CRE’s Coming Orwellian Abnormality

The CRE market is anything but “normal” in the traditional sense. Lenders are more demanding than ever and there is less capital on the table than in recent memory.

CAP rate pricing strategies are increasingly difficult to pencil-out these days. After we doing the math we are often left shaking our heads. Owners are facing note calls and having some sleepless nights wondering how to score lending. Lenders are insecure and uncertain about what the Feds might do next.

Welcome to “ABNORMAL” where normalcy, whatever it is or was, exists no more. Welcome to normal defined by abnormality. Our CRE world is fast becoming a frenzied marathon that owners discover takes them nowhere, slowly. Yikes!

Enter Legislative Reform and No Risk Lending

President Barack Obama has signed into law a 2,300 page legislative act known as the “Dodd-Frank Wall Street Reform and Consumer Protection Act” (HR 4173).

Download the Davis Polk Summary of HR4173

Although the bloated document’s proponents claim the new law will right the financial wrongs that created the current abnormal state of affairs in lending, others think it may create more uncertainty in the lending market.

Proponents of the legislation claim it will reduce systematic risk in lending and thus protect the banks and the lenders.
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