Q2 2011 CRE Loan Quality Report

Apartment and office debt yields have fell in the second quarter, reflecting that lenders are responding to improving property values even though property income is improving at a slower pace. In effect, apartment and office borrowers are encumbered with more debt for every dollar of cash flow their properties produce, heightening downside risks should economic circumstances undermine cash flow and at refinancing.

August 19 | Bloomberg

Lenders Make Riskier Apartment Loans in Second Quarter | by Hui-yong Yu | Rising prices in the nation's leading commercial real estate markets prompted lenders to make riskier loans in the second quarter. According to a report released today by Chandan Economics, debt yields -- the ratio of property income to loan balance -- for new office and apartment loans fell markedly between the first and second quarter. The largest systematic declines were in New York, Washington, DC, and San Francisco. Bloomberg's Hui-yong Yu writes:

August 19 | GlobeSt

Mortgage Metrics Dropped in Second Quarter | by Carl Gaines | Both loan-to-value ratios and debt yields declined between the first and second quarters, Carl Gaines writes in GlobeSt's coverage of Chandan's latest report on the quality of newly-originated mortgages. Gaines goes on to explain as follows:

August 11 | Fox News

Broader Implications of Sovereign Debt Crisis | A Fox News panel considers the impact of rising debt levels on the health and sustainability of democratic governments. Not the typical issue that Sam Chandan comments on, he nonetheless chimes in that democracy can thrive even in the midst of economic turbulence and frustration with the political process. He adds that the world's developed economies face very serious challenges in narrowing their defects to sustainable levels.

August 10 | National Real Estate Investor

Will the Fed's Rate Decision Bolster the Economy? | by Matt Hudgins | Following the Federal Open Market Committee's announcement that the target Fed Funds rate will remain at historically low levels through mid-2013, Matt Hudgins warns "commercial real estate investors to be prepared in case capital costs rise despite the Fed’s efforts." Sam Chandan offers that "low short- and long-term interest rates relieve some of the upward pressure on cap rates and mortgage financing costs.” Still, the Fed's move is not a panacea.

August 8 | National Real Estate Investor

What Does S&P Downgrade Mean for Real Estate? | by Matt Hudgins | Shortly after S&P's announcement that it was downgrading US debt, Sam Chandan spoke with NREI contributing writer Matt Hudgins about the implications of the move for the economy and real estate markets. “The negative impact of S&P’s move on investor and consumer sentiment is a real issue that will negatively impact global equity markets and undermine confidence,” Chandan warned. There are direct implications for real estate, as well.