping mall, part of the retail landlord?s push to offer customers new experiences that go well beyond shopping.

The New Manhattan Office Trend: Penthouses
The addition of glass-walled office spaces atop older buildings is an investment a number of owners are making in hopes of boosting income and competing with newer office buildings in Manhattan.

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