Commercial Real Estate Industry - Is the Condo Craze Over, or Just Gaining Steam

Over the last two years there has been so much condo activity that many commercial real estate lenders are starting to express concern over the future stability of condo markets. Some lenders have recently found themselves over allocated in condominiums as a result of the recent activity and have therefore become wary of all but the best opportunities.

While the best opportunities (typically in Florida, Southern California and select destination markets) are still attractive, developers in smaller markets are finding condos much more difficult to finance in recent months.

The reality is that many of the lenders expressing concern over the current state of affairs in the condo market are the lenders that have been the least active and have less knowledge about the asset class. Lenders familiar with the condo market are not as concerned about the opinions of their peers, but rather with the fundamentals of the projects and sponsors they underwrite.

Projects that demonstrate that they underwrite according to the following guidelines should be able to find financing even with the caution currently being expressed by some in the lending community:

Presales: What type of presales have you been able to generate? The higher the percentage of presales, the more are lender interest you will attract.

The bottom line is that good projects from good sponsors will always receive interest from the capital markets.

Mike Myatt is Executive Managing Director of Pacific Security Capital, a leading commercial real estate investment banking firm providing commercial real estate loans, structured finance, investment sales and advisory services. Contact Pacific Security Capital at 1-800-844-6085 or by visiting the company website at http://www.PacificSecurityCapital.com

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