Good morning to Fall Investing;
Commercial Lending
The Business and Investor Side of Our Business
Good News for now: Interest rates are holding quite steady and what’s better is that we have Banks and Lenders still active in all aspects of the market.
The Federal Reserve carefully watches core CPI. Last month our numbers did go up, again. The good news: It was solely from energy cost increases. Some may think otherwise, as core inflation ‘strips out’ food and energy. Yet energy costs do impact other inflation metrics. Good example is airline fares. You can “strip” it out, yet energy still affects inflation.
Interestingly is the housing component – 40% of Core inflation – is coming down. Yet this number is averaged over the past year. For example, today’s spot number is 2.4 %, but the 12 month average is 7.2 %. Thus, we have the better part of 6 months, before the spot number, equals the 12 month average. It helps explain the confusions around inflation numbers.
1) Interest rates: Rates continue trending sideways, with little new news to report. The exception: Keep a close watch on the value of the US dollar. It needs to be supported.
2) Residential Real Estate: Pending legislation in California regarding rent controls. Historically, the long term outcome of such action is to lower availability of needed units. With Prop 13 removed from most inherited properties, many rental houses and condo’s will be sold upon transfer. The best sales price is to 1st time homebuyers. Result: Less rental supply. Further, Builders are not focused on rental property, unless Class A apartments. Result: Again less supply for the true renter. Bright side for investors: These apparent negative trends can be positive. More competition for a dwindling supply of units, can result in higher quality tenants.
3) Commercial Real Estate: Jobs, expectations, and Federal Reserve policy both weigh on commercial real estate. Call us. Let’s help you best navigate these choppy waters, today.
For some Investors, more time is needed to work through the distress in commercial real estate brought on by CoVid. Add to this, lending costs of ownership keep rising, making it more difficult to stay the course. Choices have to be made and for some, that time is now! In light of this, we are actively working with commercial property owners 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.
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: Your not always sure they are actually doing the lending. 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. True open competition able to quickly adapt to our ever changing landscape and your unique situation. Do you benefit from hiring Mike Ryan? Time has proven the answer to be yes. And with future challenges ahead, all the more reason to call. As a Broker, my win is when you win.
General Commercial Market: Quick overview of commercial markets. Retail: Showing good strength with vacancy rates dropping. Multifamily: Rent growth slows to 2 % year-over-year. The office sector: Will continue to garner headlines with 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 downtown San Francisco.
With this, I read several articles about workers wanting to work from home. Yet, I note the number of people leaving jobs is down dramatically. This, at the same time companies are requiring more employees to come to work. One might think if working from home is a priority, more employees would leave to find companies more agreeable to this. My sense: Main stream media is biased to working from home and tends to portrays this perspective. Yet, big media is known to hide critical facts needed to make a wise choice. My suggestion: Let’s talk to best ferret out what’s needed to make sound investment decisions.
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.
CAP rates: For apartments: Currently trending near 5 %, up near 0.6 %, year over year. Retail properties up about +1/3 %, to an average of 6.5 %. Urban storefront holdings are up the best.
While the Office sector shows the smallest increase of .02% – year-over-year, but averaging 6.7 %. Breaking this sector down. Suburban is averaging 6.8 % ,while Core (CBD) is about 5.8 %.
Industrial – the bright spot the past few years – has also risen about 1/3 % to near 5.5 %. Single tenant is about 5.7 %.
Good News: Our commercial successes continues. Our depth of lending partners allows us to work with certainty of execution. We are getting it done!
From business-purpose loans with light documentation to re-development projects building housing and commercial property purchases. How does this work? It works because of who we are. We offer so many lending partners to provide the flexible loans, excellent programs and great terms to move your life forward. Our track record is proven. It does keep our phone ringing. Let’s talk. We can help.
Of particular need: Loans coming due. They are in high demand, as evidenced by our increased work to refinance various commercial properties. Suggestion: Check loan parameters and due dates, and don’t miss the annual lender requested financial statement. Key: Stay ahead of coming dates, and keep your lender smiling. Let’s talk. Good organization works.
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.