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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
10/19/18

Oil Prices Continue Descent
Posted on Wednesday October 17, 2018

The recent downward movement of crude oil futures continued Thursday.

Oil Traders Said to Mull Nigerian Proposal to Prolong Fuels Swap
Posted on Wednesday October 17, 2018

At least five oil consortiums said they were considering a proposal from the state-run Nigeria National Petroleum Corp. to prolong a crude-for-fuels swap program.

Warburg Pincus Is Said to Mull $3B Navitas Sale
Posted on Wednesday October 17, 2018

Buyout firm Warburg Pincus is considering a sale of natural gas pipeline and processing company Navitas Midstream Partners LLC, sources say.

Exxon Exploration Chief Eyes Africa for Next Elephant Oil Find
Posted on Wednesday October 17, 2018

ExxonMobil is targeting western and southern Africa for the world's next big oil bonanza.

Earthstone Gains Midland Basin Assets for $950MM
Posted on Wednesday October 17, 2018

Earthstone signs two deals to acquire assets in the northern Midland Basin for $950 million in cash and stock.

1 MMbpd Pipeline to Link Permian to Deepwater Ports
Posted on Wednesday October 17, 2018

JupiterMLP is building a 670-mile oil pipeline linking the Permian to Texas' three deepwater ports.

BP Thunder Horse Expansion in Gulf of Mexico Starts Early
Posted on Wednesday October 17, 2018

BP starts up its Thunder Horse Northwest Expansion in deepwater Gulf of Mexico months ahead of schedule.

Oceaneering Rides Recovery Wave With New ROV Technology
Posted on Wednesday October 17, 2018

Technology is increasingly becoming more important for oilfield services companies to gain an edge in what's still a recovering market.

Big Oil's Hired Hands Chase Foreign Boom
Posted on Wednesday October 17, 2018

The biggest providers of oilfield services are surfing a wave of international spending on the back of higher prices.

Equinor Sells Tommeliten Discovery Stake
Posted on Wednesday October 17, 2018

Equinor signs an agreement with PGNiG to sell its non-operated interests in the Tommeliten discovery on the Norwegian Continental Shelf for a total of $220 million.

Wall Street Journal
Commercial News

10/19/18

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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