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ORLANDO-Despite a sagging economy and the after-shocks of the Sept. 11 terrorist catastrophe, commercial real estate lenders have not closed the door on permanent financing loans but are doling out funds only to the most qualified projects, brokers tell GlobeSt.com.

Interest rates in some markets are below 7%. Loan-to-value ratios, depending on the underwriting guidelines, are up to 75% and 80%. On credit tenant leased properties, the LTV is up to 90%.

“Notwithstanding the tragic events of Sept. 11, long-term interest rates are down to the low 7% range, making it an excellent time for investors to lock in their fixed-rate permanent financing for up to 15 or 10 years,” David J. Patten, president, Interlachen Commercial Mortgage, Orlando, tells GlobeSt.com.

Patten says, “Thanks to the Fed’s multiple interest rate cuts during this past year, the 10-year Treasury bond yield has dropped as well, to the 4.5% to 5% range.”

He says, “With long-term interest rates tied to various spreads above these Treasury rates, it’s a good bet that we’re in for another year of favorable permanent financing for qualified properties.”

The longtime Orlando mortgage banker says the refinancing volume taking place around the country today is “probably going to stay at an all-time high if history repeats itself. And there is no reason to believe that history is going to repeat itself as far as what happened during the late 80s and early 90s.”

Meanwhile, life insurance companies and commercial mortgage-backed securities lenders are “cautiously processing qualified properties of all types that are being bought and sold, and that are well underwritten.”

Among the income-producing and owner-occupied properties most favored currently by life insurance companies and commercial mortgage-backed securities lenders are anchored shopping centers and other retail properties; office buildings; industrial structures; multifamily assets, parking garages, mini-storage warehouses and mobile home parks.

Interest rates are pegged at a spread over the corresponding Treasury. For example, 10-year Treasuries are currently yielding 4.5% to 5%. If the spread were 2.45%, the fixed interest rate might be 6.85%, based on a Treasury yield of 4.5%. A spread of 2.45% would mean a fixed rate of 6.95%; a spread of 2.5% would bring the rate to 7%.

“Because of the rapid downward movement of the 10-year Treasury bond during the last several weeks, the life insurance companies and the conduit (CMBS) lenders have widened their spreads in many instances so as not to follow the yield curve down below an interest rate level that the purchasers in the CMBS market are unreceptive to,” Patten says.

However, “most life insurance company lenders are willing to lock in the interest rate at the time of the application, whereas the conduit lenders will not lock in the interest rate until after their commitment has been accepted or shortly before closing,” Patten tells GlobeSt.com.

Among the biggest lenders in metro Orlando are life insurance companies and Wall Street conduits.

On the retail side, John M. Crossman, senior vice president/director, retail services, Trammell Crow Co., Orlando, tells GlobeSt.com., “Credit deals in good locations are still solid,”

Crossman says, “Properties less than solid are really struggling and it takes more time in all aspects to get deals done.” But the broker says “the funding spigot for good (credit) deals is as strong as ever.”

Grocery-anchored retail with credit, such as a Publix Supermarkets Inc., “remain very strong,” Crossman says. “Industrial is solid while industry experts project suburban office will make a comeback” in 2002.

The retail industry specialist says the big plus in today’s lending environment is that “we are not seeing fire sales or foreclosures.” Crossman says, “People still see real estate as a good investment.”

Brokers in other parts of the country tell GlobeSt.com even hotels, hard hit by the travel and tourism industries, are being considered again as loan candidates.

Hotels have not been a favorite among lenders for the past year because of lower projected room revenue and occupancy rates. (Please see Big Picture story on the National Page.)

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