Lending institutions normally lend 60 percent to 75 percent of their calculation of a building's value to finance construction or purchase. The borrower must come up with the rest.
However, a phenomenally rising market has thrown known figures out of whack, and developers say real estate lenders' guidelines have not kept pace. They say lenders' reluctance is holding back sales, as property owners keep their buildings off the market and wait for guidelines to catch up.
Meanwhile, lenders are holding back (loan) sales of their own, waiting for rents to fall back in line with traditional guidelines rather than altering the guidelines to fit what they see as a temporary phenomenon. Lenders traditionally use rental rates of $40 to $60 per sf as their guideline, rather than the skyrocketing downtown rental rates of $80 to $100 per sf.
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
