Retail Acquisition Funding: Who Has the Money?


A review of Real Capital Analytics’ Capital Trends Monthly report reveals how hard the retail market has been hit. In line with all property types, retail asset sales volume, at $1.9 billion, was down more than 90 percent from the market peak two years earlier and off 74 percent from the same quarter a year ago.

One of the biggest changes from the market’s peak is how deals are getting financed. In the past, CMBS accounted for a big piece of the pie—40 percent of all financing. That’s dried up and CMBS is no longer a way to fund deals. Instead, today more deals are financed through seller-provided finance than any other source of capital.

According to Real Capital’s report, “The unwillingness of any other group to step in to help fill this massive funding gap is a primary reason that sales volume has fallen so far off the peak. Even though the percentage of all-cash deals is up significantly, debt is still required to complete the majority of transactions. Since all-cash buyers are also demanding—and often getting—significant price concessions, assumable mortgages and seller financing have quickly emerged as the primary alternatives.”

Real Capital put together an interesting chart showing the evolution in funding sources from the market’s peak to the credit crunch to the conditions today.

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