From the Editor
BY JENNIFER E. GARRETT, EDITOR
In the Past Month
This pas T May, The delinquency raTe for coMMercial Mor Tgage-backed
securi Ties (cMbs) hi T an all-TiMe high of 10.04 percen T, according To da Ta
from Trepp LLC. This surge in defaults has long been expected, as five-year loans made at the
peak of the market in 2007 are coming due this year.
Those loans were originated when standards were at their weakest, and credit was flowing
freely. As any commercial mortgage broker working in today’s market knows, those days are
behind us. Loans being originated now are more heavily scrutinized than ever, and any deal
must be thoroughly researched and presented — with all the i’s dotted and t’s crossed — if
it hopes to make it past lenders’ stringent underwriting requirements. The smallest details
can make or break a deal, as SB Capital’s Jeff Rauth explains on Page 21. Knowing how every
lender handles different scenarios can mean the difference between securing funding — or
walking away empty-handed.
Getting the details right is especially important when submitting a deal for U.S. Department
of Housing and Urban Development (HUD) loans. Love Funding’s Adrian Hartman offers five
insider tips for getting past HUD’s close scrutiny and closing the deal on Page 24.
Knowing your lender — what they want from a loan, what works with their portfolio, what they
will and won’t accept in a loan package — is especially critical in today’s market. Jim Fried of
Aztec Group and Joseph Givner of Higer Lichter & Givner explain how to position your deals for
approval on Page 30.
With defaults and delinquencies ever-present in commercial real estate news, it’s no surprise
that exit strategies are becoming more and more important to lenders. Having a solid exit
strategy can help deals get funded, according to Global Fundings Inc.’s Fred Hollister. He presents different scenarios and what they may mean for your clients on Page 36.
No matter what property type you’re working with, underwriting is something that everyone
has to worry about. JLitt Inc.’s Jay Litt walks us through presenting a solid package for hotels
on Page 32.
Knowing what to look for and what to present to lenders are just some of the critical underwriting points that brokers must understand to succeed in today’s heavily scrutinized lending
environment. By focusing on submitting high-quality loan applications, you can position your
business to thrive despite these challenges.
Tunisia jenniferg@scotsmanguide.com 1.8 GDP;contraction;rate;in;’ 11
BEYOND;OUR;BORDERS
The country that sparked the Arab Spring has
suffered a fall in its tourism sector this past year.
Tunisia received only 4. 5 million visitors — significantly below 2010’s 7 million visitors — because of security concerns in a year marked with
regional uprisings. As a result, Tunisia’s gross
domestic product contracted by 1.8 percent and
unemployment soared to more than 18 percent,
according to Reuters.
18%
Unemployment;rate;in;’ 11
In addition, businesses likely will continue to
take a conservative approach to expansion this
year until there is more clarity on the elected
Islamist government’s openness to foreign investment. This may be a drag on the country’s
already sluggish office market. A combination
of limited demand and a high level of new construction activity has been restricting rental
growth, according to a report from Knight Frank.
This past fourth quarter, Tunis’s prime office
rents averaged 18 dinars (nearly $11) per square
meter per month, and the overall office vacancy
rate was between 12 percent and 15 percent, according to a report by Jones Lang LaSalle.
Tunis’s;overall;office
vacancy;rate;in;Q4;’ 11
12%
4. 5
Visitor;arrivals;in;’ 11
million
—;RANIA;OTEIF Y
Consumer spending creeps up
WASHINGTON, D.C. — Consumer spending increased
0.3 percent this past April, one tick higher than March’s
downwardly revised 0.2 percent, according to the U.S.
Commerce Department.
Spending was up by $31.8 billion, while personal incomes increased 0.2 percent, or $31.7 billion.
Disposable income increased by 0.2 percent, or $22 billion,
after rising 0.4 percent, or $45.9 billion, this past March.
Personal savings as a percentage of disposable income
increased 3. 4 percent this past April after increasing
0.5 percent in March, also a downwardly revised figure.
Core prices — prices excluding energy and food items —
were relatively flat in April, increasing 0.1 percent after
climbing 0.2 percent in March.
Retail sales increase
WASHINGTON, D.C. — Retail sales increased 0.1 percent
this past April over March, with motor vehicle sales up
0.5 percent, according to the U.S. Census Bureau.
The gain was shy of expectations with economists predicting a 0.2 percent increase and short of March’s gain,
which was 0.7 percent.
Retail sales, including food service sales, adjusted for
seasonal variations but not for prices, increased from
$407.8 billion this past March to $408 billion in April.
Consumer confidence drops
NE W YORK — Consumer confidence in the United States
dropped for the second consecutive month this past
May, according to the Conference Board.
The index fell from 68.7 to 64.9, the Conference Board said.
This past May, consumers were less confident about
current business conditions, but “more upbeat,” about
the prospect of rising income.
The numbers indicate the pace of economic growth
“may moderate” in the months ahead.
In May, the number of respondents to the survey indicating economic conditions were “good” fell from
15. 5 percent to 13. 6 percent. The percentage of respondents indicating conditions were “bad” rose, climbing
from 33. 2 percent to 34. 3 percent.
The percentage of consumers indicating jobs were
“plentiful” fell from 8. 4 percent to 7. 9 percent.
Next release
Consumer confidence: July 31
Durable goods orders inch up
WASHINGTON, D.C. — U.S. durable goods orders increased 0.2 percent this past April, a gain that fell short
of the 0.7 percent increase economists expected, according to the Commerce Department.
After declining in March, new orders increased to $215.5
billion this past April. March’s estimate of a 4.1 percent
drop was revised to a decline of 3. 7 percent.
Transportation orders in April carried the category, increasing by 2.1 percent to $62.2 billion. With transportation orders excluded, new orders dropped 0.6 percent in April.
Much of the gain in transportation orders came from orders
for motor vehicles and parts, which rose by $2.3 billion.
Excluding defense, new orders increased 1.2 percent as
new capital goods orders related to defense fell by $1.8
billion or 21. 5 percent to $6.6 billion.
Next release
