SBA and Commercial Finance and Investment News

Here at Centennial Lending , where we do smaller balance loans on all kinds of investor real estate from 1 unit to 100, 500 square feet to 50,000, our credit union commercial rates have hit an all time low. We  have reduced our base 5 year rate to 4.5% and our base 10 year rate to 5% flat for good quality real estate with good liquidity and credit – recent transactions include small office buildings, a 15 unit apartment complex, new construction , and a freestanding retail store.  The reduction of our rates has been dramatic.

And I understand on the life company side, spreads have narrowed to 250-300 over Treasury, which puts 10 year money at 5% for commercial.  And spreads are tighter for multifamily.  Typical agency multifamily is 75-80% LTV for a purchase or no cash out.  Commercial money at life companies is 60-70% LTV typically with 130 or better dscr.

The BANKS in our fair city of Denver are tripping over themselves here to make owner occupied commercial RE loans – I hear rumblings of rates at 4% for 5 year money and one bank bid 1.75% last week on an owner user flex building.  Insanity.

Ladies and gentlemen, these rates will NOT last! The 10 year T is on the way UP as the Greeks pretend to comply with ECB mandates and our unemployment picture improves.  NOW would be a REALLY good time to get started on that refinance or new build, or buy that building.  Take the money and run and if you need some direction email me at tim.thomas@centennial-lending.com or call 303-746-9169.

Here is what my Colleague Lou Barnes, WSJ contributor, mortgage banker and columnist, not to mention Boulderite, had to say: today:

“Gradually improving US economic data and a Greek deal of some sort have relieved immediate financial fears, and so bond and mortgage rates have risen.

The rate increase is proportional to the relief. 10-year T-notes have moved from 1.92% to 2.02%, and mortgages from just under 4.00% to just under 4.125%, roughly like your kid’s fever dropping from 105 to 104.5.

The most reassuring news here is the up-trend in the small business survey by the NFIB. Although its overall optimism is little better than the bottom of recessions going back 25 years, it has been improving each month since August, and only two months since 2007 have had better readings. The weakest internal component has been sales, now the worry fading fastest.

Another legitimate breakthrough: weekly claims for unemployment insurance have dropped again, to 348,000 last week. Wobbling near 350,000 in the last couple of months has been a straight-line decline from the 400,000+ range of the last two years, and is only about 25,000 weekly above what anyone would consider normal. However, everything about this cycle is so abnormal that nobody knows if normalized layoffs will translate in to normal hiring. “

Bottom line — we may have PASSED the low.  Time to get ON THE TRAIN!

Welcome!

Centennial Lending, whom I represent as senior Business Development Officer, is a credit union service organization owned by 13 credit unions in Colorado and Wyoming.  We lend in Colorado, Wyoming and Nebraska and finance” small” projects from as little as $100,000 up to $5 MM.  We like small retail centers, freestanding retail, office, industrial and retail condominiums, neighborhood centers, office buildings, industrial buildings and of course apartments from 5 to 100 units.   We also finance 1-4 unit rental housing.  We offer a 5+5 fixed rate and a 10 year fixed rate permanent loan, with no prepay penalty.  And construction financing for qualified projects. We also are experts on the SBA 504 and have financing up to 90% LTV for owner-user buildings.

Please click here to download our most recent rate sheet for commercial and multifamily construction and permanent financing:

Rate and Program Summary Centennial Lending Commercial Mortgages January 2012

And here are some of our recent closings

Success Stories by Centennial Lending

Contact Tim Thomas for more information, tim.thomas@centennial-lending.com, 303-746-9169

Yes, I write TWO blogs:  this one at www.sbafinancenews.com and www.coloradoloaninfo.com.

Intersted in financing?  Click on the links below for 2012 rates and programs

Rate and Program Summary Centennial Lending Commercial Mortgages January 2012 - Rates for 504 and commercial real estate loans

Success Stories by Centennial Lending - Click for somne examoples of recent closings

Malls in the top 80 U.S. markets posted an average vacancy rate of 9.2% in the quarter, down from the 11-year high of 9.4% in the third quarter, according to Reis, which began tracking mall data in 2000. Mall vacancies had been climbing steadily for most of the downturn since 2007, when the vacancy rate fell as low as 5.5%.

DENVER RETAIL, like the Nation’s malls,  is showing a gradual recovery.  Vacancy has descended slowly to about 8% overall with higher numbers in Aurora and the northwest corridor.  Asking rents are $18.64 in Boulder, showing 6.4% vacancy and $26.31 along the Colorado Blvd retail corridor which has only 1.6% vacancy.

REIS reports that nationally, the office vacancy rate fell in the fourth quarter of 2011 and rents rose for the fifth straight period, signaling that a recovery is well under way.

DENVER OFFICE rents are up slightly, to $19.74/SF asking rents versus $19.64 in third quarter.  Vacancy is 15.7% area wide.  The highest rents are (can you say oil and support industries?) downtown at $25.47/SF, then Northwest to Boulder at $21.39/SF, then in Cherry Creek at $21.18/SF.  We had net absorption last quarter of 235,000 SF on an inventory of 107 million SF in metro Denver

REIS said as well that the national apartment vacancy rate fell to 5.2 percent, the lowest since the end of 2001. It was 5.6 percent in the previous three months and 6.6 percent a year earlier. As we have already reported, the Denver multifamily market remains strong with rising rents and vacancy under 5.5%.

Building or buying industrial space?  Asking rents are $5.94/square foot overall, down a bit from $5.97 in 2010. The highest industrial rents are in Boulder, at $8.86, followed by Southeast Denver, at $8.27, followed by the northwest US 36 corridor at $8.27.  Really encouraging are the vacancy rates – 4.2% metro wide, 4.5% in Commerce City, and still tighter in Brighton and in the northeastern suburbs, with space virtually nonexistent due to the oil and natural gas boom.  The exception (but perhaps not for long) is Longmont metro, with a 16.9% vacancy due to new inventory coming online

Starting tomorrow, January 3, 2012, I am going to be making “small balance” commercial real estate loans in the Denver-Boulder area as a commercial loan officer and business developer for Centennial Lending.  Centennial originates and services commercial and residential loan investments for its owner and partner credit unions here in Colorado and in nearby states.   Why is the credit union connection important? Because credit union loans tend to be fixed rate, or hybrids, competitively priced with Bank debt, AND, unusual as it seems, they offer fixed rates without the customary but still horrible prepay penalty you find with life company debt. So a credit union loan is well worth checking out.

We lend on gas stations (sparingly) , self storage, office, multifamily, retail and industrial properties. We also do the senior part of SBA 504 loans, which offer up to 90% combined LTV on owner-user buildings and office, retail and industrial condos.

Today let’s talk about the six county metro Office Market.  Then will look at industrial, Multifamily and retail.

The Metro Denver office market vacancy rate fell a bit from 13.8 percent in the second quarter of 2011 to 13.5 percent in the third quarter. Third quarter net absorption was positive and totaled 400,180 square feet, compared to positive net absorption of roughly 253,430 square feet in the second quarter. One building with a total of 30,070 square feet was delivered in the third quarter, and 907,060 square feet in nine buildings remained under construction.

Lones Llang Lasalle’s TJ Scnippits forecast and actual numbers:

2009                       Negative  900,000 SF

2010                       Positive 800,000 SF

2011                       YTD Positive 1,000,000 SF ESt

2012                       Positive 600,000 SF Forecast

2013                       Positive 1,50,000 SF Forecast

Are we energized yet?  2012 is going to be another year of positive absorption here driven by job growth.  And lenders like credit unions are very much back in the market!

My colleague Devin Lee, CCIM and guru of All Things Southern Nevada, reports the sobering morning after numbers on this market.  Devin is a great resource – for workouts, bank portfolio restructuring, you name it — contact him at dl@accesscm.com he offices on Warm Springs Road, on the Web at www.accesscm.com.  Here you go, without further adieu, on those condo towers stretched once into the blue, for now they are read and the market is, well, dead.

Allure — 190 of 427 units unsold; 40 in default; 10 bank owned.

• Juhl — 309 of 344 unsold. 

• Newport Lofts — 23 of 168 unsold; 51 in default, 12 bank owned. 

• One Queensridge Place — 85 of 219 unsold; 8 in default. 

• Panorama Tower 3 — 334 of 372 unsold. 

• Sky Las Vegas — 79 of 405 unsold; 50 in default; 5 bank owned. 

• Streamline Tower — 248 of 275 unsold. 

• Turnberry Towers West — 255 of 318 unsold. 

• MGM Signature 3 — 84 of 576 unsold; 105 in default; 17 bank owned. 

• Palms Place — 204 of 599 unsold. 

• Trump International — 977 of 1,282 unsold.

Commercial real estate in this country saw  prices rise 1 percent in November, after a 13-month run of steady price declines.  Was October the bottom?  Maybe close.  According to REAL Capital Analytics, “After two years of value declines, commercial real estate reached its lowest value yet in October ’09, nearly 44 percent below the peak level.”  So down 44, up 1.  Not bad, if you are an incurable optimist.   Moody’s Investors Service says however that it expects prices to resume falling in the coming months as occupancy and rental rates decline in tandem “Prices in the commercial sector will rebound off the bottom as markets recover, but we expect that commercial property prices will ultimately flatten out for the longer term at levels 30 percent to 40 percent below the peak,” the report said.

2009 is best forgotten.  2010 is the time of the cash crunch, the debt crunch, and increasing realization by commercial real estate sellers that they are going to have to get real if they want to get liquid.  As CRE multimillionaire guru Sam Zell said recently at a press conference, his old advice of “Survive ’til 95″ which was oft quoted during the last crises, has been replaced by, “Come Clean by 2013.”   Bid asked spreads are going to narrow.  Sellers wanting that 6 cap will settle for 8.5.  Reality will set in.  Maybe 2010 is not the bottom, but it’ s close.  It may be the BEST year to buy your own building — or invest in something in CRE.

And WHERE does one invest?

Here are the seven cities — economies driven by OIL and TECHNOLOGY — that may lead us out, says RERCC (Real Estate Research Corporation):

• Austin, Texas
• Houston
• Oklahoma City
• San Antonio
• Seattle (tech and engineering)
• Salt Lake City
• Denver

And WITHIN the Seven Cities, what property types will lead?

The top three are:

• Multifamily
• Central Business District Office
• Industrial

And at the bottom of ALL, beneath even retail power centers?  Hotels.   If you have a hotel, you can lower your ADR (rate) EVERY DAY to meet and greet lagging demand.  Until employment picks up, and we are PAST the end of the tunnel, if you own hotels, every day may likely be more depressing than the last.  Bummer.  Multifamily or owner user.  That’s what I would buy.  Or lend upon.

Happy New Year from NYC!  This from Bob Bach at Grubb and Ellis,  courtesy John Clapp at SERVICING MANAGEMENT.  Something remotely but encouragingly upbeat yesterday:

“The good news is that the freefall we saw in 2009 is over, and the future is more certain, giving owners and users of real estate the confidence to begin making decisions again,” says Bob Bach, Grubb & Ellis’ senior vice president and chief economist. The company predicts an increase in sales volume of 20% to 30% over 2009’s levels, with prices perhaps dropping another 10% to 20% to accommodate buyers’ expectations.

Claims that commercial real estate is the “next shoe to drop” are exaggerated, Bach says. Comparing the potential commercial real estate fallout with losses tied to the subprime crisis, he notes that “the value of outstanding commercial mortgages is a fraction of the value of outstanding residential mortgages.

 “Nevertheless, losses will mount over the next several years,” he adds. “If banks aren’t lending because they’re coping with losses in their real estate portfolios, this could impede the economic recovery.”

Grubb & Ellis expects the national office market’s vacancy rate to hit 18.5% to 19% by the end of the year, which would make it the highest vacancy rate for that sector since the firm began tracking national data in 1986. The sector’s recovery depends heavily on job growth. Bach projects sustained growth in employment is “unlikely” before the second half of this year.

“The fact that the recession has come and gone, however, should provide the certainty necessary for tenants to start making decisions,” he says. “We may see leasing volume increase in 2010 as a result.”

In its quarterly data book on commercial real estate and multifamily finance, published Tuesday, the Mortgage Bankers Association said that monthly job gains need to be in the 125,000-150,000 range in order to reverse the rise in unemployment.

“Gains of this magnitude are not expected in the months ahead,” the report said. “Accordingly, the unemployment rate is apt to increase somewhat further before peaking in the spring of 2010, and then beginning a gradual, slow decline during the remainder of the year.

The industrial market, which saw increased vacancies and negative net absorption in 2009, has the potential to recovery more quickly than the office, retail and multifamily sectors because it’s less dependent on job growth. While Grubb & Ellis expects vacancy in the sector to reach 11.4% by the end of the year – 70 basis points higher than year-end 2009 – a new report from the trade group Institute for Supply Management suggests the manufacturing sector is rebounding sooner than expected.

Based off results of a survey of U.S. purchasing managers, the report showed the institute’s manufacturing index hit 55.9 in December, its highest reading since April 2006.

“Overall, this was a very strong report, and it suggests that the recovery in the U.S. manufacturing sector is gaining further traction,” TD Securities economist Millan Mulraine wrote in a note to clients, according to a San Francisco Chronicle report

YES there are Trillions of dollars sitting out of the market — waiting for the reprice in commercial real estate to happen, waiting for sellers to get a grip.  Ten percent caps , I say TEN, are on the way — and the more management intensive stuff like motels and hotels will be in the TEENS.  Raise the cap from 6 to 10?  You just lost 40% of your value.  As I write this, here in Colorado, bankers pretty much agree that real estate along the Front Range ranks, from WORST to BEST:

1.  Residential land, unfinished

2.  Finished lots

3.  High end residential

4.  Retail

5.  Office

6.  Multifamily

7.  Industrial, still holding its own, but with vacancy having crept up to 10 or so and cap rates on the rise.

The moral:

Do guaranteed loans and agency paper.  USDA.  SBA.  FNMA. 

Contact me at tim@cpcommerciallending.com (303) 656-3232 we are built to help you get going.  And we have a correspondent (premium) program in selected markets for highly experienced shops.