Editor’s Letter (September 2007)

Credit crunch? You tell us


Dear Reader:

We’d like to get a little more interactive with our readers this month.

On Page 1 of this edition we’ve published a story concerning the current credit crunch in commercial real estate, including healthcare real estate. The general consensus of the sources interviewed for the story seems to be that, at least for now, the days of cheap debt are over. In part because of problems with subprime loans in the residential mortgage industry, it looks as if investors in the commercial backed mortgage securities (CMBS) market are no longer willing to buy any mortgages with any amount of risk.

As a result, lenders are no longer willing to provide interest-only commercial loans. Nor are they willing to provide high loan-to-value ratios – such as those at 90 percent or more. And the spreads compared to the 10-year Treasuries have increased substantially.

The good news, of course, is that healthcare real estate should be a good investment over the long haul for a long time – even if some deals are currently being stalled because of higher debt costs and renegotiated terms in the short term.

As we here at Healthcare Real Estate Insightshave tried to get our arms around this credit crunch situation. But we’re journalists, not commercial real estate finance experts. So we’ve relied on a variety of sources to tell the story. We would’ve loved to have interviewed even more sources for this story, but we felt a crunch of our own – that ever-looming crunch of the newsletter deadline. And even if we would have interviewed more industry sources, we probably would have missed a few salient points as it is.

So, knowing that the credit crunch is likely to be an ongoing issue over the course of the next few months, we’d love to get some additional feedback on the issue from you, our subscribers and the folks doing business in healthcare real estate each and every day.

In the next week or so, please let us know your thoughts on the whole liquidity crunch situation and how it is – or perhaps isn’t – affecting your business. Perhaps you’d like to provide us with your own perspective on the current situation. What the heck, you can even go ahead and make an educated prediction – using your own experiences and industry knowledge – on what the final outcome will be and how long this whole thing will take before settling down.

Next month, we’ll publish as many of the responses as possible.

So go ahead, let us know your perspective on what many say is the talk of the industry. Please e-mail me at editor@hreinsights.com.

John B. Mugford, Editor

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