Not all property funding has dried up.

The current real estate market for commercial real estate financing is proceeding on a cautious and moderately active basis.

In the metropolitan New York area and northeastern region of the country including New York, New Jersey, Pennsylvania and Connecticut -- where our firm arranges financing, we see a good demand for permanent financing to replace existing loans and to refinance older mortgages. While the financial press has warned of the large amount of bullet loans coming due, we have not witnessed an excessive demand from this type of borrower. The reason for this is two-fold. One is that permanent lenders have become more realistic and now accept the fact that borrowers will have great difficulty attempting to refinance loans that do not meet today's lending standards. Therefore, we find that they are extending these mortgages at a current market rate for periods up to one year. Second, a large percentage of these loans are secured by office buildings for which it is extremely difficult to find replacement lenders. On the lending side, there are moderate amounts of money available for refinancing from metropolitan New York area thrifts, life insurance companies, foreign commercial banks and real estate credit companies. In the New York area, the thrifts are primarily interested in providing financing for rental apartment and cooperative apartment buildings. They are underwriting these loans on a conservative basis and generally offer a 10-year term with a five-year rate review at rates in the range of 9 percent to 9.5 percent. The underlying cooperative market is more competitive with additional sources offering 10-year interest-only loans for well sold out buildings in the 9 percent range.

The life insurance company market has lost many of the household name insurance companies. It appears that several of these large Eastern-based companies will continue to be out of the market for new business for the foreseeable future. However, their place has been taken by a number of mid-size life insurance companies from elsewhere in the country. These companies are primarily interested in loans in the $3 to $10 million range rather than very large financings. As with the thrift industry, they are also interested in providing financing for apartment properties. The life insurance companies are interested in suburban garden apartment properties that were constructed from the mid-1970's on. The older properties are expected to be modernized and up-to-date with new appliances and excellent maintenance.

In addition, the other two property types include shopping centers and warehouse properties. In the shopping center field, they are primarily interested in open strip centers anchored by food and drug chains. There is also good interest in new long term leases from several of the credit worthy chains expanding into the northeast. The insurance companies are offering terms of three, five, seven or 10 years with 25 year amortization schedules. For older properties with sufficient cash flow. there is a trend from both the lender and borrower to use 15 year self-liquidating mortgages. This type of financing enables the owner of an older property with expiring leases to refinance an existing loan balance and mitigate the lease renewal risk with heavy amortization. After 10 years with a 15-year amortization schedule, approximately 50 percent of the loan is repaid.

The real estate credit companies continue to have ail interest in providing financing. They can provide traditional cash flow first mortgage financing, acquisition financing and forward commitments for to-be-built projects. With the present low short term interest rates, the credit companies can provide a level of interest rates considerably below that of a fixed rate lender. Additionally, they are somewhat more flexible as to the underwriting risks which they are willing to accept. In the acquisition area, the credit companies can provide money for borrowers to purchase properties that are being offered by other lending institutions. Finally, they offer forward takeouts to satisfy the requirements of construction lenders on new projects. The primary activity in this area is the development of new shopping centers with major anchor stores and a small amount of satellite stores.

In summary, there is money available from a variety of lending sources to satisfy many of the needs of today's borrowers.