For Real Estate Professionals Seeking a Market Edge
IRS Issues Rule to Aid Commercial Real Estate Sector
Owners and developers of commercial real estate will now have more flexibility to rework their mortgages or obtain loan extensions with their CMBS lenders under a new federal tax rule. The new rule, issued by the Internal Revenue Service, impact securitized commercial loans prior to the loans going into default. Commercial property owners, who are reeling from the double hit of plunging property values and the significant contraction of commercial lending, have been unable to negotiate for extensions with the current lender while the loan was performing. Until this week, conduits and securitized grantor trusts have been unable to rework or extend loans that are not in default or at immediate risk of defaulting for fear of losing their tax-exempt status.
With now overleveraged real estate assets facing a pending loan balloon date, borrowers are dis-incentivized from reinvesting capital on property upkeep and renovations regardless of the level of net cash flow. By 2012, $153 billion of securitized commercial real estate loans are projected to balloon. Almost $100 billion of that balance will face opposition of becoming refinanced without an additional capital contribution from the borrower. This new IRS ruling will allow servicers to negotiate with borrowers who are not currently in default, allowing the borrowers to maintain their favorable credit status. The change applies to all loan modifications or extensions that are made after January 2008. In a study on behalf of The Wall Street Journal, 528 CMBS loans valued at $4.7 billion were unable to refinance when their loans matured so far in 2009. Three quarters of those offered more than sufficient cash flow to service their current debt levels.
We will keep you posted…
$3,550,000 Medical Office Building Loan Quote
Penstar obtained a loan quote for the refinance of a 98% occupied, 32,000 square foot medical office building located in Northern California. There will be no return of capital to the borrower as the current bank loan comes to maturity. The lender is offering 61% loan to value, 7.25% fixed interest for 5 years with a 25 year amortization schedule. To discuss, please contact Steven Hamermesh at (818) 883-9609 or Hamer@PenstarAdvisors.com..
Helpful Humor
The best antidote for those challenging transactions is to take a moment to have a hearty laugh. Helpful humor is our way of infusing laughter into your work-week
“Cowboy Trying to Get to Heaven” “Well, I can think of one thing,” the cowboy offered. “On a trip to the Black Hills out in South Dakota, I came upon a gang of bikers, who were threatening a young woman.” “I directed them to leave her alone, but they wouldn't listen. So, I approached the largest and most heavily tattooed biker and smacked him in his face, kicked his bike over, ripped out his nose ring, and threw it on the ground. I yelled, Now, back off!!” St. Peter was notably impressed and asked, “When did this happen?” “A couple of minutes ago.” |
30
Day Libor |
10-Year
Treasury |
Prime |
0.32% |
3.74% |
3.25% |
Penstar Realty Advisors can be reached at (818) 883-8600.
Our offices located at:
21700 Oxnard Street, Suite 1870, Woodland Hills, CA 91367