Good morning to Holidays – the season of sweet spot Investing;
Commercial Lending
The Business and Investor Side of Our Business
Good News for now: Interest rates are holding quite steady and with it the Good News: Banks and Lenders are still active in all aspects of the commercial market.
The Federal Reserve prioritizes core CPI. More Good News: This month our numbers eased downward a bit more than expected. Even more: The lagging housing, and rents, continues to move the overall blended rate lower for the year. If we were to use today’s spot number, Core CPI would be a 2.3 %. Lower lower fuel costs are contributing.
Quick side trip as relates to our Veterans: In 1938, Congress marked Sept 11th to be Veterans Day. It pays special tribute to all American veterans – living and deceased. The day, especially honors those yet alive. The state with the highest percentage of veterans is Alaska at 8.8% of the population. 16 million Americans served in WW-II, 933,000 in Korea, 5.9 million in Vietnam, and 7.8 million in the Gulf War. We are thankful, with eternal grateful.
1) Interest rates: Rates have moved a bit lower. This in response to last weeks inflation numbers and slight increase in unemployment numbers. The 10-Year Treasury is returning to the 4.5 % range, bouncing off a technical point of resistance – 5 %.
2) Residential Real Estate: Cooling numbers speak best to a typical seasonal movement. Keep in mind, we are still running about 1/2 the supply-side of the pre Co-Vid days. It helps to moderate the downward tug of high mortgage rates.
3) Commercial Real Estate: Jobs, the expectations horizon, and Federal Reserve policy are weighing on commercial real estate. Call today. We can help navigate these choppy waters.
SPECIAL NOTE: For some commercial Investors, time is needed to work through the financial distress triggered by CoVid. As well, rising lending costs have hurt the balance sheet and cash-flow statement, adding more stress in efforts to stay the course. As a result, tough choices have to be made and for some, that time is now! In light of this, we are actively working with commercial property owners and lenders, for the purpose of negotiating needed modifications to their current underlying loans. The goal: Keep the property in the hands of the investor and thereby avoid issues surrounding default. This benefits the banks, as well.
The challenges we address and renegotiate for our clients:
Commercial loan is 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 diverse. It is able to match and meet most commercial investor’s financial goals and interest. Our goal: Matching each of 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
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). 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: Quick overview: 1) Retail. It is showing good strength with vacancy rates dropping. 2) Multifamily. Rent growth slows to 2 % year-over-year. 3) Office sector. continues to garner headlines asking the question: How well can major cities adapt to the high vacancy rates due to the CoVid imposed work from home policies? Consider New York City –the “New Glut City” – or close to home, downtown San Francisco.
Granted the market is in flux. We have economic slowdown, rising costs (inflation) and the after-affects of the CoVid work-from-home experiment. Of interest: Percentage of hours worked from home vs office, is swinging back towards more office. Where this pendulum stops is anyone’s guess. For most commercial investing, having the gift of insights may prove most helpful, for now. My suggestion: Let’s talk to best ferret out what’s most needed to make sound investment decisions and at the best times. Timing matters.
Commercial Construction: Yet to reach the headlines: Noticeable slowdown in commercial building. Industrial is leveling out with “net used space”, flat the past year. Flex space more challenged due to the office component of the properties. Manufacturing a bit dicey with unknown future orders. Good News: Medical continues on a positive roll.
Architectural billings – a 9 to 12 month leading indicator – is dropping. All sectors of commercial, are slowing, yet it’s no surprise considering interest rates and absorption. Yet, headline news continues to tout labor and material costs already cooked into current property valuations. My suggestion: Let’s talk. Maintaining a healthy perspective is critical.
Apartment Sector: This sector is in a period of lower new supply, due to known financial headwinds. “New” rents are flattening and easing in some markets – labor supply, increasing cap and interest rates, and more restrictive lenders. With this, current “new” building starts for apartments, is down 40 % Y-Y. And though Apartment rents are finally showing signs of cooling, consider the 15 % increase in completed units. This growth in the supply-side of the equation does help in stabilizing prices. Going forward, history says to expect the pent-up demand of more “new” units, as the economy swings up again.
Jobs, jobs and jobs: Searching for signs and reading recent commentary on the labor market?
“For the week ending 11/4/23, initial unemployment claims were a very low 217,000, barely above decade lows. However, continuing unemployment claims came in at 1,834,000 and are up about 250,000 from the decade lows set last year. This suggests that while layoffs are very low, those unemployed and looking for a job are finding it increasingly difficult to find employment. This is consistent with a cooling labor market.”
I have to note the relevant piece of data: … “up about 250,000 from the decade lows set last year.” A 14 % increase. This level was attained just last July and the period of Jan – April this year. Let’s hope the Federal Reserves see this data as good news.
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!
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.
Let the fun of Fall be yours to enjoy. Coloring of the leaves and cooler days.