What's New
June 11, 2008
Bridge Loans – A bridge loan, with a 2-3 year loan term, is a popular financing option for many commercial property owners in the current real estate market. A bridge loan enables a borrower to maximize cash flow with interest-only payments. In addition, the borrower maintains the ability to plan the marketing of a property for sale when there are indications of an improved resale market. The lender generally will allow early prepayment of the loan with no prepayment penalty in the event of a property sale.
May 28, 2008
Apartment Sector Holds Up as Housing Crunch Yields More Renters -
Wall Street Journal
“…Cincinnati-based Berkshire Realty Group, LLC, is an owner and operating of rental-apartment buildings. With 5,500 units in Ohio and Kentucky and a healthy appetite to buy more, Berkshire and regional operators like it have found one of the few sweet spots in the market right now. While credit is scarce in many sectors, financing is still available for buying apartment buildings thanks to government-sponsored enterprises Fannie Mae and Freddie Mac. At the same time, competition facing investors like Berkshire has greatly diminished as the giants that used to rule the multifamily sector…have moved to the sidelines…Office and retail sales fell by 80% and 70%, respectively, in the first quarter from a year earlier, compared with a 40% slump in multifamily sales, according to Real Capital Analytics…The demand for rental apartments also remains healthy from people forced out in foreclosures and would-be buyers unable to get mortgages.”
May 1, 2008
Role of Real Estate Broker as Consultant - Benefits of Refinancing
In many cases, real estate brokers are the primary point of contact for owners of commercial real estate and apartments. They rely on real estate brokers to keep them informed about local and regional market conditions that may effect their property management and sales strategy. In addition to the usual market information related to current sales, rental rates, vacancy rates, property management issues, etc. real estate brokers may want to consider advising clients about the benefits of refinancing their existing mortgages.
Many property owners would benefit from refinancing based on:
- Lock-in interest rates – With 5-year interest rates in the range of 6 – 6.5%, borrowers have the ability to lock-in a favorable interest rate.
- Many existing loans that were originated in 2003-2005 have no prepayment penalty in effect.
- Newly originated loans may include flexible pre-payment penalties (i.e. step-down 5-4-3-2-1) which would facilitate the sale of the property in future years.
- Many loans may be assumed, with the lender’s approval, if the property is sold to a new buyer.
By refinancing at this time property owners can create a stable cash flow, position their property for sale as the market improves, and eliminate risk associated with rising interest rates.
March 10, 2008
Wall Street Journal Article - "Malls, Offices May Slump Less Steeply Than Houses" - March 10, 2008
Cash Flow Summary Worksheet - This worksheet is designed for use as a sales tool and for "what-if" analysis to measure the effect of changes in cap rate, NOI, etc.
» Download the March 10 Financing Update for more info
November 12, 2007
NEW LOAN PROGRAMS - We are pleased to announce several new lending programs that will be of value to many of our new and existing clients:
- Owner-User Financing - A local lender is providing long-term fixed rate financing for owner-users. These loans are available for business owners who occupy commercial real estate. Acquisition financing or refinancing is available to 80% loan-to-value. These loans offer the benefits of:
- Long-Term Fixed Rates - 10 to 15 year fixed rates - Eliminates exposure to higher interest rates in the future
- Long-Term Amortization - 20 20 25 year amortization - Reduced monthly payments
- Local Portfolio Lender - Quick response to loan requests
- Alternative to SBA financing - Lower cost and less paperwork
- Land Financing - A local lender is offering fixed-rate financing for land loans, including unimproved (to 60% LTV) and improved (to 75%). This is a unique opportunity to obtain land financing in a market that has reduced alternatives for potential borrowers, for both purchase and refinance transactions. Benefits include:
- 5-Year Fixed Rate - Less than 7% (11/12/07)
- 30-Year Amrtization - Reduced monthly payments
- Local Portfolio Lender - Quick response to loan requests
October 15, 2007
The process of the marketing and sale of a commercial/multi-family property may be viewed in the form of a timeline. The process begins before the property is listed for sale and ends at the close of escrow/loan funding. Real estate brokers who manage the process effectively will improve their service to their clients and reduce the risk of contract cancellations. The Commercial Real Estate Underwriting Timeline is provided as a resource for real estate professionals. A review of the timeline may be helpful in managing the complex process of marketing and selling multi-million dollar properties over a period of time that ranges from 3 - 12 months
» View Timeline
August 18, 2007
Portfolio lenders have emerged as the lenders of choice during the recent capital market melt-down. Portfolio lenders offer many benefits during periods of financial instability:
- Reliable Funding - Portfolio lenders use their own capital to fund loans. They are not dependent on lines of credit to fund loans.
- Competitive Pricing - Interest rates are tied to the lender's internal cost of funds (deposits).
- Stability - Portfolio lenders are not dependent on their ability to sell loans on the secondary market. They can continue to provide financing when conduits and mortgage bankers are out of the market.
It is important to note that many portfolio lenders are offering very competitive interest rates.
- Five-year fixed rate apartment loans are as low as 6.35%
- Five-year fixed rate commercial loans are as low as 6.5%
Local community banks continue to be an important source of financing when borrowers require customized loan terms, personalized service, and speed of processing.
July 10, 2007 Newly Designed Website:
We are pleased to introduce our newly designed website. The new website is designed to provide our clients with the most current and useful information in a format that is easy to use. Please contact us with your comments RGibney@AZCommercial.biz.
Financial Markets Data:
The financial markets chart is updated every day. Historical data and graphs are provided put the current interest rates in perspective.
Current Mortgage Rates:
The link to current mortgage rates is updated weekly. This is only a sample of available loan programs. Each loan is structured to meet the investment objectives of the borrower.
New Bank Formation:
Bank 1440 opened for business in June, after more than two years of preparation. I am honored to serve as a director of the new bank, along with a strong team of local business owners and bankers. The bank is built around a core group of executives and managers, who have proven their ability to serve the needs of their clients. If you are curious, the bank's name indicates the number of minutes in the day. You can access your accounts in a variety of ways, any time during the day (branch office, couriers, meetings at your office, ATM's) or evening (website).
Please contact me if you would like additional information about how the bank can assist you with your banking and financing needs. The bank's website is www.bank1440.com.
The branch office is located at 14155 N. 83rd Ave, Peoria, AZ 85381. The branch phone number is 623 463-1440. I will provide additional information about the bank's product offerings and growth. The main office is planned to open toward the end of the year near the intersection of Chauncey Lane and Scottsdale Road.
1/8/07
Thank you to the borrowers, real estate brokers, and other professional referral sources who have made 2007 another successful year. With their help, we have funded over $150,000,000 in commercial and multi-family loans since January 2002. These results would not be possible without the referral network that has been developed over the past five years. The leading regional and national lenders continue to provide exceptional service based on the high-quality of the loan requests that are prepared on behalf of our clients.
We are looking forward to working with you to make 2007 another successful year.
10/16/06 Interest-Only Option
Some lenders are offering borrowers the option of an interest-only period during the first 12-36 months of the loan term. This provision is advantageous to borrowers and lenders. Borrowers who choose the interest-only option enjoy the benefit of a temporary reduction in annual debt service. They use this period to make changes that will result in increased net operating income. This goal may be reached by raising rents, completing capital improvement projects, and otherwise improving the operating efficiency of the property. The loan converts to a 30-year amortizing loan at the end of the interest-only period. Lenders benefit from this financing structure by enabling borrowers to implement their property management and operating strategies. This results in increased net operating income and a higher debt coverage ratio.
9/23/06 Interest Rates Are Dropping
Multi-family and commercial mortgage interest rates are dropping along with U.S. Treasuries. Banks and other "non-Wall Street" lenders are offering a wider array of loan programs tied to 5 and 10-year T-Bills. As of today, multifamily loan interest rates have dropped below 6.5% for 5 or 10-year fixed rates. Further rate reductions are anticipated for next week. Now is the time to lock in long-term fixed rates. These loans are being offered with flexible pre-payment penalties (a combination of step-down and lock-outs) compared to Wall Street defeasance and yield maintenance loan terms. Please call for more information.
8/24/06 Deal Summary Information
A detailed description of recently closed loans will be provided when the financing structure includes some unique elements. The Hayward Apartment loan was underwritten using market rents and a 1.0 Debt Coverage Ratio. As a result, the loan amount was increased by 20% compared to conventional underwriting. Please see "Closed Loans" for more information.
8/5/06
I just returned from a lender's seminar in which we discussed a series of newly developed loan programs designed to address the needs of the current market for multi-family and commercial loans. The lender recognizes that the current sales prices are putting stress on the ability of borrowers to finance property acquisitions at reasonable loan-to-value ratios. I am pleased to be able to offer loans that are structured to meet the needs of borrowers:
- Multi-Family loans up to $1,000,000 underwritten to market rents and a 1.00 Debt Coverage Ratio
- Multi-Family and Commercial loans with 10-Year fixed rate loans and flexible prepayment penalties
- Multi-Family Interest-Only loans with 3-5 year fixed rates
- Multi-Family loans up to $5,000,000 underwritten to market rents
We all know of situations in which a borrower recognizes that he has chosen the wrong loan. Usually these situations relate to defeasance or yield maintenance prepayment penalties or other restrictive loan conditions. It is important for the borrower to understand all of the loan terms and conditions prior to loan funding. For example, a borrower may chose a loan with a slightly higher note rate, if the loan meets his investment objectives.
7/25/06 Non-Recourse Loans
We are pleased to announce the addition of several new non-recourse lenders to our network of correspondents. These lenders provide 5-10 year fixed rate loans at competitive pricing (150-225 basis points over the treasury index, based on the property type). In addition borrowers have the added benefit of flexible underwriting, customized loan structures, and reasonable prepayment penalty options. A recent transaction included the following loan terms:
- interest only first 12 months, no impound account for taxes or insurance, 5- year fixed rate at 160 over the treasury, prepayment penalty of 5-4-3-2-1
$133,000,000 Financed Since January 2002 - Thanks to all of our clients for our continued success in 2006.
