Real Estate Capital Management

Press Release:

February 28, 2015

RECM Predicts Structured Finance to Replace Conventional Commercial Real Estate Financing

LOS ANGELES, February 28, 2015 The global economic meltdown in 2007-2008 has forced the commercial real estate sector to seek alternative sources of financing. As a growing number of lenders and institutional investors seek to minimize risk associated with potentially overvalued real estate assets, developers and acquisition firms are relying on structured finance to meet capital requirements.

“Although, the industry definition of structured finance is still being defined, the basic premise is credit enhancement and downside protection” states Alan Daniels Chairman/CEO of Real Estate Capital Management (RECM).

Daniels further states, “Today’s global real estate markets suffer from lack of standardized valuation methods and lack of fungible assets as collateral. Access to global capital markets can make or break local real estate markets. The problems existent in today’s marketplace is the vast disconnect between the risk adverse mindset of global institutional investors and outdated capital raising methods of local real estate developers and owner/operators. The problem is further compounded by the overnight disappearance of secondary markets.”

Structured finance is an efficient solution to issues currently plaguing the global real estate markets. Equity and mezzanine investors, commercial lenders and banks are dealing with the challenges of underwriting illiquid real estate assets without standardized international valuation methods or rating systems. Lenders and investors are seeking to minimize counterparty risk by deferring to bank issued instruments as collateral in place of potentially overvalued real estate assets.

There are a growing number of collateral providers that issue collateral in the form of a Bank Guarantee (BG) or Standby Letter of Credit (SBLC) usually carrying a one (1) year maturity term. Most established providers issue from top European banks such as Deutsche Bank, HSBC and Barclays. Terms and cost normally associated with securing collateral will vary according to the providers’ specifications. In most instances, the cost associated can be deducted from the credit facility.

“Structured finance has enabled RECM clients to secure funding commitments as high as €2 Billion by partnering with RECM approved collateral providers. This provides an efficient vehicle for the rapid development of real estate projects that would otherwise be difficult to fund in the current economic climate" concludes Mr. Daniels.

Daniels and other industry leaders are convinced structured finance is the new model for large-scale real estate financing.

About RECM

Real Estate Capital Management (www.recm.com) is a global business-to-business provider of real estate financial services. RECM's first-to-market suite of products & services were specifically designed to address the industry's widespread inefficiencies. RECM products & services are supported by proprietary business processes, advanced technology infrastructure and global enterprise integration.