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High Scrutiny Pushes Lenders to Change Their Market Perspective

Commercial Construction Loan


Dubai and China will soon have some of the tallest skyscrapers in the world.


The US isn’t behind either.


Standing at 1,428-foot, New York’s111 West 57th Street will be among the tallest buildings in the US. Similarly, Seattle and Chicago will boast mega-skyscrapers 4/C and Wolf Point South Tower, respectively.


These facts suggest that the building boom will only get stronger with time. Or is it so?


Revised regulations


Recently, increased scrutiny and revised regulations related to loans are transforming how construction deals are done.


The newly introduced rules need the lenders to rethink their ways of dealing with high volatility commercial real estate or HVCRE. These new rules have altered not only financial benchmarks but also a lender’s modus operandi regarding:


  • How the money will be lent for future acquisitions?
  • How commercial buildings will be developed?


For example, as part of the new rules, the lenders will have to meet the risk weight requirement of a whopping150 percent and the equity requirement of15 percent.


Besides, a federal analysis discovered that financial institutions have a growing tendency toward making underwriting policy exceptions and toward reviewing inconsistently. Resultantly, US’s leading banking regulators are advising lenders to expect an additional degree of scrutiny.


Owning to the revised regulations, the regulators will particularly give their attention to those banks engaged in expanding commercial realty lending activities. Besides, other financial institutions operating big-ticket construction projects can expect to draw attention from regulators.


Why these regulations


These new, stringent regulations come in the wake of the shift taking place in today’s geopolitical landscape. For example, the US–China trade war, the volatile nature of oil prices, and the like are changing the geopolitical climate of the world at large.


To top it all off, banks have become more conservative with their lending model. Why? According to real estate experts, it is because of the perceived late point happening in the existing real estate cycle. Owing to this factor, most lenders are forced to change their focus or reduce their activity centered on HVCRE loans.


The aftermath


The excessive scrutiny and regulations have forced lenders to focus more on term loans instead of construction lending.


The existing market conditions have even allowed some of the lenders to fill the yawning gap by populating their balance sheet by writing high-value commercial construction loans.


That way, these alternative financial institutions are receiving premium pricing on every closed deal. These alternative set of lenders generally deal in private equity, debt funds, and hedge funds.


The silver lining


Although rigid, these regulations are broad enough to be subject to different interpretations by different lending institutions.


That means developers have to find how different financial institutions are working with regulators to disburse funds on completing construction projects.


The newly introduced structure triggers HVCRE in different ways. One solid negative impact of the revised regulations can be on pricing. However, if a developer is in complete control of its leverage, things will not be too difficult to manage.


How this regulatory shift will affect the big-building business in the long run remains to be seen, though.


In a way, these regulations have brought with them a new level of caution for lenders. Just last year these lenders were giving away money for building big real estate projects. But, now, they have become conservative and cautious. Today, a lender is more concerned about allocating funds keeping in mind the risk-return basis; now, a lender views resources as a scarce quantity.


Real estate pundits, too, believe that the developers who are optimistic about the slow but steady growth of US employment will even believe that the interest will stay low. That particular mindset will even want the developers to believe that the real estate will continue to drive growth in the coming time.


For deriving more information about different varieties of real estate financing options available to developers at such trying times, browse through Park West Capital’s offerings. In case you do not know where to start, contact one of our representatives who will happy to help.

E-commerce Growth Impacting the Industrial Real Estate Market?

pwc img


The industrial real estate industry market is rapidly evolving with the demand of consumers for faster delivery of products and with advanced technology in the logistics and retail industries. Due to the changing habits of today’s consumers and the rapid growth of e-commerce, there has been a big spike in the development of massive distribution centers in the US.


There has been an increase in demand for well-located “last-mile” fulfillment centers that are located near population centers by major e-commerce players and retailers for the purpose of meeting the precise needs of consumers for quicker product delivery at their doorstep. Before the product arrives on the doorstep of the consumer, the last mile is essentially the last leg of the product’ trip.


It is essential to understand that the new “retail model” requires industrial distribution centers that should be located near population centers. In addition, these centers should have high ceilings and be compatible with online purchases. It is essential to understand that the development of the modern distribution centers has increased rapidly in the last few years due to the rising demands of these centers by Amazon, Walmart and various other e-commerce leading companies.


The industrial real estate sector is the big winner


Due to the rising demands of the distribution centers by the leading e-commerce players, the landlords are enjoying record high rents and increasing property values. It is important to understand that the industrial vacancy is at an all-time low in the US. It has rapidly declined by 70 basis points from a year ago to an aggregate nationwide vacancy of about 5.3% in the fourth quarter of 2016.


There is no doubt that e-commerce is driving the demand of distribution centers in the US due to increased demand for inventory by the e-commerce players such as Amazon. For example, Amazon, which is one of the leading e-commerce players in the US, continues to broaden its product and service offering. It is estimated that it will require three times or more distribution centers.


Finding the right distribution center is challenging


In the last few decades, the biggest challenge faced by the e-commerce site is to locate distribution centers near the population pools. In order to deliver products quickly with lower logistics costs, it is beneficial for the e-commerce players to have distribution centers near highly populated cities. Major developers in the US are involved in the construction of distribution centers that are not more than six to nine miles away from the major metro cities, as per the recent report published in a leading real estate journal.


Finding such centers has significantly increased the same-day delivery services by major e-commerce players such as Amazon, Walmart, Instacart, Google Express, and others. Most of the major players require easily accessible warehouses in order to deliver products within the promised time frame.


Are logistic facilities, changing to meet these standards?


It is essential to understand that the logistics facilities are not a new concept in the US real estate market, but what is new is the state-of-the-art technology that is used for meeting the needs of the consumers. There were a large number of catalog houses where consumers would make an order and their order would be ordered in old buildings as they have their own trucks. This has been going on as part of the business. But consumers in the US are no longer using catalogs for making orders. They visit the online website and make an order while sitting in the comfort of their home or office with just a simple click.


It’s all about accuracy, speed, and customization


The e-commerce site has the unique ability to track what their online order is. Consumers are able to track their orders online and know where the orders are actually located in most cases immediately. Due to their wide distribution network and strong logistics support, big players like Amazon can deliver it to you in some cases within hours. It has captured a way to do it faster, cheaper and more customized solutions based on the needs and preferences of the customers. How’s that possible? It’s technology. As much as they’re a logistics company, they’re a technology company.”


E-commerce is big business


It is essential to understand that consumers alone in 2016 bought about $400 billion in goods from different online portals. Moreover, the sales of major e-commerce have been increasing rapidly by about 15% per year. In addition, many experts believe that the e-commerce business in the US will only continue to grow and the business is just in its infancy stage. The e-commerce business has driven the business of the industrial real estate sector in a big way.


This update is provided to you by Park West Capital. With over a decade experience specializing in real estate financing and commercial lending opportunities. We have assisted numerous clients with growing their real estate portfolios and providing the funding resources. We firmly believe in accountability, excellence, integrity, entrepreneurship, and teamwork. Contact us at 800-969-4901 to learn more about how we can professionally assist you with your investing needs or fill out our hard money loan application and we’ll get in touch with you.

What Makes Senior Housing The Most Recession-Proof Asset Class?



As per a recent report published in one of the leading real estate journals, it was reported that the demands for senior housing in the united states will grow from 1.4 million units in the year 2015 to 3.2 million units by the year 2040. According to the 2016 market brief of the American Senior Housing Association, it was estimated that nearly 100,000 senior housing units per year will be needed to be built by builders from 2025 to 2040 for the purpose of keeping up with demand.


It was historically difficult for an average investor to access the senior living as an asset class. Specialized operators and institutional investors were some of the primary beneficiaries of this sector as they concentrate on an asset class who demand has been driven by different demographic trends. Through the new private money real estate lenders available in the market, now the mid and small sized investors can also systematically capitalize on these trends (senior housing sector as the asset class).
Regardless of the condition of the overall economy in the U.S, senior living has continuously proven to be a strong asset class because of the rapidly aging population and short supply of newly constructed senior housing units.


Some reasons why the senior housing properties are considered to be one of the most recession-proof asset class in the united states are briefly discussed in this post. In addition, it will also briefly discuss why the rate of growth of senior housing is increasing at an exponential rate.


Reason number 1: high demand


Seniors are retiring at a truly staggering rate in America. It is estimated that about 47.8 million American who were 65 or older have retired in the year 2015. Due to the emergence of baby boomers into the age of retirement, the number of Americans 65 and older will increase to 79. 2 million by 2035.The increase in a number of people retiring will only create a greater demand for senior living facilities by the year 2035.


Reason number 2: low supply


The new construction of senior housing is not keeping pace with the increasing population of elderly people (retired) in America. The construction of senior housing had a significant decline in the year 2008 and it continued to fall through the year 2011. Units under construction have only modest growth through 2014. The need for a more newer units in senior housing is left unaddressed, which is a growing market for better communities and facilities that are tailored made to emerging retires.


– About 10,000 baby boomers are turning 65 each day
– Based on this information, it is estimated that nearly 60,000 new senior housing units will be required each year
– A 173 % increase per year in senior housing units is necessary for meeting the demand


Senior housing vs. other real estate sectors


In the united states of America, the senior housing sector has outperformed all the other sectors including apartments, hotels, industrial sectors, etc.


The Bottom Line


The resiliency of this sector in the commercial market is one of the major benefits of real estate investors in the senior housing space. An essential element of the senior housing market’s success is its lack of reliance on a particular economic or real estate environment. For the last ten years, the senior housing sector has been one of the leading performing commercial real estate sectors in the United States. This includes the period encompassing the 2007 capital market collapse, in-which returns among other commercial sectors fell as much as 20%.


This update is provided to you by Park West Capital. With over a decade experience specializing in real estate financing and commercial lending opportunities. We have assisted numerous clients with growing their real estate portfolios and providing the funding resources. We firmly believe in accountability, excellence, integrity, entrepreneurship, and teamwork. Contact us at 800-969-4901 to learn more about how we can professionally assist you with your investing needs or fill out our hard money loan application and we’ll get in touch with you.

Reasons for the Significant Rise of Urgent Care Centers in the US

urgent care


Increasing demands for convenient healthcare of consumers is driving a significant shift in the real estate strategies. These urgent care clinics are a low-cost alternative to hospital emergency rooms in the US. One of the reasons for its growing popularity is that these clinics have expanded hours. These clinics are well-equipped for diagnosis and treatment of a broad range of limb and non-life threatening illnesses and injuries.


Urgent Care centers are all about convenience of the patient


One of the fastest growing segments of the American healthcare system is the urgent care center industry, which has become a significantly viable alternative for patients due to rising wait times of both emergency and primary care providers in the US.


According to American’2016 benchmarking report, there are 7357 urgent care centers in the U.S, which is a rise of 650 from the 2015 count. In the year 2015, 92% of the urgent care centers in the US have achieved wait times of 30 minutes or less. In addition, there were about 3% of patients only in these clinics who were diverted to an emergency department.


About 22% of the patients have chosen urgent care centers over other medical facilities because they thought wait times would be shorter. As per the same study, about 21 % people preferred these centers due to convenient locations of these clinics.


Urgent Care Clinics in Retail Real Estate


The Ambulatory strategy plan is increasingly implemented by large healthcare real estate service providers in the US. For increasing their profits significantly, the retail real estate providers were leasing vacant retail spaces and urgent care clinics in areas where potential patients live.


Retail landlords are embracing healthcare tenants due to their ability to drive a significant amount of traffic. One of the major benefits of adding more health care providers to their retail mixes to a landlord is that the doctors often have higher credit ratings than any real estate retailers. Real estate providers view doctors or any healthcare employees as people who are free from the effects of the recession. The signs of healthcare tenants increases significantly as most of the retailers in the US are struggling with a rash of store closures and high vacancy rates.


When making real estate decisions, healthcare providers are beginning to think like retailers in order to tap into the retail sectors and consumer behavior.


How is site selection for urgent care centers done?


The top healthcare real estate service providers in the US have now had access to better decision support tools for guiding their site selection and successfully leasing decisions. These advanced tools use data-informed scenarios to determine a forward-looking market footprint.


The tools pinpoint regions with a favorable payer mixer and substantial health needs, which can support a sustainable growth strategy for any real estate service providers. Today the most advanced healthcare real estate providers are working with their potential clients as partners who effectively combines the patient’s data and the health providers’ critical demographic data into advanced site selection tools.


This update is provided to you by Park West Capital. With over a decade experience specializing in real estate financing and commercial lending opportunities. We have assisted numerous clients with growing their real estate portfolios and providing the funding resources. We firmly believe in accountability, excellence, integrity, entrepreneurship, and teamwork. Contact us at 800-969-4901 to learn more about how we can professionally assist you with your investing needs or fill out our hard money loan application and we’ll get in touch with you.

How Will Millennials Moving, Influence Your Real Estate Market?



Consumers under the age of thirty years with at least bachelors’ degree are often referred as the millennials. They are considered to be the most educated generation. They are better informed about their housing options and are already influencing the real estate markets and trends in the US. Real estate analysts and experts have identified the metro areas with the lowest rates and fastest rates of growth. The analysts used the data from the U.S Census Bureau. In the year 2015, the regions that have seen the strongest economic growth and real estate appreciation were the metros with the fastest rates of educated millennials’ growth and economic growth. Appreciation in the real estate of these regions highlights the real power of then millennials.


Metros with the highest growth rate of the educated millennials


The highest rates of population growth were reported in metro cities of the West, Southwest, and Southeastern regions. With a 7.6% population increase in 2015 from the year prior, Nashville ranked first in the college-educated millennials’ growth. Austin, Orlando, Seattle, and Denver followed closely behind Nashville in terms of educated population’s growth.


Reasons for enhanced growth of the millennials


There are many reasons for increase in the number of educated millennials in various metros of the US. These include well-performing job markets and entrepreneurial opportunities. In addition to this, thriving arts and cultural scenes, and high rank in various quality of life measures are some of the reasons behind the increase in the number of educated millennials over the years.


New York City, San Francisco, and Los Angeles have higher rents than the places which saw an increase in the number of educated millennials. In addition to this, these metros have created a virtuous cycle of job growth for attracting further young talent, by orienting their economies towards technology and professional service-oriented fields. Rise in the number of educated youths in these regions has helped in boosting the sales and rents of various real estate properties such as an apartment, single-family, office, and retail markets.


2015 One-Year Population Change


Cities with declining manufacturing and less prosperous trade hubs, which are located in the rust belt and the Midwest, are considered to be the lowest performing metros in terms of real estate appreciation. As these metros don’t provide the same economic opportunities or quality of life as compared to other metros, these cities have the lowest economic growth and as well as those of the educated youth. The least performing metros don’t offer reasonable incentives for the educated youth to move to these areas as these areas are marked by harsher climate conditions and industrial diversifications.


In 2015 annual growth and five-year growth plans, some of the metros like Kansas city, Cleveland and Chicago were ranked in the bottom ten. Low economic growth suggests that the long-term challenges for these areas are still not addressed.


Atlanta, Phoenix Sacramento, and Las Vegas are ranked in the bottom ten over the past five year period. Due to the improvement in their ability to attract young and college-educated workers, the economic growth of these cities has improved considerably in the year 2015.


Raleigh-Durham: A curious and unexpected outlier


This metro has several top-tier universities, which make it one of the best metros for education in the US. In addition to this, it has a growing biotech sector of the local economy. But, it ranks among the bottom ten on both the lists. It is important for such metros to simply retain their college graduates to enhance the economic growth, rather than pulling the educated millennials from elsewhere and displaying strong growth.


2010-2015 Annual Average Population Change


The report of best and worst performing metros in terms of economic growth and educated millennials may serve as a predictor of economic winners and losers in the decades to come.


It is important to understand that a growing millennial population in these metros will stimulate demand for office and retail space. In addition to this, the demand of single- and multifamily homes will also increase due to increase in the number of educated youths. Increase in the demand of commercial as well as industrial properties serves as an underpinning for the appreciation of the value of real estate.

Real Estate Investing in 2017


Are you planning on getting started with real estate investing in 2017? First time investors have a tremendous wealth of opportunities to find lucrative properties that can potentially result in substantial investment income, but it’s important to understand some of its fundamentals to ensure a process that involves as little risk as possible.

Real estate is an asset form where liquidity is limited compared to other investments. It depends heavily on capital (this may also be gained via mortgage leverage) as well as cash flow. Failure to fully comprehend such factors and lacking the proper management can make it hard for first time investors, often resulting in negative cash flow which may result in having to resell a property for less than what it was originally purchased.

Risk management, net operating income (NOI), capital appreciation, these are all important concepts to understand before dipping your toes into real estate investing. Once you’ve done your homework, we can assist with providing the knowledge and funds necessary if you’re eyeing a worthwhile project or opportunity.

This update is provided to you by Park West Capital. We have over a decade of experience specializing in real estate financing and commercial lending opportunities. We have assisted numerous clients with growing their real estate portfolios and providing the funding resources. We firmly believe in accountability, excellence, integrity, entrepreneurship, and teamwork. Contact us at 888.808.9417 to learn more about how we can professionally assist you with your investing needs or fill out our hard money loan application and we’ll get in touch with you.

The Multiple Reasons Why Multifamily Real Estate Financing Has Become Important

Real estate can surely be an alternative for all those who do not wish to withstand a stock market’s volatility. This sector is lucrative for those investors wishing to grow their capital rather than just passively investing their money into a product or a fund that someone else manages; and if there is a doubt, then google Zhang Xin and Donald Bren.


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Small-Balance Commercial Real Estate Loans and Their Types

The small balance commercial realty loan—an overview


A small balance realty loan is a real estate asset–based business model in which the capital equity’s amount/size (which is needed to do an average deal) is way lesser than USD 2,000,000. However, there is no specific bracket on the amount of capital equity required to qualify for being a small balance commercial real estate loan.


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A Guide That Overviews Foreigners Who Are Investing In The U.S. Real Estate Market

The National Association of Realtors carried out a survey showing that many of the foreign nationals or international buyers invested USD 82.5 billion in the U.S.’s residential real estate market; the survey covered a 12-month time period and ended in March 2012. Now, this value of USD 82.5 billion can be equated to 4.8 percent of the total sales that happened within the country’s residential realty market.


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Why Is There A Refinancing Boom In 2016?

From December 2015 to mid-February 2016, for the first time in nearly ten years, the Federal Reserve increased its rates. However, in that period, the mortgage rates dipped to their lowest level—something not experienced in over three years. Also, we must note, the largest refinance need (nearly more than $110 billion in due notes) are set to mature in the CMBS market from 2016 through 2021.


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