Your October 2024 Commercial Lending Successes and News

Good morning to the season of elections and Thanksgiving;

Commercial Lending

The Business and Investor Side of Our Business

Focus

Despite election rhetoric, business continues. For some, this rhetoric is important, while for others, more a distraction. Our group continues to see and think through the noise, in order to bring you information driving our market. Today we offer thoughts regarding inflation, as well as insights from our favorite California economist, Chris Thornberg.

Our focus: Retail Shopping Centers and Investors, both with our Financial Strategies.

My 35 years in the lending business provides you the knowledge, capability and qualified associates needed to succeeded. We cover a vast array of lending needs and demands. Good News: I do pay referral fees! Please know, I depend on your business, your introductions and referrals. THANK YOU!

I / we at Michael Ryan & Associates are here for you with lenders having the best solutions, at the best rates. I love to encourage, explain and educate. You are my focus. Call.

While our stated focus is Retail Shopping Centers and investors defining property types and borrowers, our regularly conversations with our funding partners allows us to place loans with Hospitality, Storage, Office, Industrial, Ag, and Construction and Development loans.  Yes, the market is quite challenging, but if you have a property and we have a lender. We know how to work around the often heard, No.

Why so? Because we are about financial solutions and the dedication needed to succeed. Our Goal: Maximize the profitability of our commercial real estate investors.

The Economic Realities:

Market happenings and You

1) Federal Reserve: ‘The Social Narrative’ concerning the “Fed”, often misses critical points, as we see portrayed in the Main Stream Media – MSM:

A) The Fed: Keeping up with challenges to their agenda for future rate reductions. Herein and in regards to inflation, they seem to keep looking for any ‘canary in the coal mine’. In response are the actions within the Chicago Fed. They are looking at modifying the “style of survey” as to inflation expectations. The goal: More dependable forecasts, based more on the dynamic flow of critical information vs. a more staggered approach, currently used.

An example of why: A recent survey stated 88 % of respondents were doing OK, while 82% of the same said most “others” were not. How does one balance such imbalances?

Another contrast: Headlines speak of “Stressed People Having a Hard Time Paying Bills”, yet restaurant receipts are up OVER 50 %, from pre-CoVid levels.

Fun Fact: Last time we had a 50 % jump in gas prices we read the same “Social Narrative” about the pain – TV interviews and headlines. Yet driving reduced by only 1.5 %.

B) Future rate cuts: Based on stronger than expected inflation data, most money specialists are split as to the timing of upcoming cuts and size – whether before or after the election; whether ½ or ¼% cut in rates. Thus the more likely a “soft landing”, the less incentive to move now or for continual actions, as to future rate cuts. Keep watch, keep reading. Keep calling.

2) Economic Data-points:

A) Interest Rate Cuts: A most interesting happening. If you have commercial rates tied to the 10-year Treasury, you might note such yields can increase after the Fed first rate cut. Except for 2019, every start of a new rate-cut cycle sees a short-term increase of the 10-Yr – about 0.4 %. It is part of healing the distorted effects of a negative yield curve. Good News: Once market trust is re-established, yields tend to retrace to rates much lower rates, sometimes as much 40 %. For mortgages, this equates to about 4.75 %.

B) California Performance: From Chris Thornberg, a highly respected economist – understanding future outcomes – provides a first big summary as to California. From his perspective, California is doing great. Yet, there are noticed areas of concern. One such is housing. We will discuss his several other points of intrigue, in coming months.

For now, let’s consider this first point. Key starting point is the State’s population. It has not grown, nor shrunk. At the same time the number of households has increased 8 %, without an equitable supply increase. Outcome: We are at record lows for vacancy’s and this is due to the levels of wealth in our State. When the economy is doing well, individually, we begin to spread out. In a recession, families draw together household numbers decrease. Simple math.

C) Inflation: Good news. The continued under utilization of factories. With the percentage continuing to trend below 80 %, it provides a deflationary bias, in the future.

D) Yield Curve: Normality is returning. Once again, the yield curve is once again holding in positive territory. Question: Will this trend continue and will the spread increase in size. For now, we will take the green, as a positive.

My Perspective

Locally, our challenge is with housing growth. For example, San Jose has a State-stated goal of increasing housing units by 60 K. And this, over the next decade. Yet only 1,600 were added last year. As for Santa Clara, they have the benefit of the large potential development site near Levi Stadium. Yet they too, have similar challenge – a goal of 11K units, with only 240 added.

Signs of help for San Jose: Moving to allow ADU’s to be split off as condo units. A great move to provide lower cost housing. Such is my hue and cry to bring on smaller units. Perhaps action to require an ADU, with every major remodel, rebuild, or in-fill build ?

Chris Thornberg suggest we need to cure our housing needs. Question: Why is Texas succeeding? What is working so well? Answer: They are building housing – PERIOD ! Great news for all: With housing comes new employees. A second point: With new housing construction, comes a downward pressure on housing costs – supply and demand. We are seeing this in some FL and TX markets, where housing supply exceeds actual growth.

As a society of people with needs for additional housing – today and tomorrow – we may need to see beyond SEQA and NIMBY. We cannot have it all. We may have to consider a more dense urban design, one modeled after Chicago or New York. This reality is not only Silicon Valley, but Southern CA, as well. Major unknown: Potential damage from earthquakes. Regardless, answers will have to be found and needed trade-offs will not be easy.

Call us. We are ready to help today.

I hope you find this letter instructive for both Commercial and Residential investing.

Key: Discipline, Preparation, and Patience. Plus a professional putting your uniqueness, first.

Good quality isn’t cheap. Cheap often cost more.

Thoughtful Consideration – Call Today

Our commercial successes continues. The depth of our lending partners allows us to work with certainty of execution. We are getting it done. We have the proven trust and credibility!

One was to help an under performing out-of-state property, with a ballon note coming due. We are able to provided solutions to avoid a default. This helps buy the owner needed time to finish leasing up the property and obtain long-term financing. CALL.

Add to this, another client moving forward by investing in an additional small apartment building. Good news: Interest rates in the 5’s. Not all the news is bad. Let’s talk.

More Good new: We hear from our friends that business in the tax-deferred exchange business is booming. If you are considering moving or trading your investment assets into a set of similar assets – please don’t hesitate to call me. We can provide helpful information and news, on ALL the benefits of deferring Capital Gains taxes. KEY: Know your full range of options and benefits, before simply pulling the sell trigger. This first step is most important.

Consistent calls: Business opportunities. Good news, healing from the CoVid disruption, is going well. With this, much is going on in the investing market – AI expansion to name one. Regardless, the challenges of the new frontiers, there is one constant: We love digging deep into finding solutions that meet your expectation – regardless how unique.

Know someone in need of such help? Call us ! We are ready and now is the best time to begin the process of preparation.

Consider as well, what sets us apart: The breadth of our lending partners: 1) business-purpose loans – with light documentation, 2) re-development building projects for housing, plus 3) commercial property purchases. How does this work? It works because we are – a team. 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 the Good News: Our track record shows it. It is why our phone keeps ringing. Let’s talk. We can help.

Consider as well, 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. In todays market of risk and uncertainties, it’s key to check loan parameters and due dates. For certain, don’t miss the annual lender requested financial statement. Key: Stay ahead of coming due dates to keep your lender smiling. Good organization is most worthy. We are ready to help.

NOTE: If you have payment concerns, please call.

We can help with loan modifications

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 what makes our lending relationship, a winner. Join our team.

You have heard me say: It starts with a first conversation. Let’s talk today.

Enjoy your family and friends this Spring season. With all the financial talk, key is who we have around us and with us. Be well and be safe, knowing we are here for you.

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