Relationships in the commercial lending business have always been important.
Certainly borrowers need relationships with lenders, but I just had an interesting case come to me from some borrowers in England that own multifamily property here in the States for which they're looking for financing (more specifically, bridge financing).
I just don't see the transaction getting funded in this environment, but the thought hit me that the destruction of the U.S. credit markets has included the total elimination of not only institutions that would have typically been interested in transactions, but more importantly, the individuals with whom I’ve had relationships with for many years.
Those relationships are not only the glue that holds transactions together, but also the network that helps move transactions to the best lender or contact or program.
So many former colleagues no longer have a phone to answer since they're employer has gone under, or since they've been layed off that it is a major task to establish new contacts in a very frightened lending environment.
This is further slowing the financing of very good transactions.
Monday, June 22, 2009
Tuesday, June 16, 2009
Experienced people are needed to get out of this commercial mortgage mess
It seems to me that there are a lot of 'people' in various government jobs pushing supposed solutions into the commercial mortgage market.
But an unproven "solution" is just an idea run up the flagpole, isn't it?
Given that there is no meeting of buyers and sellers of CMBS, or even of the SBA 7a guarantees, perhaps if those people responsible for propping up the market quit then the right people could get into the right positions.
After all, propping up a screwed up market through the or government programs that give out money to companies supposedly to buy up the "toxic" loans (which they usually don't buy) hasn't worked. Further, the banks holding those loans now have no reason to sell them at market!
Experienced traders know how to design the correct incentives to make a market. Where are these people now? It seems like there is a wonderful opportunity for them in this market!
Of course, if a market is established there would then be a proper valuation of the assets which the banks probably don't want to accept - but that's only because no one is permitting creative destruction where the losers are punished by the market for their mistakes.
But an unproven "solution" is just an idea run up the flagpole, isn't it?
Given that there is no meeting of buyers and sellers of CMBS, or even of the SBA 7a guarantees, perhaps if those people responsible for propping up the market quit then the right people could get into the right positions.
After all, propping up a screwed up market through the or government programs that give out money to companies supposedly to buy up the "toxic" loans (which they usually don't buy) hasn't worked. Further, the banks holding those loans now have no reason to sell them at market!
Experienced traders know how to design the correct incentives to make a market. Where are these people now? It seems like there is a wonderful opportunity for them in this market!
Of course, if a market is established there would then be a proper valuation of the assets which the banks probably don't want to accept - but that's only because no one is permitting creative destruction where the losers are punished by the market for their mistakes.
Saturday, June 13, 2009
How Does the Stimulus Create Jobs?
How does the stimulus create jobs?
Isn't the stimulus more like just government handouts to complete this or that project that's on the drawing board that will go to the few companies still in business so they can retain their workers?
I don't get how the stimulus will create a job, other than keep the bankers and financial wizards in place that started this mess.
And even if it does create jobs, how do we know it was from the stimulus?
Friday, June 12, 2009
Bad structure still in place
With all the criticism of the outdated banking and regulatory structure that allowed the financial disaster to take place that brought down markets worldwide, may I ask why they are still around?
Why is it that the very model which caused this problem is being funded to survive?
If the system that caused the problem remains, aren't we just feeding the monster?
Why is it that the very model which caused this problem is being funded to survive?
If the system that caused the problem remains, aren't we just feeding the monster?
Wednesday, June 10, 2009
Notice My Website Is Sort Of Dark?
I took down my website this week and replaced it with a one-page announcement that the site isn't coming back up until the credit markets revive.
With plenty of business, most of us commercial mortgage brokers cannot get funding on any property type, of any credit quality, from any institution calling themselves a lender.
Its just plain dead out there.
CMBS is long-gone. Big Bank and Regional Banks are completely out of the market. Community Banks now are saying "doesn't meet our credit policy at this time." Hard-money is no longer hard, but going after prime deals that can't get money elsewhere.
Its time to sit on the sidelines for a while.
With plenty of business, most of us commercial mortgage brokers cannot get funding on any property type, of any credit quality, from any institution calling themselves a lender.
Its just plain dead out there.
CMBS is long-gone. Big Bank and Regional Banks are completely out of the market. Community Banks now are saying "doesn't meet our credit policy at this time." Hard-money is no longer hard, but going after prime deals that can't get money elsewhere.
Its time to sit on the sidelines for a while.
Monday, June 8, 2009
Today's Broker Call - Still No Lending
Got a call today from a colleague in another state who has a commercial mortgage brokerage practice exclusive to multifamily deals.
He clearly knows how to spread, package, and present his deals but called today out of frustration at the lack of interest by lenders of any size or type in his transactions.
Mind you, these are not edgy transactions. Most brokers are now seeing some of the very best transactions of their lives - but can't get any money for them no matter what.
What's surprising is that the multifamily lending seemed stable, but basically what is happening is that no lenders want to approve and close on any transaction.
Don't buy the press from the big lenders on how much they're lending. It just isn't true, and even if they do a deal it certainly isn't for a main-street investor or building owner.
He clearly knows how to spread, package, and present his deals but called today out of frustration at the lack of interest by lenders of any size or type in his transactions.
Mind you, these are not edgy transactions. Most brokers are now seeing some of the very best transactions of their lives - but can't get any money for them no matter what.
What's surprising is that the multifamily lending seemed stable, but basically what is happening is that no lenders want to approve and close on any transaction.
Don't buy the press from the big lenders on how much they're lending. It just isn't true, and even if they do a deal it certainly isn't for a main-street investor or building owner.
Creative Destruction
The famous Austrian Josepth Schumpeter coined the phrase "creative destruction" to describe a process of radical transformation that accompanies radical innovation.
An example would be the spread of the internet that destroyed the value of old-line established companies.
Destruction is sometimes a violent prospect, but out of any destruction comes green grass, a clean slate, hope, vision, planning, and eventual building.
Living in the automotive State of Michigan, and having a different view of what happened to the auto companies than the majority of the nation's citizens may have, it is still clear that the auto industry has been radically transformed into a much leaner industry which will be much more competitive in the future.
However, it may seem a little hypocritical for me to now make the next statement:
Is there a limit to how far the government should go to bailout the banks, auto companies, local governments, and other entities?
At what point should failure be a true option, where something better can be put in place through constructive confrontation of new ideas and methods?
From the street level it seems like people are getting used to the fact that things are bad and are getting their heads and hands around their personal issues to deal with these problems. Future generations might become more financially responsible, conservative in their spending, and sow seeds for greater growth in the future.
But if the old habits and structures are allowed to stay in place, changing them for the better will be much harder, won't it?
An example would be the spread of the internet that destroyed the value of old-line established companies.
Destruction is sometimes a violent prospect, but out of any destruction comes green grass, a clean slate, hope, vision, planning, and eventual building.
Living in the automotive State of Michigan, and having a different view of what happened to the auto companies than the majority of the nation's citizens may have, it is still clear that the auto industry has been radically transformed into a much leaner industry which will be much more competitive in the future.
However, it may seem a little hypocritical for me to now make the next statement:
Is there a limit to how far the government should go to bailout the banks, auto companies, local governments, and other entities?
At what point should failure be a true option, where something better can be put in place through constructive confrontation of new ideas and methods?
From the street level it seems like people are getting used to the fact that things are bad and are getting their heads and hands around their personal issues to deal with these problems. Future generations might become more financially responsible, conservative in their spending, and sow seeds for greater growth in the future.
But if the old habits and structures are allowed to stay in place, changing them for the better will be much harder, won't it?
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