LSI 2010 Real Estate Joint Ventures conference materials.pdf

Tracy B. Edgers of Wells Fargo Bank Speaker 3: 2
Market observations
Pricing is down to 35%-45% +/- from peak valuations
Cap rates have increased 200 bp +/- while rents have
declined 10% - 30% depending on the market
Loans in special servicing are growing $2-3 Billion per
month; currently $50 billion
Massive need for de-leveraging
Vast majority of deals done in past 12 months had
assumable debt, seller financing, or lender willing to
facilitate a sale
Some traditional transactions are getting done
2
Underwriting trends
Banks represent 58% of market but have limited capacity
with a good portion of that capacity being used for REITs
and extensions
Life Companies represent only 11% of market > Targeting
$15 billion net new originations
Quality, well-leased (85%+) properties in good markets with
moderate leverage (50-60%; 13-15% debt yield) and
moderate size (< $150mm) can get done
Biggest Issues:
Change in property values combined with new underwriting
standards
Large loans
Need for additional capital to stabilize deals
Looming maturities outstrips new origination capacity
3
Law Seminars International | Real Estate Joint Ventures and Funds | 02/08/10 in Seattle, WA