Magazine article Mortgage Banking

CRE Loan Prices Rise for Seventh Straight Month

Magazine article Mortgage Banking

CRE Loan Prices Rise for Seventh Straight Month

Article excerpt

Commercial real estate (CRE) loan prices rose in June for the seventh consecutive month, continuing an upward trend over the past 15 months, according to DebtX, Boston.

DebtX said the aggregate value of commercial real estate loans it prices to collateralize commercial mortgage-backed securities increased to 88.4 percent as of June 3o from 88.2 percent in May. A year ago, loan values stood at 84.9 percent.

"Rising prices have prompted a growing number of sellers to take advantage of liquidity in the marketplace," said DebtX Chief Executive Officer Kingsley Greenland. "It remains a good time to sell due to strong investor demand."

DebtX said it priced 54,946 commercial real estate loans in June with a $766.1 billion aggregate principal balance. These loans collateralize 742 U.S. CMBS trusts.

A separate report from Environmental Data Resources Inc., Torrance, California, said the volume of Phase i Environmental Site Assessments [ESAsJ, considered an indicator of commercial real estate lending and of general real estate market conditions in the United States, increased by 13.4 percent over the same period a year ago--the largest such jump in the past 15 months.

By contrast, the number of Phase i ESAs performed in the United States increased by 7 percent in 2011 from 2010, a year in which the volume of commercial and multifamily originations also increased, the Mortgage Bankers Association said. ESA activity in the second quarter rose by 8.4 percent over the previous quarter with 104,617 ESAs ordered in the first half of the year.

The report said 70 percent of its orders for ESAs were from traditional lenders, with 22 percent from agency lenders such as Fannie Mae, Freddie Mac, the Department of Housing and Urban Development (HUD) and the Small Business Administration. CMBS lenders represented 7 percent of ESA volume.

"There is a strong correlation between the real estate lending and Phase 1 ESA reporting," said Joseph Derhake, president of Partner Engineering and Science Inc., El Segundo, California, an environmental and engineering consulting firm. "Phase 1 ESAs are ordered when there is a serious intent to arrange financing for an acquisition or to recapitalize an asset. …

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