Good morning to the New Year, and may the helpful rains continue;
Commercial and Residential Lending
The Business and Investor Side of Our Business
Good News Today: Interest rates have taken a needed move lower. This is positive news!
1) Interest rates: Rates are lower in response to the continued reduction in the inflationary metrics. This includes one lagging metric – employment. Of interest: Bad news on the economy typically brings about lower rates. Yet, the unemployment metric often lags such changes – sometimes 6 months. Thus, we have lower rates, with employment remaining stubbornly high. Personally, I believe this new blend of rates and employment will become the accepted view.
Consider: The 10-Year Treasury – a key measure for rates – after dropping into the high 3’s, has moved back to the low 4’s. Other indexes have moved similarly. Credit cards and Home equity loans have shown no movement, as both are tied to the Prime interest rate – a rate controlled by the Fed. With this, there are initial discussions of the Fed dropping the Prime in 2024. A nice reality to anticipate.
2) Residential Real Estate: Cooling numbers speak best to what’s often called a typical seasonal movement. Keep in mind, the supply side of house, is running about 1/2 of the pre Co-Vid days for available inventory. This helps moderate the downward tug of higher mortgage rates. Of note: All of the specialized groups tracking the values of homes –- in America – are posting a 6 – 7 % value increase in 2023. (Case-Shiller, FHFA, Black Knight / ICE and Core Logic)
3) Commercial Real Estate: Dynamic and dicey market, with “splintered” being a good description. Location, property type, leverage, cash-flow all feed into the specifics of each properties performance. Jobs expectations and Federal Reserve policy will weigh on commercial real estate for quite some time. Good News: We know how to navigate these choppy waters. Call today.
SPECIAL NOTE: Foreclosure Assistance
For some commercial Investors, time is needed to work through the financial distress – triggered by CoVid – and the impact of rising lending costs upon company balance sheets and cash-flow statements.
The numbers are there, about 16 % of the office loans will mature this year. About 150 B worth, and add to that the same amount scheduled for both 2025 and 2026.
As a result, tough choices are being made to stay the course. For some, that time is now! In light of this, we are actively working with commercial property owners and lenders. Why? To help negotiate needed modifications to maintain any current underlying loans.
The goal: Keep the property in the hands of the investor and thereby avoid issues surrounding default. Even more, this is a benefit to the banks, as well.
The challenges we address and renegotiate for our clients:
Commercial loan coming due,
Valuations dropping below guidelines,
Income no longer supports the current loan and operating expenses,
Payments are behind
If this can be helpful to you or someone you know,
please call today. Each day matters.
Good News: Commercial investing, as a whole, is quite diversified, thus able to match and meet most commercial investor’s financial goals and interest. Our goal: Matching our clients with the best lending options and customized programs. Let’s talk, today. Early prep is key.
Call us. We are ready to help today.
Economic News Helpful for Commercial Investing
and, the same statement applies for our Residential work!
Banking and Financing: DIY or using a Broker.
DIY: Benefit: You can trade on your historical connection with your Bank. Downside: You are not always sure they are actually getting it done. The Bank loan agent brings the deal in the door, but they are not allowed to tell you the percentage of actual closings.
Broker: Downside: You do pay a point (Except with SBA and residential lending). Benefits: Our connections to lending sources, interaction with industry groups, and continued conversations with our peers. This brings about true and open competition able to quickly adapt to the shifting landscape and your unique situation. Do you benefit from hiring Mike Ryan? Time proves to be Yes. And with future challenges ahead, all the more reason to call. As a Broker, your victory is my win.
General Commercial Market:
Commercial: Alas, prices continue a multi-year slide. Albeit moving from a 10 % drop in 2022 to 8 % drop in 2023 valuations.. Very hi-level picture. Strip and smaller retail show good signs of strength, as do large centers with good diversification, management and solid anchors. Retail sales holding up strongly with monthly gains supporting.
Office is a story of 2 types. Large core markets vs small markets. The large core markets are all knocking around a 20 % vacancy rate as the big corporations deal the most with work place employment head counts. Smaller markets are not as sensitive as employees live in a closer proximity to work.
Apartment Sector: Apartment numbers continue to show stability, with the large number of units that came on the market in 2023 and those expected to be delivered in 2024 will help to keep rental costs subdued.
Jobs, jobs and jobs: We continue to see low numbers from the weekly unemployment claims. Those with continuing claims recently dropped a bit, yet we do not know if from people losing (dropping off) benefits, or from finding jobs. It is a muddle through sideways time.
Good News:
Our commercial successes continues. The depth of our lending partners allows us to work with certainty of execution. We are getting it done, because we know how!
Recent closings include a private loan to heirs facilitating the completion of their probate status. Few will write this type of financing as the dynamics of owner occupied / probate court / irrevocable trust status removes most funding sources from consideration. We have sources and we did complete on time, avoiding a foreclosure action.
From business-purpose loans – with light documentation – to re-development building projects for housing and commercial property purchases. How does this work? It works because of who we are. We offer a broad range of lending partners able to provide flexible loans, excellent programs, and great terms. It is how we help move your life forward and our track record shows it. It is what keep our phone ringing. Let’s talk. We can help.
Consider Loans coming due. They are in high demand, as evidenced by our increased work to refinance various commercial properties. Recent statistics show 30 % of maturing loans were refinanced, 25 % were modified and 40 % are in default. NOTE: We can help with loan modifications. In the meantime: Check loan parameters and due dates, and don’t miss the annual lender requested financial statement. Key: Stay ahead of coming dates to keep your lender smiling. Let’s talk. Good organization is most worthy.
Good News: We have great lending partners. They respect our work and attention to detail. This is good news for you, as they trust our approach and loan packages. In response, we carefully strive to maintain the quality of their depository relationships. This is called team chemistry and is what makes our lending relationship, a winner. Join our team.
You have heard me say: It starts with a first conversation. Let’s talk.
Enjoy your family and friends this season. With all the financial parts I talk about, the most important part of life is who we have around us. Be well and be safe!