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Financing market update: cash is available.

Three speakers at a National Realty Club luncheon dispelled the notion that no mortgage money is available

With lending amounts ranging upwards to $300 million, the speakers from GE Capital, New York Life Insurance Company and New York Federal Savings Bank gave some encouragement to the audience that real estate can be financed.

Held at the 60 East Club in the Lincoln Building, industry members were told that for larger amounts of money, personal guarantees were not even necessary if there was enough equity.

Charles W. Schoenherr, district manager of GE Capital, said their lending program is structured around cash flow and the expectation of at least 15 percent in equity with some flexibility, however, in the form of a kicker. They are in the market for deals upwards of $6 million and looking for new customers.

They are bullish on retail strips, apartments, mobile home parks and industrial and specialty application buildings. "Office buildings are more problematic," he said.

Long term, Schoenherr believes, the industry will have to "slug it out" for a few years, because there is no demand. "Job growth must be the primary focus," he said. He also thinks the economy will strengthen, albeit slowly, after the election while retail sales and corporate profits improve due to the low interest rates and the progress made with workouts.

David T. Kra, a real estate investment analyst and mortgage financier with New York Life Insurance Company, said they are looking for Class-A properties in Tier 1 developments that have staggered lease renewals and classy tenants. With $8 billion in real estate assets, the company lends on deals primarily in the $10 million and up range but will go down to $5 million on occasion.

New York Life has about half its loans in office projects, and they are still interested, Kra said. Approximately 20 percent of the loans are in apartments and 10 percent in retail. Another 20 percent is in industrial and special use properties.

Kra is concerned that in general, where the equity has dropped, "there will be no one to take the deals out." The developers need support to fund tenant improvements, he added.

Donald L. Shapiro is the CEO of New York Federal Savings Bank, which was founded by the law firm of Herrick Feinstein and other investors with $5 million in 1989. Shapiro said they expect to lend $12 million this year on some underlying co-op mortgages, townhouses and individual apartments.

"These are borrowers who aren't being paid attention to," he said.

He does not see prices coming back and explained the commercial market activity is actually causing a further reduction in equity for owners. With more than 60 percent of tenants paying above market leases, Shapiro Wondered what will happen when these leases roll over and the deals reduce the equity.

Shapiro, a former real estate executive, said he is often asked if the banking life is boring.

"When something is exciting in a bank it's gone wrong," he said. "The object is to keep it quiet and dull."
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Title Annotation:speakers at National Realty Club meeting discuss financing for real estate market
Author:Weiss, Lois
Publication:Real Estate Weekly
Date:Nov 4, 1992
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