Publications

- June 2011: Vol. 23 No. 6

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Debt Markets Loosen Up: Improved Liquidity Equals Better Terms and Rates

by Alan Todd and Mike Kelly

After a deep freeze in the availability of real estate financing for more than two years, the debt markets began to thaw toward the end of 2009. As many balance sheet lenders — primarily banks and insurance companies — identified and began dealing with their problem loans or potential problem loans, they were once again ready to aggressively deploy capital. A year later, an active CMBS market joined the steady stream of returning lenders. As corporate bond yields have tightened, commercial real estate loans and new issue CMBS bonds once again offer significant spreads over Treasuries on a risk-adjusted basis. Conservative leverage for core assets (up to approximately 65 percent to 70 percent loan-to-value) is readily available for two- to three-year terms for floating-rate loans and five- to 10-year terms with fixed-rate coupons.

BALANCE SHEET LENDERS Balance sheet lenders were the first lenders back in the marketplace in late 2009, aggressively mar

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