I am a commercial llender in an area that has been relatively immune to the credit crunch and economic slowdown, but I have to say that within the last month the effects are making their appearance locally. I mean, there’s no way I should have this much time to read through analystforum… and now that the test is almost 2 weeks history, there really isn’t that much spice to this forum anymore. ANyway, just wanted to see how everyone else’s business was doing in this slower economic climate.
Are you in Texas?
No. Northern Rockies. Resort/2nd Home community.
nice location jummylegs. I bet you feel on vacation all year long.
It’s not bad. Although it was still snowing and accumulating here not more than 2 weeks ago. Things are finally starting to melt.
I work on a commercial real estate investment fund and we haven’t done a deal since October. Even though fundamentals aren’t bad, it’s near impossible to get construction financing because our traditional lending sources have other balance sheet issues. I imagine it’s the same for a lot of investment opportunities – why take the risk in an uncertain environment when asking prices are still inflated? Better off waiting until the economy picks a direction and go from there.
jbaldyga Wrote: ------------------------------------------------------- > I imagine it’s the same for a lot of investment > opportunities – why take the risk in an uncertain > environment when asking prices are still inflated? > Better off waiting until the economy picks a > direction and go from there. I agree that this is how many lenders are looking at things right now. But there are still good deals to be had, however. I’ve ran deals through where the borrower has as much as 50% of cash into the project plus several closed presales and liquidity to carry the project for several years. I work for a relatively small bank so we have a lending limit to stay within. So even if I get a deal approved on my end, our usual participant network doesn’t even want to consider anything with the word real estate attached to it. Thus we can’t get deals funded and the borrower looks elsewhere for financing. And as far as interest rates go, I’d say the feds reduction in rates as it relates to real estate investment/stimulation is in many cases irrelevant. We are pricing deals higher than a year ago because no other banks want to touch this stuff. Our pricing is commensurate with perceived risk, which as you know is substantially greater than 12 to 24 months ago. Two years ago a real estate development project may have received a prime variable rate (8.25% at the time). Today we are about Prime + 2 - 3% (7-8%) for a deal that is supported by good guarantors and a large cash investment by the borrower. It’s a weird market, and I think those who do their homework and select the best deals out there will recive a nice return on their investment… the old being greedy when others are fearful principle.
>I agree that this is how many lenders are looking at things right now. But there are still >good deals to be had, however. True, but definitely localized. Our focus is So. Ca. industrial which is a very good market, except as you move Inland to Riverside/San Bernardino County which is starting to look overbuilt. The housing market out there is in shambles – one of the worst in the nation. Unfortunately that’s just about the only place you can find land to build industrial. It’s tough to justify a deal out there from both an equity and debt perspective for now at least. We’ve needed to close financing on a couple deals that we’ve been carrying recently and the terms are night and day compared to last year. 50%+ equity, recourse, libor +300, etc etc. Larger deals are extremely strict because the banks need favorable terms in order to syndicate or sell to a conduit, as I’m sure you’re aware. Agree, spreads are way up even w/ base rates low, which we expected. Thanks for nothing Mr. Bernanke.