Current Debt Market Situation
Wondering what we are seeing in the debt markets for different classes.
i.e we currently presented a large format retail asset ~$15M NOI ~3+ yr WALT and were looking for 50% financing. BIG THUMBS DOWN.
Talk to me.
DCR & Debt Yield?
DCR: 3.37x Debt Yield 31.8%
31.8% DY on $15mm NOI at 50% LTV implies a 16% cap rate……..
Wait what? A 31.8% debt yield, is this current or some sort of stabilized figure upon lease up? If inplace, its unheard of unless your taking on like 15% LTV loans and you should have no problem finding a lender.
If this is based on proforma, you'll have to provide strong supporting justification on lease up at market rates with an assumption for decent TI/Leasing commissions built in, and assuming submarket occupancy is decent, you might find some interest from a lender.
31.8% is in place - 97% occupied large format in a tertiary market. The second half of your response was all accounted for
And you got a complete pass from the entire CMBS market? Are you the asset owner or banker/broker?
It’s a pass because it’s a tiertiary market. A 16% cap doesn’t imply a good deal. It really means nothing. Actually it tells me you’re probably buying something with a ton of risk because you’re going to try to change zoning and/or use to unlock value. But at its worst, you make your money back in 7 years on cash and run it to zero.
It’s unreal how allergic the market is to retail. Do you still need financing? PM me if so.
This!!!
Interestingly enough that hasn't been what we've been finding lately. It seems that now is one of the best times to find retail debt over the past 5 years.
Lenders are seeing generally decreasing vacancy rates across the country as the current retailers have withstood both Amazon and Covid. Grocer-anchored shopping centers and high quality strip malls are pricing pretty similar to industrial.
Tertiary market, 97% occupied, anchors have options out the wazoo and are high performers. Sales are ~$500/psf but that is reflective of rents. Anchors are not on the verge of BK.
Active deal - can't really give out more details.
Delete- misread.
Is this on the border by chance?
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