For struggling commercial property owners, loan modifications can be answered prayers, but without proper tax planning, all hell may break loose come April 15.
That's because income from debt cancellation is taxable, something that is often overlooked as owners scramble to ward off financial ruin. Uninformed real estate owners could find themselves in financial peril when they file their IRS tax returns and owe hundreds of thousands of dollars in unexpected taxes they cannot afford to pay.
Consider the big picture: Commercial loan defaults are posting record-high rates -- and momentum is moving toward worsening default rates through 2015. Real Estate Econometrics expects the default rate to rise to 5.2 percent by the end of 2010 alone.
All this means heightened possibilities for commercial lenders working with overleveraged property owners to forgive a debt rather than waste more resources chasing insolvent borrowers.
"If the borrower is bankrupt, the bank will have no chance to recover the money on a recourse debt, and attempting to collect on a recourse debt from someone who is insolvent may exceed the benefits," said Dennis Fitzpatrick, principal with Kaufman, Rossin & Co. in Miami. "Either way, to the extent that the lender forgives the debt, there is income to the borrower and it is taxable."
If the lender forgives part of the debt, the owner sees a gain as if the property was sold. That gain is the difference between the fair market value of the property and the borrower's basis, along with depreciation on any improvements. With declining market values in mind, the gain could be hundreds of thousands or even millions of dollars.
Although there are no escaping tax laws on the gain from a short sale, the good news is recent changes to tax codes allow borrowers to exclude cancellation of debt income from personal income taxes on recourse loans. The tax code gives companies looking to reduce or restructure debt the opportunity to defer the impact of COD income on debts occurring in 2009 or 2010 for a five-year period.
"This helps taxpayers that are working out their debt and may have losses this year but may have paid taxes in prior years," said Ed Godoy, tax business line leader for the Miami office of BDO Seidman. "They may be able to carry back those losses and not be affected by this income inclusion and even get some refunds from prior years."
Since public debt is frequently bought and sold by third parties, tax experts agree that the landmines are many in the area of forgiveness of debt. The bottom line: forgiveness isn't always a good thing and what you thought was forgiven may come back to haunt you if loans are sold.
The first step in avoiding a financial explosion on the IRS front is for the borrower to understand his tax position based on the type of corporate entity that owns the property.
"Borrowers need to get into discussions with their lenders and understand the ramifications of these decisions," Fitzpatrick said. "You need to know what the real cost is going to be of accepting debt forgiveness on a distressed property because there could be costs down the road that aren't so obvious."
CAPITALIZATION RATE IMPACT – PERCENTAGE CHANGE IN PROPERTY VALUE AS CAP RATE INCREASES
Old Cap Rate >> 5.50% 6.00% 6.50% 7.00% 7.50% 8.00% 8.50% 9.00%
New Cap Rate
6.00% -8.30%
6.50% -15.40% -7.70%
7.00% -21.40% -14.30% -7.10%
7.50% -26.70% -20.00% -13.30% -6.70%
8.00% -31.30% -25.00% -18.80% -12.50% -6.30%
8.50% -35.30% -29.40% -23.50% -17.60% -11.80% -5.90%
9.00% -38.90% -33.30% -27.80% -22.20% -16.70% -11.10% -5.60%
9.50% -42.10% -36.80% -31.60% -26.30% -21.10% -15.80% -10.50% -5.30%
10.00% -45.00% -40.00% -35.00% -30.00% -25.00% -20.00% -15.00% -10.00%
10.50% -47.60% -42.90% -38.10% -33.30% -28.60% -23.80% -19.00% -14.30%
11.00% -50.00% -45.50% -40.90% -36.40% -31.80% -27.30% -22.70% -18.20%
Market Snapshot—Monday’s closes (6-14-10) are in parentheses
Treasury Yields Key Indicators Other Key Indicators
2-yr 0.71% (0.73%) DJIA: 10451 (10211) Prime Rate: 3.25%
5-yr 2.01% (2.03%) NASDAQ: 2310 (2244) Fed Reserve Target Rate: 0.25%
10-yr 3.22% (3.23%) S&P 500: 1117 (1092) U.S. Unemployment Rate: 9.70%
30-yr 4.14% (4.15%) S&P 100: 504 (493)
LIBOR NYSE Comp: 6988 (6814)
1- Mo. LIBOR: .35% (.35%) Crude Oil: $77 ($74)
3-Mo. LIBOR: .54 (.54%) Gold: $1258 ($1229)
Until next week -
Brad Cox, CCIM, CPM
Senior Vice President - Debt Placement
Thomas D Wood and Company
Office: (941) 552-9731
Email: bcox@tdwood.com
Monday, June 21, 2010
Monday, June 7, 2010
Multifamily suffers nationally as CMBS delinquencies are on the rise.
WEEKLY MARKET COMMENTARY - AS OF JUNE 7, 2010
HISTORICAL CMBS DELINQUENCIES CONTINUE - Delinquencies in commercial mortgage-backed securities continued at historical highs in May, up 40 basis points to 8.42 percent, said Trepp LLC, New York.
Trepp recorded 8.02 percent in CMBS delinquencies in April for CMBS loans more than 30 days delinquent. The firm said the overall delinquency rate would be nearly 9 percent “if defeased loans were taken out of the equation.”
Seriously delinquent loans—more than 60 days in foreclosure, real estate owned (REO) or non-performing balloons—were up 41 basis points to 7.55 percent.
Fitch Ratings, New York, said average loss severities for its U.S. CMBS rated universe will continue to exceed historical averages through the end of 2011.
In Fitch's U.S. CMBS Loss Study, the ratings agency said it expects higher loss severities for all property types this year. Annual loss severities by property type last year were at 58 percent for multifamily; 48.2 percent for retail; office at 56.9 percent; industrial at 48.8 percent and hotels at nearly 82 percent.
In its monthly delinquency report, Trepp said multifamily had the highest delinquency rate among major property types, up 28 bps to 13.34 percent, and lodging—hotel delinquencies—jumped nearly 130 bps to 18.45 percent. Office delinquencies approached 6 percent—now at 5.81 percent—after up 44 bps from April, and retail CMBS delinquencies increased 42 bps to more than 6.86 percent. Only industrial properties posted a delinquency rate decline among major property types.
Fitch said its overall view of the CMBS sector remains negative, and maturations for 10-year fixed rate 2005 to 2007 vintages are fewer than five years away.
Fitch's 2009 losses were primarily in the 1998 vintage, led by the hotel sector, and the 2006 vintage, dominated by multifamily losses.
Fitch reported underperforming properties in states with weak economies, which led to an increase in rated U.S. CMBS delinquencies for April to 7.48 percent.
Brad Cox, CCIM, CPM
Senior Vice President - Debt Placement
Thomas D Wood and Company
Email: bcox@tdwood.com
HISTORICAL CMBS DELINQUENCIES CONTINUE - Delinquencies in commercial mortgage-backed securities continued at historical highs in May, up 40 basis points to 8.42 percent, said Trepp LLC, New York.
Trepp recorded 8.02 percent in CMBS delinquencies in April for CMBS loans more than 30 days delinquent. The firm said the overall delinquency rate would be nearly 9 percent “if defeased loans were taken out of the equation.”
Seriously delinquent loans—more than 60 days in foreclosure, real estate owned (REO) or non-performing balloons—were up 41 basis points to 7.55 percent.
Fitch Ratings, New York, said average loss severities for its U.S. CMBS rated universe will continue to exceed historical averages through the end of 2011.
In Fitch's U.S. CMBS Loss Study, the ratings agency said it expects higher loss severities for all property types this year. Annual loss severities by property type last year were at 58 percent for multifamily; 48.2 percent for retail; office at 56.9 percent; industrial at 48.8 percent and hotels at nearly 82 percent.
In its monthly delinquency report, Trepp said multifamily had the highest delinquency rate among major property types, up 28 bps to 13.34 percent, and lodging—hotel delinquencies—jumped nearly 130 bps to 18.45 percent. Office delinquencies approached 6 percent—now at 5.81 percent—after up 44 bps from April, and retail CMBS delinquencies increased 42 bps to more than 6.86 percent. Only industrial properties posted a delinquency rate decline among major property types.
Fitch said its overall view of the CMBS sector remains negative, and maturations for 10-year fixed rate 2005 to 2007 vintages are fewer than five years away.
Fitch's 2009 losses were primarily in the 1998 vintage, led by the hotel sector, and the 2006 vintage, dominated by multifamily losses.
Fitch reported underperforming properties in states with weak economies, which led to an increase in rated U.S. CMBS delinquencies for April to 7.48 percent.
Brad Cox, CCIM, CPM
Senior Vice President - Debt Placement
Thomas D Wood and Company
Email: bcox@tdwood.com
Tuesday, June 1, 2010
How is Commercial Real Estate Getting Done. These Guys Know!
FEWER TRANSACTIONS PRODUCE VALUATION UNCERTAINTIES -
Values are going to be a slippery slope for probably the next 24 months until real sales get out there in the market to provide some (comparables)," said Paul Smyth, president of Centerline Servicing LLC, Irving, Texas.
Speaking recently at the Mortgage Bankers Associations Commercial/Multifamily Servicing and Technology Conference, Smyth said fewer current comparables and distressed sale comparables drive significant valuation differences in appraisals—some set even one week apart.
"Alot of it is subjective. You really don't know in a lot of cases until you are actually exposed to the market," Smyth said.
While appraisals remain unreliable, borrower special request volume at Berkadia Commercial Mortgage LLC, Horsham, Pa., increased by nearly four-fold after last year, said Mark McCool, executive vice president.
"Our CMBS (delinquencies) continue to creep up; therefore, our appraisal needs continue to creep up. They remain as unreliable as they ever have been, probably more so at this point," McCool said. "It is incredibly difficult to think from a valuation perspective from the appraisals. It is incredibly difficult."
"Appraisers are having trouble getting their arms around value when there are only so many comps," said Steven Smith, president and COO at PNC Real Estate/Midland Loan Services Inc., Overland Park, Kan. "Appraisals are, by nature, a backward looking exercise, and there are just not many data points for appraisers to settle on."
Smith said assumptions are "a little too aggressive" on recovery amount; PNC/Midland does not agree on stabilized value. It will rely on broker opinion value and, based on the market, PNC/Midland will develop its own value.
Some feedback within the CMBS capital stack showed investors within the stack disagree with the appraisals, Smith added. "We try to do what is best for all certificate holders in the trust," he said. "It is not always a clear deposition and you just don't make everybody happy."
In 2007, Midland completed five modications; four in 2008; 50 modifications in 2009 and 53 modifications year-to-date. However, pressure continues to mount for servicers. "Even though it ebbs and flows, there is an average 300 questions a month from ratings agencies," Smyth said.
Centerline assigns a special asset group for government-sponsored enterprises and a special, separate group in CMBS, Smyth said. With critical mass in special servicing, Centerline subdivides areas trying to keep 15 loans per asset manager, different from the Resolution Trust Corp., which handled north of 100 during the early 1990s.
Smith said PNC's Midland expects questions on special servicing issues to double this year; and the servicer started tracking those queries last year.
"We are seeing a pretty healthy increase in questions come in related to maturities, related to tenant issues, whether they are tenant rollovers or lease renewals or just basic questions—very detailed questions—about lease information," Smith said. "We can expect questions about the watchlist, delinquencies and ARDs (anticipated repayment dates)."
Greater scrutiny also necessitates other analysis for valuation besides the appraisal, Smyth said.
"It's like working out loans in the Roman arena now because the whole world is watching you," Smyth said. "It's a very different arena to work out loans and the credit values are not the only value."
Brad Cox, CCIM, CPM
Email: bcox@tdwood.com
Values are going to be a slippery slope for probably the next 24 months until real sales get out there in the market to provide some (comparables)," said Paul Smyth, president of Centerline Servicing LLC, Irving, Texas.
Speaking recently at the Mortgage Bankers Associations Commercial/Multifamily Servicing and Technology Conference, Smyth said fewer current comparables and distressed sale comparables drive significant valuation differences in appraisals—some set even one week apart.
"Alot of it is subjective. You really don't know in a lot of cases until you are actually exposed to the market," Smyth said.
While appraisals remain unreliable, borrower special request volume at Berkadia Commercial Mortgage LLC, Horsham, Pa., increased by nearly four-fold after last year, said Mark McCool, executive vice president.
"Our CMBS (delinquencies) continue to creep up; therefore, our appraisal needs continue to creep up. They remain as unreliable as they ever have been, probably more so at this point," McCool said. "It is incredibly difficult to think from a valuation perspective from the appraisals. It is incredibly difficult."
"Appraisers are having trouble getting their arms around value when there are only so many comps," said Steven Smith, president and COO at PNC Real Estate/Midland Loan Services Inc., Overland Park, Kan. "Appraisals are, by nature, a backward looking exercise, and there are just not many data points for appraisers to settle on."
Smith said assumptions are "a little too aggressive" on recovery amount; PNC/Midland does not agree on stabilized value. It will rely on broker opinion value and, based on the market, PNC/Midland will develop its own value.
Some feedback within the CMBS capital stack showed investors within the stack disagree with the appraisals, Smith added. "We try to do what is best for all certificate holders in the trust," he said. "It is not always a clear deposition and you just don't make everybody happy."
In 2007, Midland completed five modications; four in 2008; 50 modifications in 2009 and 53 modifications year-to-date. However, pressure continues to mount for servicers. "Even though it ebbs and flows, there is an average 300 questions a month from ratings agencies," Smyth said.
Centerline assigns a special asset group for government-sponsored enterprises and a special, separate group in CMBS, Smyth said. With critical mass in special servicing, Centerline subdivides areas trying to keep 15 loans per asset manager, different from the Resolution Trust Corp., which handled north of 100 during the early 1990s.
Smith said PNC's Midland expects questions on special servicing issues to double this year; and the servicer started tracking those queries last year.
"We are seeing a pretty healthy increase in questions come in related to maturities, related to tenant issues, whether they are tenant rollovers or lease renewals or just basic questions—very detailed questions—about lease information," Smith said. "We can expect questions about the watchlist, delinquencies and ARDs (anticipated repayment dates)."
Greater scrutiny also necessitates other analysis for valuation besides the appraisal, Smyth said.
"It's like working out loans in the Roman arena now because the whole world is watching you," Smyth said. "It's a very different arena to work out loans and the credit values are not the only value."
Brad Cox, CCIM, CPM
Email: bcox@tdwood.com
Monday, May 24, 2010
REPORT: U.S. CRE RETURNS TURN POSITIVE FOR FIRST TIME IN 18 MONTHS
- Commercial real estate in the United States delivered its first positive quarterly return in 18 months during the first quarter, said Investment Property Databank, London.
IPD's U.S. Quarterly Property Index showed a 1.2 percent total return of negative 0.5 percent capital growth and 1.7 percent income return. The valuation-based quarterly index was based on 1,863 properties from 16 core funds worth $76 billion at the end of March.
The office sector showed most improvement in capital value growth, to negative 0.7 percent compared to negative 3.7 percent the previous quarter. Office closely followed the residential sector with capital growth of 0.4 percent compared to negative 2.4 percent in the fourth quarter of 2009. Some analysts, however, say office fundamentals may be last to deteriorate based on tenants with long-term leases.
“While most indications are that the worst of the write-downs are behind investors, uncertainties persist on the medium term health of the broader economy,” said Simon Fairchild, managing director of IPD North America. “Preliminary data from the Bureau of Economic Analysis indicated that Q1 GDP [gross domestic product] increased at an annual rate of 3.2 percent, although if economists’ predictions of a sluggish recovery are accurate then so too will be the pace of capital appreciation.”
The index showed “steady quarterly improvement” in U.S. real estate since bottoming out in the first quarter of 2009. Cap rates remained above their long-term average across the sectors, but improved sentiment boosted capital coming back to the market, Fairchild said. Returning investors started to compete on pricing more aggressively than during the past two years because of limited prime-stock supply, and beneath the headline, total return figures slowed market value depreciation and resilient income returns.
Market Snapshot—Monday’s closes (5-17-10) are in parentheses
Treasury Yields Key Indicators Other Key Indicators
2-yr 0.75% (0.78%) DJIA: 10193 (10620) Prime Rate: 3.25%
5-yr 2.00% (2.15%) NASDAQ: 2229 (2347) Fed Reserve Target Rate: 0.25%
10-yr 3.21% (3.46%) S&P 500: 1088 (1135) U.S. Unemployment Rate: 9.90%
30-yr 4.08% (4.34%) S&P 100: 494 (516)
LIBOR NYSE Comp: 6775 (7078)
1- Mo. LIBOR: .34% (.34%) Crude Oil: $71 ($72)
3-Mo. LIBOR: .48 (.44%) Gold: $1177 ($1232)
Brad Cox, CCIM, CPM
Office: (941) 552-9731
Email: bcox@tdwood.com
IPD's U.S. Quarterly Property Index showed a 1.2 percent total return of negative 0.5 percent capital growth and 1.7 percent income return. The valuation-based quarterly index was based on 1,863 properties from 16 core funds worth $76 billion at the end of March.
The office sector showed most improvement in capital value growth, to negative 0.7 percent compared to negative 3.7 percent the previous quarter. Office closely followed the residential sector with capital growth of 0.4 percent compared to negative 2.4 percent in the fourth quarter of 2009. Some analysts, however, say office fundamentals may be last to deteriorate based on tenants with long-term leases.
“While most indications are that the worst of the write-downs are behind investors, uncertainties persist on the medium term health of the broader economy,” said Simon Fairchild, managing director of IPD North America. “Preliminary data from the Bureau of Economic Analysis indicated that Q1 GDP [gross domestic product] increased at an annual rate of 3.2 percent, although if economists’ predictions of a sluggish recovery are accurate then so too will be the pace of capital appreciation.”
The index showed “steady quarterly improvement” in U.S. real estate since bottoming out in the first quarter of 2009. Cap rates remained above their long-term average across the sectors, but improved sentiment boosted capital coming back to the market, Fairchild said. Returning investors started to compete on pricing more aggressively than during the past two years because of limited prime-stock supply, and beneath the headline, total return figures slowed market value depreciation and resilient income returns.
Market Snapshot—Monday’s closes (5-17-10) are in parentheses
Treasury Yields Key Indicators Other Key Indicators
2-yr 0.75% (0.78%) DJIA: 10193 (10620) Prime Rate: 3.25%
5-yr 2.00% (2.15%) NASDAQ: 2229 (2347) Fed Reserve Target Rate: 0.25%
10-yr 3.21% (3.46%) S&P 500: 1088 (1135) U.S. Unemployment Rate: 9.90%
30-yr 4.08% (4.34%) S&P 100: 494 (516)
LIBOR NYSE Comp: 6775 (7078)
1- Mo. LIBOR: .34% (.34%) Crude Oil: $71 ($72)
3-Mo. LIBOR: .48 (.44%) Gold: $1177 ($1232)
Brad Cox, CCIM, CPM
Office: (941) 552-9731
Email: bcox@tdwood.com
Monday, May 17, 2010
Another fine example of quality workmanship......
Thank you to Brad Cox of Thomas D. Wood for his exemplary work in the area of "Pursuit of Greatness". His weekly commentary, found here, is made available weekly to hundreds of property owners around the country. I am glad to have his as my friend and colleague, with such a rich understanding and dedication to his craft.
Thanks Brad.
WEEKLY MARKET COMMENTARY - AS OF MAY 17, 2010
FOR CRE DEBT, IT'S BOTTOM'S UP - With billions of dollars in commercial real estate debt coming due, the industry refuses to panic, sensing that the cycle's bottom is near, said DLA Piper's 2010 State of the Market Survey.
Responding to this bottoming out process, the U.S. commercial real estate industry outlook remains largely bearish; however, DLA Piper said bullish sentiment is improving and has started to gain momentum.
The survey, measuring attitudes and perspectives of 308 top executives within the U.S. commercial real estate market, reveals that 60 percent described themselves as bearish, down from a record 90 percent in September 2008 when DLA Piper previously surveyed the market just days after the collapse of Lehman Brothers and the sale of Merrill Lynch to Bank of America.
Bullish responses, consequently, quadrupled from 10 percent to 40 percent.
Meanwhile, 60 percent said real estate markets will reach bottom in 2010. Looking ahead, respondents expect that workouts and loan extensions will be the two most prominent strategies used to navigate this recovery as waves of commercial real estate debt come due between now and 2014, DLA Piper said.
"After the most grueling downturn the industry has ever seen, there is a genuine sense of stability beginning to return to the marketplace," said Jay Epstien, chair of DLA Piper’s U.S. Real Estate practice.
"From this point, the recovery will hinge in large part on workouts and loan extensions, but the real wild card is job growth that would drive renewed real estate demand in virtually every asset class."
Other survey findings:
Two of three respondents believed that the federal government’s Troubled Asset Relief Program and Troubled Asset-Backed Securities Loan Facility and other real estate-focused programs have done "enough" to stabilize the real estate marketplace.
Consistent with this view 70 percent do not expect any additional federal legislation focused on aiding the U.S. commercial real estate market.
Six out of 10 respondents do not expect the commercial mortgage-backed securities market to return in time to help refinance the more than $150 billion in CMBS loans coming due in the next two years.
Respondents do not expect workouts to yield deep discounts with lenders: 61 percent of respondents expect that the largest loan write-offs will range between 11 percent to 30 percent.
Armed with war chests of new capital, respondents expect private equity and hedge funds, 37 percent, and REITS, 29 percent, to be the most active investors during the next near.
Multifamily, 37 percent, ranks as the most attractive investment opportunity during the next 12 months, while hotels, 25 percent, rebounded from last place in 2008 to finish as the second most attractive investment opportunity.
Market Snapshot—Monday’s closes (5-10-10) are in parentheses
Treasury Yields Key Indicators Other Key Indicators
2-yr 0.78% (0.82%) DJIA: 10620 (10380) Prime Rate: 3.25%
5-yr 2.15% (2.16%) NASDAQ: 2347 (2266) Fed Reserve Target Rate: 0.25%
10-yr 3.46% (3.42%) S&P 500: 1135 (1111) U.S. Unemployment Rate: 9.90%
30-yr 4.34% (4.27%) S&P 100: 516 (507)
LIBOR NYSE Comp: 7078 (6916)
1- Mo. LIBOR: .34% (.30%) Crude Oil: $72 ($75)
3-Mo. LIBOR: .44 (.37%) Gold: $1232 ($1208)
OUR SERVICES - As a privately held mortgage banking firm Thomas D Wood and Company has been arranging and structuring commercial real estate loans for over 35 years. We arrange all types of debt for existing commercial real estate properties through our correspondent relationship with life insurance companies, community banks and private lenders. Single-tenant, owner-occupied, and multi tenant properties are all acceptable. For a list of recent closings visit our web site at www.tdwood.com.
Until next week -
Brad Cox, CCIM, CPM
Senior Vice President - Debt Placement
Thomas D Wood and Company
Email: bcox@tdwood.com
Thanks Brad.
WEEKLY MARKET COMMENTARY - AS OF MAY 17, 2010
FOR CRE DEBT, IT'S BOTTOM'S UP - With billions of dollars in commercial real estate debt coming due, the industry refuses to panic, sensing that the cycle's bottom is near, said DLA Piper's 2010 State of the Market Survey.
Responding to this bottoming out process, the U.S. commercial real estate industry outlook remains largely bearish; however, DLA Piper said bullish sentiment is improving and has started to gain momentum.
The survey, measuring attitudes and perspectives of 308 top executives within the U.S. commercial real estate market, reveals that 60 percent described themselves as bearish, down from a record 90 percent in September 2008 when DLA Piper previously surveyed the market just days after the collapse of Lehman Brothers and the sale of Merrill Lynch to Bank of America.
Bullish responses, consequently, quadrupled from 10 percent to 40 percent.
Meanwhile, 60 percent said real estate markets will reach bottom in 2010. Looking ahead, respondents expect that workouts and loan extensions will be the two most prominent strategies used to navigate this recovery as waves of commercial real estate debt come due between now and 2014, DLA Piper said.
"After the most grueling downturn the industry has ever seen, there is a genuine sense of stability beginning to return to the marketplace," said Jay Epstien, chair of DLA Piper’s U.S. Real Estate practice.
"From this point, the recovery will hinge in large part on workouts and loan extensions, but the real wild card is job growth that would drive renewed real estate demand in virtually every asset class."
Other survey findings:
Two of three respondents believed that the federal government’s Troubled Asset Relief Program and Troubled Asset-Backed Securities Loan Facility and other real estate-focused programs have done "enough" to stabilize the real estate marketplace.
Consistent with this view 70 percent do not expect any additional federal legislation focused on aiding the U.S. commercial real estate market.
Six out of 10 respondents do not expect the commercial mortgage-backed securities market to return in time to help refinance the more than $150 billion in CMBS loans coming due in the next two years.
Respondents do not expect workouts to yield deep discounts with lenders: 61 percent of respondents expect that the largest loan write-offs will range between 11 percent to 30 percent.
Armed with war chests of new capital, respondents expect private equity and hedge funds, 37 percent, and REITS, 29 percent, to be the most active investors during the next near.
Multifamily, 37 percent, ranks as the most attractive investment opportunity during the next 12 months, while hotels, 25 percent, rebounded from last place in 2008 to finish as the second most attractive investment opportunity.
Market Snapshot—Monday’s closes (5-10-10) are in parentheses
Treasury Yields Key Indicators Other Key Indicators
2-yr 0.78% (0.82%) DJIA: 10620 (10380) Prime Rate: 3.25%
5-yr 2.15% (2.16%) NASDAQ: 2347 (2266) Fed Reserve Target Rate: 0.25%
10-yr 3.46% (3.42%) S&P 500: 1135 (1111) U.S. Unemployment Rate: 9.90%
30-yr 4.34% (4.27%) S&P 100: 516 (507)
LIBOR NYSE Comp: 7078 (6916)
1- Mo. LIBOR: .34% (.30%) Crude Oil: $72 ($75)
3-Mo. LIBOR: .44 (.37%) Gold: $1232 ($1208)
OUR SERVICES - As a privately held mortgage banking firm Thomas D Wood and Company has been arranging and structuring commercial real estate loans for over 35 years. We arrange all types of debt for existing commercial real estate properties through our correspondent relationship with life insurance companies, community banks and private lenders. Single-tenant, owner-occupied, and multi tenant properties are all acceptable. For a list of recent closings visit our web site at www.tdwood.com.
Until next week -
Brad Cox, CCIM, CPM
Senior Vice President - Debt Placement
Thomas D Wood and Company
Email: bcox@tdwood.com
Thursday, May 13, 2010
Monday, May 10, 2010
A Summary of Current Market Trends or Reasons to Buy Now
From Tom Vincent, CCIM - Chicago, IL | We listened to Bob White of Real Capital Analytics discuss the current CRE market and trends. The good news is that the market is starting to slowly come back. Highlights include:
* Prices are starting to rise in the primary markets, driving down cap rates as there is more competition
* Secondary and tertiary markets are about 6 months behind this trend
* Many investors are sitting on the sidelines waiting to invest
* Debt financing has begun to return for good properties though underwriting guidelines have changed mostly with financial institutions requiring more equity – down payments of 35-40% are common
* Pricing may not increase linearly (in an increasing, straight line, but with “bumps in the road”)
* Properties that are trading are income-producing with current cash flows
* The market is two-tiered; value-added properties are lagging behind with biggest loss of value
* Single tenant cash flowing properties are showing biggest gains
Buyers have waited for the large influx of distressed properties to come to market. During the savings and loan crisis, financial institutions wanted the bad loans off their books and were selling at distressed prices of about 20-30 cents on the dollar. This is not happening now and likely will not!
* Banks are using the “extend and pretend” option
* FDIC has enough failed and failing financial institutions to contend with and are not anxious to add more
* Banks will sell distressed real estate at lower discounts in the 60-75 cent range
For the private investor, cash-flowing properties are selling in the $500,000 – $2,500,000 range. Financing is starting to be easier to find though lenders are imposing more stringent underwriting guidelines. BUT if you have extra cash earning 1% or less in a money market, now may be the time to leverage that money at the least 60% to buy an income-producing property. As an accountant, I also can’t resist adding this: Tax increases are coming, Bush’s tax cuts expire this year and Obama’s spending spree will add new taxes. Owning property can shield some income from taxation (depreciation, etc.). Now may be a good time to buy and of course, we are ready to assist you in finding the right property for you!! For further information on acquisitions, please read Tom’s White Paper HERE.
Question or comments about these trends and how your portfolio is positioned? Call us at (847) 963-1031 or email us!
* Prices are starting to rise in the primary markets, driving down cap rates as there is more competition
* Secondary and tertiary markets are about 6 months behind this trend
* Many investors are sitting on the sidelines waiting to invest
* Debt financing has begun to return for good properties though underwriting guidelines have changed mostly with financial institutions requiring more equity – down payments of 35-40% are common
* Pricing may not increase linearly (in an increasing, straight line, but with “bumps in the road”)
* Properties that are trading are income-producing with current cash flows
* The market is two-tiered; value-added properties are lagging behind with biggest loss of value
* Single tenant cash flowing properties are showing biggest gains
Buyers have waited for the large influx of distressed properties to come to market. During the savings and loan crisis, financial institutions wanted the bad loans off their books and were selling at distressed prices of about 20-30 cents on the dollar. This is not happening now and likely will not!
* Banks are using the “extend and pretend” option
* FDIC has enough failed and failing financial institutions to contend with and are not anxious to add more
* Banks will sell distressed real estate at lower discounts in the 60-75 cent range
For the private investor, cash-flowing properties are selling in the $500,000 – $2,500,000 range. Financing is starting to be easier to find though lenders are imposing more stringent underwriting guidelines. BUT if you have extra cash earning 1% or less in a money market, now may be the time to leverage that money at the least 60% to buy an income-producing property. As an accountant, I also can’t resist adding this: Tax increases are coming, Bush’s tax cuts expire this year and Obama’s spending spree will add new taxes. Owning property can shield some income from taxation (depreciation, etc.). Now may be a good time to buy and of course, we are ready to assist you in finding the right property for you!! For further information on acquisitions, please read Tom’s White Paper HERE.
Question or comments about these trends and how your portfolio is positioned? Call us at (847) 963-1031 or email us!
Friday, May 7, 2010
Where did the week go.....
The weather is awesome here in North Texas and there was not a minute to spare......because things are moving fast.
Bankers, lawyers, accountants, more lawyers........space planning, furniture selection, all before noon. Then it is deal, after deal, after deal. This week we saw activity in multi-family, a little retail and some student housing in three different states. Very exciting.
This lunch hour was dedicated to setting up more media, cleaning up the in-box and talking with bankers, lawyers and accountants.
More to come next week. Everyone have a great weekend and thank you to everyone involved in our efforts.
Core Ventures, LLC provides debt and equity to commercial real estate middle market entrepreneurs. If you are a Borrower/Sponsor or Lender that needs liquidity to get the show back on the road, please do not hesitate to contact us.
Bankers, lawyers, accountants, more lawyers........space planning, furniture selection, all before noon. Then it is deal, after deal, after deal. This week we saw activity in multi-family, a little retail and some student housing in three different states. Very exciting.
This lunch hour was dedicated to setting up more media, cleaning up the in-box and talking with bankers, lawyers and accountants.
More to come next week. Everyone have a great weekend and thank you to everyone involved in our efforts.
Core Ventures, LLC provides debt and equity to commercial real estate middle market entrepreneurs. If you are a Borrower/Sponsor or Lender that needs liquidity to get the show back on the road, please do not hesitate to contact us.
Monday, May 3, 2010
In CRE, everyone agrees that the sky is falling.....very, very, slowly.....for now.
Below is another fine commentary compiled by my friend Brad Cox. Brad, thanks again for your contribution.
AWAITING THE ONSLAUGHT OF FORECLOSED PROPERTIES - For some time now, commercial real estate professionals have been anticipating a wave of foreclosures. Hundreds of billions of dollars worth of commercial real estate loans either have matured or are expected to mature in the coming months, leaving borrowers unable to refinance or pay back what they owe.
However, with the exception of a small percentage of upside-down properties, most of these properties have not yet been foreclosed upon. So, why are commercial properties continuing to avoid foreclosure, and what needs to occur in order for these assets to be returned to the market?
First, commercial mortgage-backed securities (CMBS) can complicate matters. For institutional lenders that granted loans using a specific property or portfolio of properties as collateral, the foreclosure process is relatively straightforward. If a borrower can no longer service its debt, the property that was used as collateral can be foreclosed and returned to the lender.
But in the case of properties or portfolios that were used as collateral for CMBS, the process is much more complicated. Each defaulting property or portfolio is owned by the pool of investors that own the CMBS products that collectively financed these assets.
Consequently, no single lender can accept receivership of the defaulting property or properties. Instead, a special servicer must be appointed to oversee the foreclosure process and ensure that every investor's individual interests are met.
Many commercial properties have been undergoing foreclosure for quite some time as special servicers attempt to peel back the multi-layered financing that is characteristic of CMBS products.
Despite the large role that CMBS has played in the delay of commercial foreclosures, there have also been other forces at work. Even commercial properties that were financed by single institutional lenders have been slow to foreclose.
Most lenders are reluctant to take ownership of defaulting commercial properties and are actively delaying their foreclosure. Often facing limited market knowledge of commercial real estate submarkets, lenders are reluctant to burden themselves with the liability and challenge of managing these assets.
Instead, many lenders are choosing to renegotiate with borrowers in order to work through these tough times, particularly if the defaulting property is continuing to produce income, albeit at a much lower level than was projected at the time the loan was granted.
Foreclosure alternatives
For many commercial properties, renegotiating the loan is simply impossible, because borrowers cannot service debt, forcing lenders to assume control of these assets, typically via foreclosure.
As an alternative, some lenders have turned to loan sales, which allow distressed properties to change hands without lenders having to foreclose on the assets. A growing number of nonperforming commercial property loans are being sold by local, regional and foreign lenders to avoid the foreclosure process and the liabilities associated with the ownership on the chain of title.
Lenders are opting to sell loans at anywhere between 30% and 70% of their original value, depending on the asset type, physical condition and property submarket. The lender can write down its losses immediately and clear its balance sheets, rather than risk suffering a further fall in value.
Despite lower levels of commercial foreclosures than many real estate professionals have predicted, commercial foreclosures are, nonetheless, occurring in all commercial real estate markets and across all product types.
Foreclosure rates appear to be higher in the office market than the industrial market, with the retail market somewhere in between. Much of this difference can be attributed to the boom in development, which was more concentrated in the office market due to the higher returns initially offered by this property type. Consequently, office space was added to the market at much higher rates than other product types.
Despite having the highest rates of anticipated return, office product also requires the highest level of additional investment in order to fill the space because it requires expensive tenant improvements and leasing costs.
Conversely, tenant improvements and leasing costs for industrial properties are generally lower than most other commercial property types. During the development boom, less industrial product was added to the market because it offered less favorable returns.
Demand for industrial space has, therefore, remained more in balance with supply, and the space that is vacant requires the least additional capital in order to fill. As a result, office foreclosure rates seem to have been higher than industrial foreclosure rates.
More and more retail properties are entering the foreclosure process today because of the vast decline in consumer demand. The drop in U.S. consumer spending has forced a great number of retailers out of business, along with decreased revenue for existing retailers.
Furthermore, as anchor tenants have vacated centers, the remaining retailers whose lease agreements were tied to the presence of these anchor tenants have been able to break their leases, negotiate lower rates or move to more profitable centers. Retail-center owners have been forced to endure a double hit, which has resulted in an increasing rate of retail property foreclosures.
Resetting property values
Most commercial property loans were underwritten based on projected incomes that were much higher than the incomes they produce today. Under current conditions, many borrowers cannot service their debt.
Despite lenders' best efforts to wait on the sidelines in the hope that stimulus money will re-ignite the economy and return property values to their pre-downturn levels, many commercial properties still face an inevitable value reset.
Thus, the wave of foreclosures is set to break, as lenders are forced to accept reality and foreclose on these commercial properties in order to offload them. When, precisely, this wave will hit is impossible to predict, but as the Federal Deposit Insurance Corp. continues to take over additional banks, it is likely that the pressure on lenders to address these declining property values will result in more distressed sale transactions.
Even though commercial foreclosures will increase and loan sales will rise over the course of this year, this will only be the beginning. Many of the larger lenders that benefited from Troubled Asset Relief Program funds and have since been stockpiling cash will continue to hold on to their assets, hoping to wait out the market.
Thus, the inventory of distressed property will be slowed in its return to the market, delaying the basis reset of property values. Unfortunately, until property values are reset, most buyers will not be interested in making purchases. In conjunction with rising loan sales, additional foreclosures will result in downward pressure on property values.
When commercial property values finally do reset to a market level, in order for investment activity to rebound, liquidity and tenant demand will still need to return before buyers are motivated to take action.
Some buyers with cash are already active in the commercial real estate market, but their interest remains focused on the few properties that offer exceptional investment opportunities. Additionally, the majority of property sales and the majority of investors will not resume activity until commercial financing becomes more widely available.
In order for the debt markets to rebound and for lenders to start lending, commercial properties must be able to generate sufficient income for borrowers to service their debt. For this to happen, property values must be returned to a level that is proportional to today's market lease rates.
Increased foreclosures will result in lower property values, but this must happen alongside renewed tenant demand (likely fueled by job growth and increased consumer spending). When these market forces finally come into play, commercial real estate will once again attract the high volume of investment that characterized it in the past.
ATTENTION APARTMENT OWNERS – Fannie Mae and Freddie Mac continue to tighten their underwriting guidelines, cutting further into loan dollars and sidelining many potential deals. Most loans are maxing out at 65% or less and new rules seem to show up daily further affecting proceeds. Although the rate is attractive, providing insufficient proceeds forces many borrowers to look elsewhere. Alternatively, the Life Companies can provide more proceeds and be much more creative on how the loan is structured. The rate is higher, but so are the proceeds. If you have an apartment community that needs a new loan, call us to discuss what you’re looking for.
APARTMENT EQUITY AVAILABLE – Equity investor looking for borrowers with multifamily properties facing a 2010 or greater maturity where current available financing proceeds would be less than the balance of the maturing loan. The existing debt service payments must be current and the property in good physical condition.
Here’s how it would work: We would arrange a new long term loan (7 to 10 years) through Fannie Mae or one of the Life Companies we represent. The new equity would infuse capital into the borrowering entity. It will fund the gap between the new loan and the pay off of the existing loan. It would be co-terminus with the new first mortgage. Equity provider would determine selection and monitoring of the management company. Call for details.
MEZZ FOR RETAIL – One of the capital sources we represent provides mezzanine loans for retail properties. This structure can work well for borrowers that need the higher leverage in order to refinance out of an existing loan, or an investor buying a property with limited equity.
Example: Borrower wants to buy a $7,000,000 shopping center but the life company can only provide a 65% loan-to-value at 7% for 5-years ($4,550,000). The mezz loan can increase the leverage to 80% - 85% ($1,400,000 mezz loan). The rate on their money is in the 10% range. If you have a deal that is going to need the extra leverage to work then call for details.
***LIFE COMPANY’S HAVE CAPITAL TO MAKE LOANS TODAY***
Our firm is a correspondent for 14 life companies. They are more active this year than the past couple years and they are interested in financing stabilized commercial properties:
• Apartments
• Office
• Retail
• Industrial
• Mixed-Use
• Flex
• Self-Storage
• Owner-Occupied
• Single or Multi-Tenant
• $500K - $50MM
NEED A LOAN FAST? HAS YOUR TRADITIONAL LENDER TURNED YOU DOWN? HERE ARE THE TOP REASONS WHY BORROWERS APPLY FOR A PRIVATE MONEY LOAN:
• You received a loan quote from a Life Company, Conduit, or Bank and the LTV is too low. Our lenders can provide a mezzanine loan behind a newly originated first mortgage.
• Money for trapped equity
• Money for capital improvements and tenant improvements
• Money to acquire fractured condo units
• Paydown of existing loan so the lender will agree to extend the term
• Opportunistic purchases that need to close fast
• Refinancing of maturing commercial real estate loans
• A conventional commercial real estate loan closing falls apart in the 11th hour and new financing needs to get put in place quickly to meet the closing deadline
• Repositioning / Transitional Properties
• “Lease-Ups” (provides time to get property occupied)
• Rehabilitations
• Financing for properties exiting Bankruptcy
• Unusual borrower situation
• Cash-out financing
• Foreclosure purchases
• Commercial Real Estate Loans that don’t meet bank underwriting criteria
• Partner buyouts
Market Snapshot—Monday’s closes (4-26-10) are in parentheses
Treasury Yields Key Indicators Other Key Indicators
2-yr 0.95% (1.07%) DJIA: 11009 (11204) Prime Rate: 3.25%
5-yr 2.42% (2.59%) NASDAQ: 2461 (2530) Fed Reserve Target Rate: 0.25%
10-yr 3.66% (3.81%) S&P 500: 1187 (1217) U.S. Unemployment Rate: 9.70%
30-yr 4.52% (4.66%) S&P 100: 540 (552)
LIBOR NYSE Comp: 7474 (7702)
1- Mo. LIBOR: .28% (.26%) Crude Oil: $86 ($85)
3-Mo. LIBOR.34 (.32%) Gold: $1180 ($1158)
OUR SERVICES - As a privately held mortgage banking firm Thomas D Wood and Company has been arranging and structuring commercial real estate loans for over 35 years. We arrange all types of debt for existing commercial real estate properties through our correspondent relationship with life insurance companies, community banks and private lenders. Single-tenant, owner-occupied, and multi tenant properties are all acceptable. For a list of recent closings visit our web site at www.tdwood.com.
Until next week -
Brad Cox, CCIM, CPM
Senior Vice President - Debt Placement
Thomas D Wood and Company
7349 Professional Parkway East, Ste. B
Sarasota, FL 34240
Office: (941) 552-9731; Fax: (941) 761-5795
Cell: (813) 727-7709
Email: bcox@tdwood.com
AWAITING THE ONSLAUGHT OF FORECLOSED PROPERTIES - For some time now, commercial real estate professionals have been anticipating a wave of foreclosures. Hundreds of billions of dollars worth of commercial real estate loans either have matured or are expected to mature in the coming months, leaving borrowers unable to refinance or pay back what they owe.
However, with the exception of a small percentage of upside-down properties, most of these properties have not yet been foreclosed upon. So, why are commercial properties continuing to avoid foreclosure, and what needs to occur in order for these assets to be returned to the market?
First, commercial mortgage-backed securities (CMBS) can complicate matters. For institutional lenders that granted loans using a specific property or portfolio of properties as collateral, the foreclosure process is relatively straightforward. If a borrower can no longer service its debt, the property that was used as collateral can be foreclosed and returned to the lender.
But in the case of properties or portfolios that were used as collateral for CMBS, the process is much more complicated. Each defaulting property or portfolio is owned by the pool of investors that own the CMBS products that collectively financed these assets.
Consequently, no single lender can accept receivership of the defaulting property or properties. Instead, a special servicer must be appointed to oversee the foreclosure process and ensure that every investor's individual interests are met.
Many commercial properties have been undergoing foreclosure for quite some time as special servicers attempt to peel back the multi-layered financing that is characteristic of CMBS products.
Despite the large role that CMBS has played in the delay of commercial foreclosures, there have also been other forces at work. Even commercial properties that were financed by single institutional lenders have been slow to foreclose.
Most lenders are reluctant to take ownership of defaulting commercial properties and are actively delaying their foreclosure. Often facing limited market knowledge of commercial real estate submarkets, lenders are reluctant to burden themselves with the liability and challenge of managing these assets.
Instead, many lenders are choosing to renegotiate with borrowers in order to work through these tough times, particularly if the defaulting property is continuing to produce income, albeit at a much lower level than was projected at the time the loan was granted.
Foreclosure alternatives
For many commercial properties, renegotiating the loan is simply impossible, because borrowers cannot service debt, forcing lenders to assume control of these assets, typically via foreclosure.
As an alternative, some lenders have turned to loan sales, which allow distressed properties to change hands without lenders having to foreclose on the assets. A growing number of nonperforming commercial property loans are being sold by local, regional and foreign lenders to avoid the foreclosure process and the liabilities associated with the ownership on the chain of title.
Lenders are opting to sell loans at anywhere between 30% and 70% of their original value, depending on the asset type, physical condition and property submarket. The lender can write down its losses immediately and clear its balance sheets, rather than risk suffering a further fall in value.
Despite lower levels of commercial foreclosures than many real estate professionals have predicted, commercial foreclosures are, nonetheless, occurring in all commercial real estate markets and across all product types.
Foreclosure rates appear to be higher in the office market than the industrial market, with the retail market somewhere in between. Much of this difference can be attributed to the boom in development, which was more concentrated in the office market due to the higher returns initially offered by this property type. Consequently, office space was added to the market at much higher rates than other product types.
Despite having the highest rates of anticipated return, office product also requires the highest level of additional investment in order to fill the space because it requires expensive tenant improvements and leasing costs.
Conversely, tenant improvements and leasing costs for industrial properties are generally lower than most other commercial property types. During the development boom, less industrial product was added to the market because it offered less favorable returns.
Demand for industrial space has, therefore, remained more in balance with supply, and the space that is vacant requires the least additional capital in order to fill. As a result, office foreclosure rates seem to have been higher than industrial foreclosure rates.
More and more retail properties are entering the foreclosure process today because of the vast decline in consumer demand. The drop in U.S. consumer spending has forced a great number of retailers out of business, along with decreased revenue for existing retailers.
Furthermore, as anchor tenants have vacated centers, the remaining retailers whose lease agreements were tied to the presence of these anchor tenants have been able to break their leases, negotiate lower rates or move to more profitable centers. Retail-center owners have been forced to endure a double hit, which has resulted in an increasing rate of retail property foreclosures.
Resetting property values
Most commercial property loans were underwritten based on projected incomes that were much higher than the incomes they produce today. Under current conditions, many borrowers cannot service their debt.
Despite lenders' best efforts to wait on the sidelines in the hope that stimulus money will re-ignite the economy and return property values to their pre-downturn levels, many commercial properties still face an inevitable value reset.
Thus, the wave of foreclosures is set to break, as lenders are forced to accept reality and foreclose on these commercial properties in order to offload them. When, precisely, this wave will hit is impossible to predict, but as the Federal Deposit Insurance Corp. continues to take over additional banks, it is likely that the pressure on lenders to address these declining property values will result in more distressed sale transactions.
Even though commercial foreclosures will increase and loan sales will rise over the course of this year, this will only be the beginning. Many of the larger lenders that benefited from Troubled Asset Relief Program funds and have since been stockpiling cash will continue to hold on to their assets, hoping to wait out the market.
Thus, the inventory of distressed property will be slowed in its return to the market, delaying the basis reset of property values. Unfortunately, until property values are reset, most buyers will not be interested in making purchases. In conjunction with rising loan sales, additional foreclosures will result in downward pressure on property values.
When commercial property values finally do reset to a market level, in order for investment activity to rebound, liquidity and tenant demand will still need to return before buyers are motivated to take action.
Some buyers with cash are already active in the commercial real estate market, but their interest remains focused on the few properties that offer exceptional investment opportunities. Additionally, the majority of property sales and the majority of investors will not resume activity until commercial financing becomes more widely available.
In order for the debt markets to rebound and for lenders to start lending, commercial properties must be able to generate sufficient income for borrowers to service their debt. For this to happen, property values must be returned to a level that is proportional to today's market lease rates.
Increased foreclosures will result in lower property values, but this must happen alongside renewed tenant demand (likely fueled by job growth and increased consumer spending). When these market forces finally come into play, commercial real estate will once again attract the high volume of investment that characterized it in the past.
ATTENTION APARTMENT OWNERS – Fannie Mae and Freddie Mac continue to tighten their underwriting guidelines, cutting further into loan dollars and sidelining many potential deals. Most loans are maxing out at 65% or less and new rules seem to show up daily further affecting proceeds. Although the rate is attractive, providing insufficient proceeds forces many borrowers to look elsewhere. Alternatively, the Life Companies can provide more proceeds and be much more creative on how the loan is structured. The rate is higher, but so are the proceeds. If you have an apartment community that needs a new loan, call us to discuss what you’re looking for.
APARTMENT EQUITY AVAILABLE – Equity investor looking for borrowers with multifamily properties facing a 2010 or greater maturity where current available financing proceeds would be less than the balance of the maturing loan. The existing debt service payments must be current and the property in good physical condition.
Here’s how it would work: We would arrange a new long term loan (7 to 10 years) through Fannie Mae or one of the Life Companies we represent. The new equity would infuse capital into the borrowering entity. It will fund the gap between the new loan and the pay off of the existing loan. It would be co-terminus with the new first mortgage. Equity provider would determine selection and monitoring of the management company. Call for details.
MEZZ FOR RETAIL – One of the capital sources we represent provides mezzanine loans for retail properties. This structure can work well for borrowers that need the higher leverage in order to refinance out of an existing loan, or an investor buying a property with limited equity.
Example: Borrower wants to buy a $7,000,000 shopping center but the life company can only provide a 65% loan-to-value at 7% for 5-years ($4,550,000). The mezz loan can increase the leverage to 80% - 85% ($1,400,000 mezz loan). The rate on their money is in the 10% range. If you have a deal that is going to need the extra leverage to work then call for details.
***LIFE COMPANY’S HAVE CAPITAL TO MAKE LOANS TODAY***
Our firm is a correspondent for 14 life companies. They are more active this year than the past couple years and they are interested in financing stabilized commercial properties:
• Apartments
• Office
• Retail
• Industrial
• Mixed-Use
• Flex
• Self-Storage
• Owner-Occupied
• Single or Multi-Tenant
• $500K - $50MM
NEED A LOAN FAST? HAS YOUR TRADITIONAL LENDER TURNED YOU DOWN? HERE ARE THE TOP REASONS WHY BORROWERS APPLY FOR A PRIVATE MONEY LOAN:
• You received a loan quote from a Life Company, Conduit, or Bank and the LTV is too low. Our lenders can provide a mezzanine loan behind a newly originated first mortgage.
• Money for trapped equity
• Money for capital improvements and tenant improvements
• Money to acquire fractured condo units
• Paydown of existing loan so the lender will agree to extend the term
• Opportunistic purchases that need to close fast
• Refinancing of maturing commercial real estate loans
• A conventional commercial real estate loan closing falls apart in the 11th hour and new financing needs to get put in place quickly to meet the closing deadline
• Repositioning / Transitional Properties
• “Lease-Ups” (provides time to get property occupied)
• Rehabilitations
• Financing for properties exiting Bankruptcy
• Unusual borrower situation
• Cash-out financing
• Foreclosure purchases
• Commercial Real Estate Loans that don’t meet bank underwriting criteria
• Partner buyouts
Market Snapshot—Monday’s closes (4-26-10) are in parentheses
Treasury Yields Key Indicators Other Key Indicators
2-yr 0.95% (1.07%) DJIA: 11009 (11204) Prime Rate: 3.25%
5-yr 2.42% (2.59%) NASDAQ: 2461 (2530) Fed Reserve Target Rate: 0.25%
10-yr 3.66% (3.81%) S&P 500: 1187 (1217) U.S. Unemployment Rate: 9.70%
30-yr 4.52% (4.66%) S&P 100: 540 (552)
LIBOR NYSE Comp: 7474 (7702)
1- Mo. LIBOR: .28% (.26%) Crude Oil: $86 ($85)
3-Mo. LIBOR.34 (.32%) Gold: $1180 ($1158)
OUR SERVICES - As a privately held mortgage banking firm Thomas D Wood and Company has been arranging and structuring commercial real estate loans for over 35 years. We arrange all types of debt for existing commercial real estate properties through our correspondent relationship with life insurance companies, community banks and private lenders. Single-tenant, owner-occupied, and multi tenant properties are all acceptable. For a list of recent closings visit our web site at www.tdwood.com.
Until next week -
Brad Cox, CCIM, CPM
Senior Vice President - Debt Placement
Thomas D Wood and Company
7349 Professional Parkway East, Ste. B
Sarasota, FL 34240
Office: (941) 552-9731; Fax: (941) 761-5795
Cell: (813) 727-7709
Email: bcox@tdwood.com
Thursday, April 29, 2010
The market is coming back, but it likely doesn't apply to you.....
This article will start off telling us that everything is getting better and that liquidity is returning to the market resulting in transactions to be completed.
The detail is, that is only true of institutional grade Sponsorship, core assets, and credit tenants in tow. The excerpt below was deep, deep in the article and applies to most Sponsors, assets, and tenants.
A Bifurcated Market
Excerpt from: First Quarter Bank Results: Potential for CRE Armageddon Fading; Mark Heschmeyer CosStar
Class A properties are doing well and probably are doing better than anybody might mark them, so actually we're not in the business of selling those even though we might have taken a mark on them when we took them in. Those properties tend to come back with the economy, and that's the right thing to do.
The C properties, you just sell. C property rarely comes back so you take very strong marks on those right up front and you just sell them because they always have trouble recovering at all. So we've been actively doing that and we're comfortable with our marks.
The B properties, obviously the majority of the portfolio, but those are the ones you mark down and you have to manage one by one… So that's a plus, and I think the commercial real estate business over time, if a property loses a tenant, clearly that property has less value as you know. But then they go resign somebody else at a lower lease rate, so the property is worth less, but it's not like it falls off the planet. There is some cash flow. So I think those B properties, I think will work their way through for the most part.
James Rohr, Chairman & CEO, PNC Financial Services Group Inc.
Core Ventures, LLC capitalizes distressed multi-family and other commercial real estate assets. If you are an owner or lender that needs liquidity to consummate a transaction, please contact Core Ventures for more details.
The detail is, that is only true of institutional grade Sponsorship, core assets, and credit tenants in tow. The excerpt below was deep, deep in the article and applies to most Sponsors, assets, and tenants.
A Bifurcated Market
Excerpt from: First Quarter Bank Results: Potential for CRE Armageddon Fading; Mark Heschmeyer CosStar
Class A properties are doing well and probably are doing better than anybody might mark them, so actually we're not in the business of selling those even though we might have taken a mark on them when we took them in. Those properties tend to come back with the economy, and that's the right thing to do.
The C properties, you just sell. C property rarely comes back so you take very strong marks on those right up front and you just sell them because they always have trouble recovering at all. So we've been actively doing that and we're comfortable with our marks.
The B properties, obviously the majority of the portfolio, but those are the ones you mark down and you have to manage one by one… So that's a plus, and I think the commercial real estate business over time, if a property loses a tenant, clearly that property has less value as you know. But then they go resign somebody else at a lower lease rate, so the property is worth less, but it's not like it falls off the planet. There is some cash flow. So I think those B properties, I think will work their way through for the most part.
James Rohr, Chairman & CEO, PNC Financial Services Group Inc.
Core Ventures, LLC capitalizes distressed multi-family and other commercial real estate assets. If you are an owner or lender that needs liquidity to consummate a transaction, please contact Core Ventures for more details.
Good news; Bad news...Place your bets and hedge 'em
I love Federal Reserve Speak. I must say that Alan Greenspan was much better at it than our newly found friend Bernake. This is pretty plain language.
Things are good, not good enough, no eminent tightening. See the article below or find the original by clicking the title below.
Fed Pledges to Keep Low Rates for ‘Extended Period’ - Bloomberg; Torres/Matthews
April 28 (Bloomberg) -- Federal Reserve officials restated their intention to keep the benchmark interest rate near zero for an “extended period” and saw signs of life in the job market.
“The labor market is beginning to improve,” the Federal Open Market Committee said in a statement today in Washington, after last month saying it was “stabilizing.” Officials also said growth in household spending has “picked up recently.”
Chairman Ben S. Bernanke is contending with an unemployment rate that has been stuck at 9.7 percent for three straight months even as payrolls started to grow. Fed officials repeated that inflation is likely to be “subdued” and that consumer spending is held back by tight credit and weak income growth.
“You have got sub-comfort-zone core inflation with a high volume of labor-market slack,” Michael Darda, chief economist at MKM Partners LP, said in a Bloomberg Television interview. “The Fed would rather be a little bit behind the curve and play catch up later than move too soon.”
Treasury notes fell and stocks rose after the decision. The Standard & Poor’s 500 Index gained 0.7 percent to close at 1,191.36 in New York. Two-year Treasury notes fell, pushing up the yield 2 basis points to 1.02 percent. A basis point is 0.01 percentage point.
Slack in labor markets and resulting limited wage pressures have held down consumer prices. The so-called core inflation rate, which excludes food and energy, was 1.1 percent for the 12 months ending March, down from 1.3 percent in February.
Inflation Expectations
“Economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period,” today’s Fed statement said.
“The policy guidance was left fully intact,” said Jim O’Sullivan, chief economist at MF Global Ltd. in New York. “The message for now is there is no imminent tightening.”
U.S. central bankers have left the benchmark lending rate in a range of zero to 0.25 percent since December 2008. Their purchases of $1.25 trillion in mortgage-backed securities, which ended last month, boosted the balance sheet to a record $2.34 trillion.
Kansas City Fed President Thomas Hoenig dissented for the third straight meeting. He said “that continuing to express the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted because it could lead to the buildup of future imbalances and increase risks to longer-run macroeconomic and financial stability” and limit the ability to increase rates “modestly.”
Economic Growth
Gross domestic product grew at a 3.3 percent annual pace in the first quarter, according to the median forecast of economists surveyed by Bloomberg News ahead of an April 30 report from the Commerce Department. After a 5.6 percent expansion in the prior three months, such growth would mark the best back-to-back performance since the last six months of 2003.
A surge in corporate profits last quarter was led by demand from overseas and lower labor costs, according to results from S&P 500 companies that have reported earnings this month.
Conditions in financial markets have also improved. Raytheon Co., the world’s largest missile maker, and the finance unit of Royal Dutch Shell PLC led a drop in U.S. industrial company debt yields to 129 basis points more than similar- maturity Treasuries last week, according to Bank of America Merrill Lynch index data.
The spread is one basis point tighter than it was on Aug. 9, 2007, when BNP Paribas SA halted withdrawals from three investment funds near the start of the credit crisis. Industrial company spreads widened one basis point yesterday to 130 basis points.
Forecasts Raised
Economists have raised forecasts from earlier this month as reports showed consumer spending climbed, inventories rose and businesses invested in new equipment. The median estimate of analysts polled from April 1 to April 8 called for a 3 percent growth rate.
Retail sales increased 1.6 percent last month, more than anticipated and the biggest gain in four months, according to figures from the Commerce Department. Stocks of companies that rely on discretionary spending are up. Shares of Chipotle Mexican Grill Inc., a Denver-based Mexican restaurant chain, are up about 53 percent year-to-date. Shares of Starbucks Corp., based in Seattle, have risen 14 percent.
Jobless Rate
For all the positive news, economists surveyed by Bloomberg News expect non-farm payrolls to rise by just 175,000 this month, not enough to lower the unemployment rate from 9.7 percent, where it stood in March.
“The Fed is unconvinced in the sustainability of the recovery because job growth has been modest,” said Joseph LaVorgna, chief U.S. economist in New York at Deutsche Bank Securities Inc. in New York. “They want to be very certain the economy has gotten traction and the only way to be sure is if the labor market has gotten better over the next few months.”
Officials brought a fresh set of forecasts to today’s meeting. Their outlook for inflation and unemployment, which will be disclosed in three weeks when minutes are released, will offer insights into their estimates of how fast the economy will use up spare capacity.
About 80 percent of S&P 500 companies to have posted first- quarter earnings have topped analysts’ projections, according to data compiled by Bloomberg.
Increased Demand
Some companies are positioning for a sustained increase in demand.
Caterpillar Inc., based in Peoria, Illinois and the world’s largest maker of construction equipment, posted its first earnings increase in seven quarters on April 26, exceeding analysts’ estimates.
Eastman Chemical Co., the biggest U.S. maker of plastics for water bottles, topped analysts’ estimates with first-quarter earnings and its second-quarter forecast. Jim Rogers, chief executive officer of the Kingsport, Tennessee-based company, said April 23 that its output will rise after first-quarter sales jumped 39 percent to $1.56 billion.
Macy’s Inc., the second-largest U.S. department-store chain, boosted its annual profit and sales forecasts yesterday. Sales at stores open at least a year will rise as much as 3.5 percent, Chief Financial Officer Karen Hoguet said at an analyst meeting in New York. The Cincinnati-based retailer earlier predicted a gain of 2 percent at most.
“There are questions about the pace of the recovery and the sustainability of the housing recovery,” said John Silvia, chief economist at Wells Fargo Securities LLC in Charlotte, North Carolina. “Therefore, it is too early to move. The extended period is still in force.”
Core Ventures, LLC capitalizes distressed multi-family and other commercial real estate assets. If you are an owner or lender that needs liquidity to consummate a transaction, please contact Core Ventures for more details.
Things are good, not good enough, no eminent tightening. See the article below or find the original by clicking the title below.
Fed Pledges to Keep Low Rates for ‘Extended Period’ - Bloomberg; Torres/Matthews
April 28 (Bloomberg) -- Federal Reserve officials restated their intention to keep the benchmark interest rate near zero for an “extended period” and saw signs of life in the job market.
“The labor market is beginning to improve,” the Federal Open Market Committee said in a statement today in Washington, after last month saying it was “stabilizing.” Officials also said growth in household spending has “picked up recently.”
Chairman Ben S. Bernanke is contending with an unemployment rate that has been stuck at 9.7 percent for three straight months even as payrolls started to grow. Fed officials repeated that inflation is likely to be “subdued” and that consumer spending is held back by tight credit and weak income growth.
“You have got sub-comfort-zone core inflation with a high volume of labor-market slack,” Michael Darda, chief economist at MKM Partners LP, said in a Bloomberg Television interview. “The Fed would rather be a little bit behind the curve and play catch up later than move too soon.”
Treasury notes fell and stocks rose after the decision. The Standard & Poor’s 500 Index gained 0.7 percent to close at 1,191.36 in New York. Two-year Treasury notes fell, pushing up the yield 2 basis points to 1.02 percent. A basis point is 0.01 percentage point.
Slack in labor markets and resulting limited wage pressures have held down consumer prices. The so-called core inflation rate, which excludes food and energy, was 1.1 percent for the 12 months ending March, down from 1.3 percent in February.
Inflation Expectations
“Economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period,” today’s Fed statement said.
“The policy guidance was left fully intact,” said Jim O’Sullivan, chief economist at MF Global Ltd. in New York. “The message for now is there is no imminent tightening.”
U.S. central bankers have left the benchmark lending rate in a range of zero to 0.25 percent since December 2008. Their purchases of $1.25 trillion in mortgage-backed securities, which ended last month, boosted the balance sheet to a record $2.34 trillion.
Kansas City Fed President Thomas Hoenig dissented for the third straight meeting. He said “that continuing to express the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted because it could lead to the buildup of future imbalances and increase risks to longer-run macroeconomic and financial stability” and limit the ability to increase rates “modestly.”
Economic Growth
Gross domestic product grew at a 3.3 percent annual pace in the first quarter, according to the median forecast of economists surveyed by Bloomberg News ahead of an April 30 report from the Commerce Department. After a 5.6 percent expansion in the prior three months, such growth would mark the best back-to-back performance since the last six months of 2003.
A surge in corporate profits last quarter was led by demand from overseas and lower labor costs, according to results from S&P 500 companies that have reported earnings this month.
Conditions in financial markets have also improved. Raytheon Co., the world’s largest missile maker, and the finance unit of Royal Dutch Shell PLC led a drop in U.S. industrial company debt yields to 129 basis points more than similar- maturity Treasuries last week, according to Bank of America Merrill Lynch index data.
The spread is one basis point tighter than it was on Aug. 9, 2007, when BNP Paribas SA halted withdrawals from three investment funds near the start of the credit crisis. Industrial company spreads widened one basis point yesterday to 130 basis points.
Forecasts Raised
Economists have raised forecasts from earlier this month as reports showed consumer spending climbed, inventories rose and businesses invested in new equipment. The median estimate of analysts polled from April 1 to April 8 called for a 3 percent growth rate.
Retail sales increased 1.6 percent last month, more than anticipated and the biggest gain in four months, according to figures from the Commerce Department. Stocks of companies that rely on discretionary spending are up. Shares of Chipotle Mexican Grill Inc., a Denver-based Mexican restaurant chain, are up about 53 percent year-to-date. Shares of Starbucks Corp., based in Seattle, have risen 14 percent.
Jobless Rate
For all the positive news, economists surveyed by Bloomberg News expect non-farm payrolls to rise by just 175,000 this month, not enough to lower the unemployment rate from 9.7 percent, where it stood in March.
“The Fed is unconvinced in the sustainability of the recovery because job growth has been modest,” said Joseph LaVorgna, chief U.S. economist in New York at Deutsche Bank Securities Inc. in New York. “They want to be very certain the economy has gotten traction and the only way to be sure is if the labor market has gotten better over the next few months.”
Officials brought a fresh set of forecasts to today’s meeting. Their outlook for inflation and unemployment, which will be disclosed in three weeks when minutes are released, will offer insights into their estimates of how fast the economy will use up spare capacity.
About 80 percent of S&P 500 companies to have posted first- quarter earnings have topped analysts’ projections, according to data compiled by Bloomberg.
Increased Demand
Some companies are positioning for a sustained increase in demand.
Caterpillar Inc., based in Peoria, Illinois and the world’s largest maker of construction equipment, posted its first earnings increase in seven quarters on April 26, exceeding analysts’ estimates.
Eastman Chemical Co., the biggest U.S. maker of plastics for water bottles, topped analysts’ estimates with first-quarter earnings and its second-quarter forecast. Jim Rogers, chief executive officer of the Kingsport, Tennessee-based company, said April 23 that its output will rise after first-quarter sales jumped 39 percent to $1.56 billion.
Macy’s Inc., the second-largest U.S. department-store chain, boosted its annual profit and sales forecasts yesterday. Sales at stores open at least a year will rise as much as 3.5 percent, Chief Financial Officer Karen Hoguet said at an analyst meeting in New York. The Cincinnati-based retailer earlier predicted a gain of 2 percent at most.
“There are questions about the pace of the recovery and the sustainability of the housing recovery,” said John Silvia, chief economist at Wells Fargo Securities LLC in Charlotte, North Carolina. “Therefore, it is too early to move. The extended period is still in force.”
Core Ventures, LLC capitalizes distressed multi-family and other commercial real estate assets. If you are an owner or lender that needs liquidity to consummate a transaction, please contact Core Ventures for more details.
Friday, April 23, 2010
Better than the rest......
Texas, as a whole, is doing better than the rest of the country in the world of commercial real estate.....so take a look at these facts from the DBJ. Look here for the full article.
Commercial property foreclosures in North Texas have climbed 63 percent so far this year, with land and apartment complexes among the hardest hit.
So far in 2010, 1,393 foreclosure postings were filed on commercial properties in Dallas, Tarrant, Collin and Denton Counties. This compares to 857 for the same period last year, according to Addison-based Foreclosure Listing Service.
The number of postings for land jumped 73 percent to 311, and apartment postings jumped 44 percent to 191. Office building postings increased 21 percent to 116. Postings for miscellaneous commercial buildings -- which include restaurants, hotels, auto dealerships and funeral homes -- surged a whopping 139 percent, to 596.
Core Ventures, LLC capitalizes distressed multi-family and other commercial real estate assets. If you are an owner or lender that needs liquidity to consummate a transaction, please contact Core Ventures for more details.
Commercial property foreclosures in North Texas have climbed 63 percent so far this year, with land and apartment complexes among the hardest hit.
So far in 2010, 1,393 foreclosure postings were filed on commercial properties in Dallas, Tarrant, Collin and Denton Counties. This compares to 857 for the same period last year, according to Addison-based Foreclosure Listing Service.
The number of postings for land jumped 73 percent to 311, and apartment postings jumped 44 percent to 191. Office building postings increased 21 percent to 116. Postings for miscellaneous commercial buildings -- which include restaurants, hotels, auto dealerships and funeral homes -- surged a whopping 139 percent, to 596.
Core Ventures, LLC capitalizes distressed multi-family and other commercial real estate assets. If you are an owner or lender that needs liquidity to consummate a transaction, please contact Core Ventures for more details.
Tuesday, April 20, 2010
Some guys seem to always get it exactly right
Brad has been a friend of mine for going on four years. We worked at the same employer for some time several years ago and never fell out of touch. He has the most amazing business and marketing sense of any individual deal originator I have ever met. With his permission I will be posting his weekly address.
Todd, thank you as always and especially for this contribution. Keep up the good work. I am glad to know that business is still getting done out there.
Those of you skimming this post, note that current market data for the week of 4/19 follows:
WEEKLY MARKET COMMENTARY - AS OF APRIL 19, 2010
INTEREST RATES HAVE NOWHERE TO GO BUT UP - If you have a commercial loan that is maturing in the next 36 months you should serious consider refinancing now, even if there is a prepayment penalty. Even as prospects for the American economy brighten, consumers are about to face a new financial burden: a sustained period of rising interest rates. That, economists say, is the inevitable outcome of the nation’s ballooning debt and the renewed prospect of inflation as the economy recovers from the depths of the recent recession.
The shift is sure to come as a shock to consumers whose spending habits were shaped by a historic 30-year decline in the cost of borrowing.
“Americans have assumed the roller coaster goes one way,” said Bill Gross, whose investment firm, Pimco, has taken part in a broad sell-off of government debt, which has pushed up interest rates. “It’s been a great thrill as rates descended, but now we face an extended climb.”
The impact of higher rates is likely to be felt first in the housing market, which has only recently begun to rebound from a deep slump. The rate for a 30-year fixed rate mortgage has risen half a point since December, hitting 5.31 last week, the highest level since last summer.
Along with the sell-off in bonds, the Federal Reserve has halted its emergency $1.25 trillion program to buy mortgage debt, placing even more upward pressure on rates.
“Mortgage rates are unlikely to go lower than they are now, and if they go higher, we’re likely to see a reversal of the gains in the housing market,” said Christopher J. Mayer, a professor of finance and economics at Columbia Business School. “It’s a really big risk.”
Each increase of 1 percentage point in rates adds as much as 19 percent to the total cost of a home, according to Mr. Mayer.
The Mortgage Bankers Association expects the rise to continue, with the 30-year mortgage rate going to 5.5 percent by late summer and as high as 6 percent by the end of the year.
Another area in which higher rates are likely to affect consumers is credit card use. And last week, the Federal Reserve reported that the average interest rate on credit cards reached 14.26 percent in February, the highest since 2001. That is up from 12.03 percent when rates bottomed in the fourth quarter of 2008 — a jump that amounts to about $200 a year in additional interest payments for the typical American household.
With losses from credit card defaults rising and with capital to back credit cards harder to come by, issuers are likely to increase rates to 16 or 17 percent by the fall, according to Dennis Moroney, a research director at the TowerGroup, a financial research company.
“The banks don’t have a lot of pricing options,” Mr. Moroney said. “They’re targeting people who carry a balance from month to month.”
Similarly, many car loans have already become significantly more expensive, with rates at auto finance companies rising to 4.72 percent in February from 3.26 percent in December, according to the Federal Reserve.
Washington, too, is expecting to have to pay more to borrow the money it needs for programs. The Office of Management and Budget expects the rate on the benchmark 10-year United States Treasury note to remain close to 3.9 percent for the rest of the year, but then rise to 4.5 percent in 2011 and 5 percent in 2012.
The run-up in rates is quickening as investors steer more of their money away from bonds and as Washington unplugs the economic life support programs that kept rates low through the financial crisis. Mortgage rates and car loans are linked to the yield on long-term bonds.
Besides the inflation fears set off by the strengthening economy, Mr. Gross said he was also wary of Treasury bonds because he feared the burgeoning supply of new debt issued to finance the government’s huge budget deficits would overwhelm demand, driving interest rates higher.
Nine months ago, United States government debt accounted for half of the assets in Mr. Gross’s flagship fund, Pimco Total Return. That has shrunk to 30 percent now — the lowest ever in the fund’s 23-year history — as Mr. Gross has sold American bonds in favor of debt from Europe, particularly Germany, as well as from developing countries like Brazil.
A couple of weeks ago , the yield on the benchmark 10-year Treasury note briefly crossed the psychologically important threshold of 4 percent, as the Treasury auctioned off $82 billion in new debt. That is nearly twice as much as the government paid in the fall of 2008, when investors sought out ultrasafe assets like Treasury securities after the collapse of Lehman Brothers and the beginning of the credit crisis.
Though still very low by historical standards, the rise of bond yields since then is reversing a decline that began in 1981, when 10-year note yields reached nearly 16 percent.
From that peak, steadily dropping interest rates have fed a three-decade lending boom, during which American consumers borrowed more and more but managed to hold down the portion of their income devoted to paying off loans.
Indeed, total household debt is now nine times what it was in 1981 — rising twice as fast as disposable income over the same period — yet the portion of disposable income that goes toward covering that debt has budged only slightly, increasing to 12.6 percent from 10.7 percent.
Household debt has been dropping for the last two years as recession-battered consumers cut back on borrowing, but at $13.5 trillion, it still exceeds disposable income by $2.5 trillion.
The long decline in rates also helped prop up the stock market; lower rates for investments like bonds make stocks more attractive.
ATTENTION APARTMENT OWNERS – Fannie Mae and Freddie Mac continue to tighten their underwriting guidelines, cutting further into loan dollars and sidelining many potential deals. Most loans are maxing out at 65% or less and new rules seem to show up daily further affecting proceeds. Although the rate is attractive, providing insufficient proceeds forces many borrowers to look elsewhere. Alternatively, the Life Companies can provide more proceeds and be much more creative on how the loan is structured. The rate is higher, but so are the proceeds. If you have an apartment community that needs a new loan, call us to discuss what you’re looking for.
REFERRAL FEE – We will pay you a referral fee if you refer us a client that needs a commercial real estate loan and we arrange the financing for them. Call for more details.
***LIFE COMPANY’S HAVE CAPITAL TO MAKE LOANS TODAY***
Our firm is a correspondent for 14 life companies. They are more active this year than the past couple years and they are interested in financing stabilized commercial properties:
• Apartments
• Office
• Retail
• Industrial
• Mixed-Use
• Flex
• Self-Storage
• Owner-Occupied
• Single or Multi-Tenant
• $500K - $50MM
NEED A LOAN FAST? HAS YOUR TRADITIONAL LENDER TURNED YOU DOWN? HERE ARE THE TOP REASONS WHY BORROWERS APPLY FOR A PRIVATE MONEY LOAN:
• You received a loan quote from a Life Company, Conduit, or Bank and the LTV is too low. Our lenders can provide a mezzanine loan behind a newly originated first mortgage.
• Money for trapped equity
• Money for capital improvements and tenant improvements
• Money to acquire fractured condo units
• Paydown of existing loan so the lender will agree to extend the term
• Opportunistic purchases that need to close fast
• Refinancing of maturing commercial real estate loans
• A conventional commercial real estate loan closing falls apart in the 11th hour and new financing needs to get put in place quickly to meet the closing deadline
• Repositioning / Transitional Properties
• “Lease-Ups” (provides time to get property occupied)
• Rehabilitations
• Financing for properties exiting Bankruptcy
• Unusual borrower situation
• Cash-out financing
• Foreclosure purchases
• Commercial Real Estate Loans that don’t meet bank underwriting criteria
• Partner buyouts
Market Snapshot—Monday’s closes (4-19-10) are in parentheses
Treasury Yields Key Indicators Other Key Indicators
2-yr 0.95% (1.06%) DJIA: 11018 (10997) Prime Rate: 3.25%
5-yr 2.47% (2.62%) NASDAQ: 2481 (2454) Fed Reserve Target Rate: 0.25%
10-yr 3.77% (3.88%) S&P 500: 1192 (1194) U.S. Unemployment Rate: 9.70%
30-yr 4.67% (4.74%) S&P 100: 544 (545)
LIBOR NYSE Comp: 7685 (7529)
1- Mo. LIBOR: .26% (.25%) Crude Oil: $83 ($85)
3-Mo. LIBOR.30 (.29%) Gold: $1138 ($1162)
OUR SERVICES - As a privately held mortgage banking firm Thomas D Wood and Company has been arranging and structuring commercial real estate loans for over 35 years. We arrange all types of debt for existing commercial real estate properties through our correspondent relationship with life insurance companies, community banks and private lenders. Single-tenant, owner-occupied, and multi tenant properties are all acceptable. For a list of recent closings visit our web site at www.tdwood.com.
Until next week -
Brad Cox, CCIM, CPM
Senior Vice President - Debt Placement
Thomas D Wood and Company
6802 Honeysuckle Trail, Ste. 101
Lakewood Ranch, FL 34202
Office: (941) 552-9731; Fax: (941) 761-5795
Cell: (813) 727-7709
Email: bcox@tdwood.com
Todd, thank you as always and especially for this contribution. Keep up the good work. I am glad to know that business is still getting done out there.
Those of you skimming this post, note that current market data for the week of 4/19 follows:
WEEKLY MARKET COMMENTARY - AS OF APRIL 19, 2010
INTEREST RATES HAVE NOWHERE TO GO BUT UP - If you have a commercial loan that is maturing in the next 36 months you should serious consider refinancing now, even if there is a prepayment penalty. Even as prospects for the American economy brighten, consumers are about to face a new financial burden: a sustained period of rising interest rates. That, economists say, is the inevitable outcome of the nation’s ballooning debt and the renewed prospect of inflation as the economy recovers from the depths of the recent recession.
The shift is sure to come as a shock to consumers whose spending habits were shaped by a historic 30-year decline in the cost of borrowing.
“Americans have assumed the roller coaster goes one way,” said Bill Gross, whose investment firm, Pimco, has taken part in a broad sell-off of government debt, which has pushed up interest rates. “It’s been a great thrill as rates descended, but now we face an extended climb.”
The impact of higher rates is likely to be felt first in the housing market, which has only recently begun to rebound from a deep slump. The rate for a 30-year fixed rate mortgage has risen half a point since December, hitting 5.31 last week, the highest level since last summer.
Along with the sell-off in bonds, the Federal Reserve has halted its emergency $1.25 trillion program to buy mortgage debt, placing even more upward pressure on rates.
“Mortgage rates are unlikely to go lower than they are now, and if they go higher, we’re likely to see a reversal of the gains in the housing market,” said Christopher J. Mayer, a professor of finance and economics at Columbia Business School. “It’s a really big risk.”
Each increase of 1 percentage point in rates adds as much as 19 percent to the total cost of a home, according to Mr. Mayer.
The Mortgage Bankers Association expects the rise to continue, with the 30-year mortgage rate going to 5.5 percent by late summer and as high as 6 percent by the end of the year.
Another area in which higher rates are likely to affect consumers is credit card use. And last week, the Federal Reserve reported that the average interest rate on credit cards reached 14.26 percent in February, the highest since 2001. That is up from 12.03 percent when rates bottomed in the fourth quarter of 2008 — a jump that amounts to about $200 a year in additional interest payments for the typical American household.
With losses from credit card defaults rising and with capital to back credit cards harder to come by, issuers are likely to increase rates to 16 or 17 percent by the fall, according to Dennis Moroney, a research director at the TowerGroup, a financial research company.
“The banks don’t have a lot of pricing options,” Mr. Moroney said. “They’re targeting people who carry a balance from month to month.”
Similarly, many car loans have already become significantly more expensive, with rates at auto finance companies rising to 4.72 percent in February from 3.26 percent in December, according to the Federal Reserve.
Washington, too, is expecting to have to pay more to borrow the money it needs for programs. The Office of Management and Budget expects the rate on the benchmark 10-year United States Treasury note to remain close to 3.9 percent for the rest of the year, but then rise to 4.5 percent in 2011 and 5 percent in 2012.
The run-up in rates is quickening as investors steer more of their money away from bonds and as Washington unplugs the economic life support programs that kept rates low through the financial crisis. Mortgage rates and car loans are linked to the yield on long-term bonds.
Besides the inflation fears set off by the strengthening economy, Mr. Gross said he was also wary of Treasury bonds because he feared the burgeoning supply of new debt issued to finance the government’s huge budget deficits would overwhelm demand, driving interest rates higher.
Nine months ago, United States government debt accounted for half of the assets in Mr. Gross’s flagship fund, Pimco Total Return. That has shrunk to 30 percent now — the lowest ever in the fund’s 23-year history — as Mr. Gross has sold American bonds in favor of debt from Europe, particularly Germany, as well as from developing countries like Brazil.
A couple of weeks ago , the yield on the benchmark 10-year Treasury note briefly crossed the psychologically important threshold of 4 percent, as the Treasury auctioned off $82 billion in new debt. That is nearly twice as much as the government paid in the fall of 2008, when investors sought out ultrasafe assets like Treasury securities after the collapse of Lehman Brothers and the beginning of the credit crisis.
Though still very low by historical standards, the rise of bond yields since then is reversing a decline that began in 1981, when 10-year note yields reached nearly 16 percent.
From that peak, steadily dropping interest rates have fed a three-decade lending boom, during which American consumers borrowed more and more but managed to hold down the portion of their income devoted to paying off loans.
Indeed, total household debt is now nine times what it was in 1981 — rising twice as fast as disposable income over the same period — yet the portion of disposable income that goes toward covering that debt has budged only slightly, increasing to 12.6 percent from 10.7 percent.
Household debt has been dropping for the last two years as recession-battered consumers cut back on borrowing, but at $13.5 trillion, it still exceeds disposable income by $2.5 trillion.
The long decline in rates also helped prop up the stock market; lower rates for investments like bonds make stocks more attractive.
ATTENTION APARTMENT OWNERS – Fannie Mae and Freddie Mac continue to tighten their underwriting guidelines, cutting further into loan dollars and sidelining many potential deals. Most loans are maxing out at 65% or less and new rules seem to show up daily further affecting proceeds. Although the rate is attractive, providing insufficient proceeds forces many borrowers to look elsewhere. Alternatively, the Life Companies can provide more proceeds and be much more creative on how the loan is structured. The rate is higher, but so are the proceeds. If you have an apartment community that needs a new loan, call us to discuss what you’re looking for.
REFERRAL FEE – We will pay you a referral fee if you refer us a client that needs a commercial real estate loan and we arrange the financing for them. Call for more details.
***LIFE COMPANY’S HAVE CAPITAL TO MAKE LOANS TODAY***
Our firm is a correspondent for 14 life companies. They are more active this year than the past couple years and they are interested in financing stabilized commercial properties:
• Apartments
• Office
• Retail
• Industrial
• Mixed-Use
• Flex
• Self-Storage
• Owner-Occupied
• Single or Multi-Tenant
• $500K - $50MM
NEED A LOAN FAST? HAS YOUR TRADITIONAL LENDER TURNED YOU DOWN? HERE ARE THE TOP REASONS WHY BORROWERS APPLY FOR A PRIVATE MONEY LOAN:
• You received a loan quote from a Life Company, Conduit, or Bank and the LTV is too low. Our lenders can provide a mezzanine loan behind a newly originated first mortgage.
• Money for trapped equity
• Money for capital improvements and tenant improvements
• Money to acquire fractured condo units
• Paydown of existing loan so the lender will agree to extend the term
• Opportunistic purchases that need to close fast
• Refinancing of maturing commercial real estate loans
• A conventional commercial real estate loan closing falls apart in the 11th hour and new financing needs to get put in place quickly to meet the closing deadline
• Repositioning / Transitional Properties
• “Lease-Ups” (provides time to get property occupied)
• Rehabilitations
• Financing for properties exiting Bankruptcy
• Unusual borrower situation
• Cash-out financing
• Foreclosure purchases
• Commercial Real Estate Loans that don’t meet bank underwriting criteria
• Partner buyouts
Market Snapshot—Monday’s closes (4-19-10) are in parentheses
Treasury Yields Key Indicators Other Key Indicators
2-yr 0.95% (1.06%) DJIA: 11018 (10997) Prime Rate: 3.25%
5-yr 2.47% (2.62%) NASDAQ: 2481 (2454) Fed Reserve Target Rate: 0.25%
10-yr 3.77% (3.88%) S&P 500: 1192 (1194) U.S. Unemployment Rate: 9.70%
30-yr 4.67% (4.74%) S&P 100: 544 (545)
LIBOR NYSE Comp: 7685 (7529)
1- Mo. LIBOR: .26% (.25%) Crude Oil: $83 ($85)
3-Mo. LIBOR.30 (.29%) Gold: $1138 ($1162)
OUR SERVICES - As a privately held mortgage banking firm Thomas D Wood and Company has been arranging and structuring commercial real estate loans for over 35 years. We arrange all types of debt for existing commercial real estate properties through our correspondent relationship with life insurance companies, community banks and private lenders. Single-tenant, owner-occupied, and multi tenant properties are all acceptable. For a list of recent closings visit our web site at www.tdwood.com.
Until next week -
Brad Cox, CCIM, CPM
Senior Vice President - Debt Placement
Thomas D Wood and Company
6802 Honeysuckle Trail, Ste. 101
Lakewood Ranch, FL 34202
Office: (941) 552-9731; Fax: (941) 761-5795
Cell: (813) 727-7709
Email: bcox@tdwood.com
Monday, April 19, 2010
Why say "No" when it feels so right to say "Yes"
Being a contrarian of is not a very popular position. I have found that it serves me well. Take a look at what Jon Markman of Markman Capital Insight has to say on the matter here:
Some quotes to pique your interest:
...." Let me put it this way: Would you rather buy paper shares of a technology company that could lose its innovation edge at any time? Or half a block of Manhattan at a 50% discount? Yeah, me, too."
Core Ventures is uniquely positioned with its access to flexible capital to assist the middle market Commercial Real Estate entrepreneur to reenter the market and take advantage of the discounted hard assets and cash flow Mr. Markman describes.
If you are a seasoned real estate professional waiting for the capital markets to thaw, please do not wait any longer. Contact Core Ventures, LLC today and let's discuss what we can do together in today's market.
Some quotes to pique your interest:
...." Let me put it this way: Would you rather buy paper shares of a technology company that could lose its innovation edge at any time? Or half a block of Manhattan at a 50% discount? Yeah, me, too."
Core Ventures is uniquely positioned with its access to flexible capital to assist the middle market Commercial Real Estate entrepreneur to reenter the market and take advantage of the discounted hard assets and cash flow Mr. Markman describes.
If you are a seasoned real estate professional waiting for the capital markets to thaw, please do not wait any longer. Contact Core Ventures, LLC today and let's discuss what we can do together in today's market.
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