We’ve endured the endless bombarding of “up-to-the–minute” news, “news-alerts”, and “this just in” for what seems like, dare I say, forever! And this doesn’t even include the onslaughts to those of you who stay glued to your hand-held devices for the never-ending tweets and hashtags. And the hot topics of the days gone by remain: trade tariffs, inverted yield curves, not if, but now when the next recession will hit, speculation about the Fed’s policies and whether the next FMOC meeting will raise, lower or hold pat on the Fed Funds Rate. The response of markets adjusting to the...
Commercial Loans
THE FED IS JUST THE TIP
Perhaps a better question isn’t when will they drop or raise the rate again, or by how much, but rather why will they do either, or consciously decide to do nothing. The by-now-well-known (accepted) reason is to support the stock market, of course. But that’s old hat – everybody knows that, and as such there’s no particular advantage to any one investor. (Incidentally, nothing in the Congressional Act authorizing the creation & mandate of the Fed is support of the stock market mentioned.) But that doesn’t concern you … you’re reading this for information and insight into managing...
July 31, 2019July 31, 2019john
HOW LONG CAN IT LAST?
And what would “it” be, we query? Why “the cycle” of course. Pick your cycle of choice: the economic cycle, the credit cycle, the business cycle, the stock market cycle, the labor cycle, etc.While these, plus others, are loosely sequenced, they are by no means coincidental. Our cycle of greatest consideration at Counsel Mortgage is the credit cycle, closely aligned with the real estate cycle … both residential and commercial – each different. Earlier this month the president of the St. Louis Federal Reserve became the first Fed official to publicly suggest a need to not only hold the line...
July 1, 2019July 1, 2019john
FINANCING THE RETAIL ASSET
From a financing perspective, the retail sector continues to be challenged, but there are good gems to be acquired too. From a lender’s perspective, there are particular challenges to retail deals getting done: • lease roll overs, • expiring leases with no backfill identified, • downward pressure on retailer credit, • lack of transparency on retail sales figures, and • long term permanent loan take-outs. All of these issues can have significant impact on leverage levels, pricing, and whether or not a deal can even garner interest from a lender. And who’s the culprit threatening retail? Why e-Commerce, of...
May 29, 2019May 29, 2019john
COMMERCIAL REAL ESTATE AS AN INVESTMENT
Wait a minute … shouldn’t this be written by a commercial real estate broker? Good question – read on. Money is mobile. It moves among markets, countries (currencies), and asset classes in order for the investor to optimize his (or her) risk/reward. This is notable and timely today given the recent activity in the stock market. Some of these market participants are going to reconsider their allocation of assets. Commercial real estate may be on the table – maybe your table! Commercial real estate investment doesn’t consider flipping houses, up to 4 units. This is also real estate investing, but...
May 15, 2019May 15, 2019john
SO WHAT HAVE YOU DONE LATELY?
This was a refi of 2 existing gas stations with convenience stores in the Phoenix metro market. Underwritten as a portfolio loan, but structured as 2 separate loans. The loan was conventional and refinanced 2 SBA 7(a) loans. The refinancing released about $2.3mm of SBA capacity to be re-used for additional acquisitions. Combined loan amount was approximately $3.2mm, and included about $1mm cash out to the borrower. LTV was about 70% with an interest rate in the low 5’s. This was a strategic refinancing that allowed the borrower to reduce his debt service, liquefy...
April 27, 2019April 27, 2019john
THAT’S A WRAP!
Today’s post is written by Michael Green, Commercial Loan Originator for Counsel Mortgage Group, LLC. No, we’re not talking about the closing of the Mueller investigation of President Trump for collusion, obstruction, etc. This is a wrap of a different kind. We’re talking about a wraparound mortgage. A wraparound mortgage is a type of junior (subordinate) loan which wraps around, or includes, the current note due on the property. The wraparound loan will consist of the balance of the original loan, or more, plus an amount to cover the new purchase price for the property. These mortgages...
March 31, 2019March 31, 2019john
BANKS ARE EXPECTING A STRONG YEAR (2019) FOR CRE LENDING
Today’s post is written by Michael Green, Commercial Loan Originator for Counsel Mortgage Group, LLC. The Mortgage Bankers Association (MBA) recently reported another stellar year for commercial/multifamily mortgage originations in 2018. Although the MBA will release final data next month, results from its fourth quarter mortgage originations survey point to volume that could be 3% higher than the record $530 million reached in 2017. Banks are facing more competition. Growth of non-bank lenders has added a whole new dimension to the competitive landscape, particularly in bridge and construction financing, notes Kathleen Farrell, executive vice president, line of business...
March 6, 2019March 6, 2019john
UP 1% IN 2018
The Fed’s quarter point bump in Dec. is now in the books. Their most recent forward guidance suggests two ¼ point increases in 2019 … but when? The early money says Jun & Dec. Most every market prognosticator, soothsayer, psychic and analyst state that their market is “late in the cycle”. Which cycle that is depends on which market you’re talking about. What we’ve observed over the last few months is enhanced volatility in the public markets (stock, bond and derivatives), reflecting increased uncertainty in the investment environment. What I’ll remind you of is that money is mobile....
December 29, 2018December 29, 2018john
TERM SHEET OR COMMITMENT LETTER
The glossary of terms in commercial real estate (CRE) lending is packed with synonymous and unique terms not typically found outside the arena of commercial real estate lending, and often mis-used by practitioners within the industry, as well as those bumping up against CRE lending in their respective tangential industries, e.g., CRE real estate licensees, escrow officers, and surveyors, appraisers, etc. A couple of the offenders are “term sheet” and “commitment letter”. I come across borrowers regularly who are in escrow and think they have, or will, secure a loan as soon as they get a term sheet, aka, letter...
November 28, 2018November 28, 2018john