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CIT: U.S. Commercial Real Estate Financing Outlook for 2012

May 30, 2012, 06:30 AM
Filed Under: Commercial Real Estate

Approximately $1.4 trillion of commercial mortgage-backed security (CMBS) transactions are coming due over the next three years, creating an excellent climate for real estate financing. Since many lenders are saddled with large portfolios and a number of European banks are experiencing funding issues, there is a need for financing for new construction or financing to add value to existing properties in the middle market space, according to Matt Galligan, Group Head of CIT Real Estate Finance at CIT Group Inc. 
Galligan discusses the current trends and financing opportunities in the 2012 U.S. Commercial Real Estate Financing Outlook, the latest in a series of in-depth executive Q&As featured in CIT’s Executive Spotlight series.

Opportunities in Retail and Office Sectors
The cost of financing across most segments has increased because of the weak economic recovery both in Europe and the United States. “We think that the spreads are very attractive in today’s market and see significant opportunities onthe retail side and select opportunities in the office sector,” says Galligan. “Multi-family properties, however, remain very competitive because of the government’s role with Fannie Mae and Freddie Mac.”

24-Hour Cities Remain Attractive

“We see opportunities in the Boston, New York City and Washington, DC, corridor and nationally in selective markets for low leveraged financing for office, retail, multi-family and industrial properties,” says Galligan. “We also view
these locations as being 24-hour cities with a constant influx of people around the clock. These cities are secure, vibrant and contribute not only to the office dynamic but also to the retail and multi-family dynamic.”

Private Equity Dominates Distressed Commercial Real Estate Market
“The private equity community dominates the distressed commercial real estate market,” says Galligan. “When the cycle turns toward new development and these firms can achieve double-digit levered returns, they will move their money into the commercial real estate sector.”

Read the 2012 U.S. Commercial Real Estate Financing Outlook

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