A Change In The Weather

The last several years have been a tumultuous adventure in the capital markets. Due to massive over-leverage on all financial fronts, the weakest link in the chain broke as the housing markets overheated and the infrastructure of leverage associated with that broke as well, causing a massive deleveraging and repositioning of private equity firms to take advantage of what they anticipated to be another "RTC buying Bonanza." As a practice focused on equity and the various institutional and non-institutional investors in that sector, we watched as several funds capitalized accordingly and underwrote high returns in anticipation of acquiring assets at bargain basement prices. The problem for them and the market, was that it never materialized as they thought. Instead of the Federal Government intervening in the market and forcing financial institutions out of the real estate business, either through the bank regulators or the RTC, they allowed a recapitalization of balance sheet exposure through TARP and to hold toxic assets on their balance sheets to restructure or write down over time. The good news of that policy, was that a forced liquidation RTC environment of the 90’s would have collapsed the banking institutions and no one would have been “too big to fail.” There was simply too much balance sheet exposure to liquidity. The downside of that policy was that it has slowed recovery and left huge amounts of capital dedicated but uncalled from funds oriented to distressed real estate.
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Financing Notes

Our newest edition of Financing Notes is now available. In this edition, Jack Cohen discusses: - It’s a great time to be a borrower! - How artificially low interest rates drive property values – are bubbles forming? - Appropriate pricing of risk, and how risk tolerance can change with competitive pressure. - The fundamentals and core competencies – what changes in the search for yield? - Price deterioration and its destabilizing effect on capital. - The role of the Federal Reserve in interest rates and the effect on property values. - CMBS may be back, but is it different? Can it become a stable source of capital or continue its booms & busts? - And more…
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Reader Survey

Where ever you look, the signs and forecasts for commercial real estate point in every direction - be cautious, take risks, capital is tightening, and rates are at their lowest. Cohen Financial would like to hear from our readers. What are the issues that keep you up at night? What opportunities keep you charging ahead?
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Achieving A Lower Transaction Cost Through Loan Assumption

In the current low interest rate environment, the assumption of a mortgage loan by a prospective buyer can result in significantly lower transaction costs. Not only do the parties avoid the high cost of defeasance or prepayment penalties, but the current loan features may be better than today’s new loan terms.
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Take Me Out To A Ball Game

Being a fan of the Kansas City Royals for all too many seasons now has been difficult. I can really appreciate the Chicago Cubs fans and their dedication to their team after decades of losing season after losing season.
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A Beautiful Day For A Walk

The 19th Annual Cancer Survivors’ Celebration and Walk was a record-breaking event, over 3,800 gathered in Chicago’s Grant Park on Sunday, June 2nd for a beautiful morning full of sunshine, fun, family and friends. Regardless of the weather, everyone would agree it was a beautiful day for a walk.
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Time Is Running Out On SBA Loan Program

It’s crazy how time flies….in just over two years, Cohen Financial began offering borrowers of owner occupied commercial real estate financing through the Small Business Administration (SBA). For business owners, taking advantage of the historic low interest rates, currently at 4.74% for SBA 504 loans, has really triggered a flurry of activity in both acquisitions and refinancing through SBA lenders.
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Work Ahead: Restoring a Robust CMBS Marketplace

As of six years ago, in commercial real estate finance, there is no question that CMBS had captured the lion share of the marketplace. When the financial crisis hit, CMBS was the first to go down. In fact, CMBS 1.0 is still in a world of hurt with its loans on distressed assets currently clogging special servicing and keeping the marketplace from resolving the problem. Leaders from across our industry seem to think that the way to deal with it is by denying involvement and dismissing it. We need to come together and acknowledge the mess we made.
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Retail Financing - We've come a long way

As I get ready to embark upon my annual pilgrimage to the ICSC in Las Vegas, I can't help but think about how far we've come the past few years. It wasn’t long ago that newly built NNN Walgreen stores were selling for 8 CAPs.
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Inflation...What's REALLY Going On

Here’s what they are telling us…..Over the last 12 months, the Chicago area all items CPI-U increased 1.6 percent. The energy index rose 2.0 percent since last February, primarily due to price increases in gasoline. The all items less food and energy index was 1.2 percent higher over the year. Here's what we're actually experiencing…..
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