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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 provided the best financing for shopping centers in the U.S. and abroad since 1977.

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
8/25/19

Oil Prices Mixed for the Week
Posted on Thursday August 22, 2019

WTI and Brent crude futures declined Friday, but the Brent managed to show a slight week-on-week increase.

AAA Sees Falling Fall Pump Prices
Posted on Thursday August 22, 2019

Most US motorists could save 25 cents or more per gallon on gasoline this fall compared to this summer, claims AAA.

US Oil, Gas Rig Count Plummets by 19
Posted on Thursday August 22, 2019

The U.S. dropped 16 oil rigs and three gas rigs for a net loss of 19 rigs, according to BHGE.

Keystone XL Clears Hurdle in Nebraska
Posted on Thursday August 22, 2019

TC Energy Corp.'s long-delayed Keystone XL oil pipeline cleared a significant legal hurdle as the Nebraska Supreme Court ruled that regulators approval of the conduit's route through the state was valid.

Saudi Aramco Awards 28-Jacket Project
Posted on Thursday August 22, 2019

A consortium of Larsen & Toubro and Subsea 7 subsidiaries has won an EPCI contract from Saudi Aramco.

Half of Venezuela's Oil Rigs May Shut Down If US Waivers Lapse
Posted on Thursday August 22, 2019

A looming U.S. sanctions deadline is threatening to clobber Venezuela's dwindling oil-rig fleet and hamper energy production in the nation with the world's largest crude reserves.

Texas Driller Sues US to Get Visa for Big-Game Hunter
Posted on Thursday August 22, 2019

Matador Resources Co. is suing U.S. immigration authorities to give the oil driller's $110,00-a-year big-game hunting expert a visa.

$50 Oil Threatens Future Subsea Growth
Posted on Thursday August 22, 2019

2019 will mark the first time since 2014 the subsea market will have year-on-year growth, but declining oil prices could threaten this growth, according to Rystad Energy.

Oil Prices Falter Before Jackson Hole Speech
Posted on Wednesday August 21, 2019

WTI and Brent futures posted losses Thursday.

Trump Admin to Meet to Discuss Biofuels Fallout
Posted on Wednesday August 21, 2019

Top Trump administration officials will meet to consider options for quelling a backlash in politically important farm states over recent biofuel policy moves.

Wall Street Journal
Commercial News

8/25/19

WSJ.com: US Business

Google Curbs Political Debate by Employees
Google tightened its guidelines on how employees communicate about politics and topics not related to work, in a major shift for a company that has long prided itself on open debate.

U.S. Appeals Court Freezes Antitrust Ruling Against Qualcomm
A federal appeals court halted for now a ruling that found Qualcomm committed an array of antitrust violations, a boost for the chip maker that allows it to maintain its business practices for the near future.

Disney Enlists Superfans as It Prepares to Face Off Against Netflix
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Amazon Has Ceded Control of Its Site. The Result: Thousands of Banned, Unsafe or Mislabeled Products
Just like other tech companies that have struggled to tackle misinformation on their platforms, Amazon has proven unable or unwilling to effectively police third-party sellers on its site. A Wall Street Journal investigation found 4,152 items declared unsafe by federal agencies, deceptively labeled or banned by federal regulators.

The Atlantic, Propped Up by Laurene Powell Jobs, Charts New Course
The Atlantic magazine, which has beefed up its staff and expanded its coverage in the past 18 months, faces a test when it launches a new paywall strategy sometime after Labor Day.

BOE's Carney Says Trade War Imperils Global Growth
Bank of England Gov. Mark Carney said in an interview at the annual central bankers symposium in Jackson Hole, Wyo., that global growth prospects are flagging due to a trade war pursued by Washington.

Powell Issues Warning Over Trade, Signals More Rate Cuts Are Possible
Fed Chairman Jerome Powell gave his most forceful warning yet about the risks to the U.S. economy from escalating trade tensions and the limits to the central bank?s ability to cushion any fallout.

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