Your August 2021 Commercial Lending Successes and News

Good morning to Summer vacations; 

Back to Business – Commercial Investing

Stay Strong – Be of Great Courage

Take Full Advantage of Great Rates

Federal Reserve policy is a complex beast. Yet, media often love the short cut, grabbing only the info supporting a preferred agenda. Sadly, we lose what is critical to investing, in favor of promoting a specific agenda. It is why I strive to bring what is significant, while being clear about my personal bias and operative paradigm.

Coming soon, will be discussions of the Fed tapering open market activities. Currently, the Fed is buying new mortgages at a clip of $40 B per month and 60 B of Treasuries +, with “discussion” of a future target of $40 B. Seems like a lot that can be market moving. However, with the Fed’s balance sheet of mortgages there is a runoff of about $250 B per month. There is no current conversation about stopping the re-investment of monies redeemed, even as runoff is allowed.  So, the deeper info is current purchase in excess of 350 B per month, and reducing this by 60 B or so is not a large enough percentage to move the market as some pundits promote.

The Fed is complex, but the good news:

Interest rates still favor the investor, relative to appreciation and risk of inflation. 

Current conversations regards “tapering” speaks only to new purchases, with only new money being adding to the balance sheet. Herein, tapering is about slowing the growth of the balance sheet, while having little desire to stop investors from investing. I love the word, growth. 

From my perspective, if we have a supply problem driving up prices, we need to increase new supply. How? By increasing commercial investment. This is the best tool to meet new demand. 

As for commercial financing, it runs more on the 5-year and 10-year T-bills. So are rates for commercial lending effected by the Fed? It is indirect, but it is impactful. With the Fed neck deep in short term Treasury and Mortgages, this pushes a large part of the market into investing in 5-year and 10 year instruments.  Good News: This brings an oversupply, relative to demand, thus helping keep commercial rates extremely attractive. This makes “risk” review critical.

How long will such a great market continue? Only time will tell. Suffice to say, rates will remain attractive, in response to the Fed’s buying appetite. The Fed is the Big Dog in the world market and when they bark, the world trembles. 

Call to Action:  New Clients

The Bad News: Expectations of new commercial buyers, based on CAP rates alone.

A common expectation of new commercial buyers regards the required detailed analysis of actual net cash flow, relative to the investment itself. Often one is not properly aware that as comparative too, CAP rates are best utilized across similar-use income properties. At the same time, they are quite effective if and when one understands how best to improve rents and increase property valuation. One has to careful in using CAP rates. They are not always a good predictor of actual net cash, flowing from the investment. Thus proper CAP rate comparisons must come with careful, and detailed due diligence. The Bad New: This is too often ignored, and a poor investment is the outcome. 

Note: If one only deducts actual interest expense from income, and does not include the principal buy-down of the financing, the ROI will reveal a more accurate and useful number. 

The Good News:

We have the needed tools for a detailed working discussions. We offer differing strategies of successfully investing to achieve a better tomorrow – ROI, ROE, CAP rates, ‘pro-forma’ income / expenses. Each has its own dynamic in building a profitable tomorrow. Smart investing designed to help establish strong balance sheets and maintain solid cash flow. 

At the same time, if you have already decided, our focus becomes about establishing a verifiable review, with documentation, making clear to the Lender the net available net cash relative to debt service and capital replacement. This is a solid way to establish current market valuations and with good management skills, one can improve income and property valuations. This is how you turn CAP rates and ROI evaluation, into your friend. 

Even more, we can also discuss how to best utilize favorable tax treatment for your current and highly appreciated investments. It is an excellent tool to turn today’s taxes into deferred taxes that keeps more of your investment dollars working for you. 

In the meantime, if you are look for Bridge-lending” this year – and next – start planing today. A “Bridge” loan is a great option, when traditional commercial underwriting falls short. 

Let’s Talk Now – Don’t Miss Today’s Great Rates

SBA LENDING: Full Steam Ahead

1) SBA lending continues full steam, 2) Refinance window has re-opened, and 3) some rates on buildings, starting in the 2’s % !! 4) SBA fee waivers still in place! Currently until Sept 30, or until funds run out.. pending more funds. 

Call Today! – Don’t Delay.

Do all you can for your local Small Business

One cannot repeat this enough. WE need them.

Market News

xxxx Inflation: Watching carefully. Perhaps best to compare pre-Covid pricing with post Covid numbers. In many cases, prices have yet to fully recover. Beyond the short-term issues of supply chain shortages, a careful 2 year study of prices may be helpful. Key: Don’t over-react. Labor shortage and supply-chain issues should begin to balance this Fall. Yet, our biggest inflationary and supply-chain problems may originate and continue, due to DC politics. 

 The Markets: Stock are holding and Bond pricing is flat. 10-year Treasury trending between 1.15 % and 1.4 % the past month. This is well off the high’s of last March. 

 Looking Ahead: Let’s allow that there maybe a confluence of factors to help quiet fears of inflation beginning this Fall season. First, pent-up demand exploded faster than the supply-chain could keep pace. Second, the shortage was made worse by government hand-outs that made staying home easier than filling job openings. Third, in combination of the first two, there was incentive to enjoy this summer, where last year no one could. Travel and outings with family was in high demand this summer, helping drive gas prices higher. As we look ahead, I suggest investors carefully review trend lines, and not put too much emphasis on singular data points. It is often a good way to avoid knee jerk reaction and the politics of specific numbers.

Good News: Benefits to the CoVid jab. The re-opening of States, stores, and schools. Now let’s hope States bring an end to the extra pandemic payout. A responsible choice especially with so many new job openings. Everyone benefits. At the same time, there is growing discussion of a needed CoVid booster shot. CoVid illness among the “vaccinated” is growing. They use the term “variant”, but what matters is that this cold, is far more troubling than just a Summer cold. Fortunately, rates for hospitalization and death, remain quite low. We hope to have far better details and understanding next month. My suggestion: Fluids, vitamin D3, zinc, and sunshine. Key: Don’t overplay yourself sick. Don’t get run-down. 

Commercial Refinances: Slow recovery of CoVid weakened P&L’s. Good News: Lenders are lending and financing continues. Kicker: They are being more diligence in the quality and detail of the paperwork. Here is where I can help. Let’s talk. Let’s start the “prep” work today. 

We know the paper work, the process, and how they think

KEY: The Good News of great rates and how they benefit your investments.

These rates offer unique opportunities: 1) Secure solid financing, 2) Modify one’s commercial investment portfolio, even an exchange to defer taxes, 3) Strengthen the balance sheet, and 4) Increase net cash. 

If you are ready, then let’s get going. Let’s talk today.

In the works:

 Apartment Rents: Year-end estimated suggest 28 % of tenants are past due. A “CoVid Compromise” is being discussed. There is monies for landlords, but with a Trade-off. Landlords recapture 80 % of monies owed, if they forgive the other 20%. Other ideas may be in the works. One such idea, a California companion, as a source of funds paying the other 20 %. Bottom Line: Chasing rents just got easier. It must grow on trees. 

Office properties:  Slipping. Those properties having market challenges are being put on sub-lease market. No Surprise. Yet, in the South Bay we have an on-going building boom. And based upon what is proposed, next year will be as strong. Vacancy Rates: Expect continued hedging up. BUT, this will not affect our clients, as we all work on buildings with 20,000 sf and less. A smart money niche, less noticed by media hype.

 Good News: On-The-Edge Financing

As we look ahead, a quick reminder: We do ‘on-the-edge‘ financing. This includes: Gas Stations, construction companies, and even commercial condo’s. Included is a smattering of small apartment buildings. Key: It is a team game. First, having lenders with an “on-going-work” approach to lending. Second, wonderful clients ready to work and meet the challenges. And third, our professional expertise. It is what is needed, if you want done, what needs to be done. We close deals and are ready to talk today. Good things come from good preparation. 


As a broker: WE provide a needed ray of hope, in uncertain times. For our commercial clients: WE provide a straightforward, careful review of available lenders, with a full range of lending options. If you are ready, they are ready. Together we can make your investment dreams happen. It is an excellent pathway to success – uniting a strong, solid loan application, with interest rates unbelievably low. We are proven, with quality lenders ready to lend. Call today. 

Trust the true value and peace of getting your loan done – right.

Many blessings for family and friends.