Today’s post is written by Michael Green, Senior Commercial Loan Originator with Counsel Mortgage Group, LLC.  Mike writes monthly on the commercial mortgage market.  Check back each month for his commentary.  

As a commercial real estate broker, I specialized in the gas station sub-segment of retail for about 25 years.  During that period, I had adequate time to learn about the upstream and midstream economics of oil, and energy in general.  In this continuation of the “information age” we are fed a continuous feed of blow-by-blow activities in the Middle East, and a variety of opinions on the economic and geo-political impact of daily activities.  

Connecting the dots… what does it all mean?  It’s been said that the first casualty of war is the truth, likely said by a British Intelligence agent monitoring Joseph Goebbels propaganda releases on behalf of the Nazis during WW II. At what point, then, does random information become actionable?  

That depends.  What is our focus of interest?  What is our timeframe?  What is our risk tolerance?  What are our alternatives?  What if we do nothing … wait it out?  (Doing nothing comes with its own risk … perhaps opportunity risk – risk of missing out.)

For information to become actionable, it must be translated into knowledge, i.e., it must mean something.  We’ve been told that Iran’s strategy for winning the war isn’t to defeat the U.S. militarily, but to hang in there long enough to create economic damage sufficient for Trump to declare victory and go home.  Certainly $100/bbl of oil could do that. History records for us that on prior similar conflicts the damage done …

The table shown presents only the effect on housing.  There were clearly other areas of economics affected … the stock market, bond market, currencies, political fall-out, and yes, even commercial real estate.  How bad might it get, we wonder?  The folks over at Bloomberg offer the following projection.  (Note this is modeled on historical data, interpreted, and opinionated into the chart below. We don’t know if AI was used.)

So, we have an abundance of information.  What does it mean in terms of CRE mortgages in the near term, e.g., tomorrow?  

It’s difficult to take pieces of information gathered randomly over an indefinite period and arrive at a conclusion with an acceptable degree of uncertainty.  (There’s always some uncertainty!)  It would be better to have a concentration of pre-defined primary data points extended to multi-layered derivatives to better define our expectations, and create a timeline for execution.  But who has time?  

We do … it’s what we do.  Perhaps more important, we have resources to bring to bear.  Who has lendable funds today for what projects in what market segments (sweet spots) and for what terms and conditions?  Granted, these are not perceived as ideal (perhaps even acceptable) conditions to initiate loans.  But the inalterable variable for both lenders and borrowers is time.  The clock doesn’t stop because of war, $100/bbl of oil, the Government’s halt on funding Homeland Security, or other exogenous factors.  

If you have a “situation”, either a problem or opportunity, that defies patience, give us a call to see how we can help you.