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Mortgage Markets Crave For Shopping Centers


Retail Properties Command Best Realty Capital Market Pricing

Chicago, August 14, 2006 -- Although rates have been climbing throughout the year, permanent mortgage pricing terms remain relatively competitive. And within the commercial mortgage property sector, “retail properties rank high on lenders’ lists,” according to Nat Zvislo, research director of the Real Estate Capital Institute.

Lenders still prefer retail properties because of strong historic performance. Overall national occupancies are within the single-digit figures and new construction is paced. This sector maintains its development discipline based on overall expansion plans of national and regional retailers.

Overall trends are positive for this property sector. A major shift continues from enclosed mall development to lifestyle and community/neighborhood centers. Within most urban areas, “infill” properties remain top priorities for many developers seeking to serve the intercity markets.

Due to strong fundamentals, shopping centers attract the lowest interest rates and most aggressive underwriting terms. Sampling of the market indicates the following terms are readily available for most retail properties:

1) Up to 80% loan-to-value/purchase price
2) Interest-only payment combined with 30-year amortization - even for older properties
3) Over and above immediate funding timelines, forward-delivery costs reduced to as low as two basis points per month
3) Streamlined third-party cost bundled with loan underwriting fees at reduced levels
4) Less differentiation between underwriting anchored and un-anchored centers

Mortgage spreads reflect excellent pricing. Extremely low-leverage properties attract pricing as low as 75 to 80 basis points over comparable-term treasuries. More typically leverage properties (e.g. 75 to 80%) capture spreads of 90 to 130 basis points or more over comparable-term treasuries. Higher-risk, redevelopment, high-leverage and other similar loans are priced within the 140 to 160 basis point range. Mezzanine level financing and other subordinate mortgage debt climb to the mid-to-high-hundreds.

For more information about daily rates for retail properties, please visit and the Real Estate Capital Institute website at For updates on rates every hour each business day, call the Real Estate Capital Rateline at 7RE-CAPITAL (773-227-4825).


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