How fragile is the nature of doing business today?
It occurs to me that everyone, naturally so, is in a hurry for things to return to “normal”. Funny thing, this “normal” thing. Who defines it? Is normal really the flow of business we experienced from 2004 to 2007? If not, then what is? And, how do we know given the “rose colored glasses” of normalcy we wear today? Can any of us truly give up our mental memory of the future?
Financing possibilities shifted dramatically when in early February, life insurance companies started “waving in” business. They all claimed to have money to lend, greater allocations and an interest in doing business. The light was green. And, all of us took them at their word. Following the life insurance companies out of the starter’s block were a half dozen new CMBS conduit lenders (201 version) to attempt to match intent. And, a “tale of two cities” was on. If you had an “institutional quality” deal then there seemed to be a 2006-like feeding frenzy for bids; otherwise, not. Consequently, a ton of activity measured not much progress.
In April the business seemed to shift again. Conversations in the field with borrowers, as well as water-cooler talk in the field with finance professionals suggested that finance conversation was being had that was real across the nation. Better, more realistic, actual conversations seemed to be in vogue. And, our pipeline grew. And, grew until some of it actually closed. But, some of it fell apart “inside the red zone.”
As I survey the carnage of recent casualties of pre-close fall-out I wonder how fragile the new business cycle is really. The recession landed for us all as a sprint; the recovery will certainly be a marathon. I hope we all are in shape!
By Jack M. Cohen
June 25, 2010
©2012 Cohen Financial | Terms and Conditions
Comments
Posted by: Paul Christ on 06.30.10 at 04:04
I can confirm much of your assessment with a real live 'deal'. We have a 300+ unit apartment complex whose Life Company loan comes do soon. The original loan has been paid down from $11.2 to $8.5. The complex did suffer in 2009, but is now back to 95% occupancy & old rents. NOI is up. The current lender said no-not lending in that market. But with a good performer, we weren't worried. We should have been. We 'shopped till we dropped', only to have lenders say no for at least 10 different reasons, even though they all were 'in the market'. Hello FHA, our last resort!
John Phair
Posted by: John Phair on 06.30.10 at 05:03
We are seeing a few deals occur at 50% LTV. Wells Fargo just financed a deal > $10MM but the borrower had matching funds on deposit. Otherwise it continues to be what I call the Manic Recession.
Posted by: Trevor Hall, Jr. on 06.30.10 at 05:26
Posted by: Andrew Ettinger on 07.01.10 at 07:21
All, thanks for the kind words - next blog is on my reaction to financial reform.
In this past Sunday New York Times Representative Chris Van Hollen was quoted "Never again will we allow the American economy to be held hostage to bad decisions made by Wall Street and the financial sector."
Great, the trouble is, we are stuck with the American economy being held hostage to worse decisions being made by Congress. Forrest Gump said, "stupid is what stupid does" and I'm dissappointed that congress is making decisions based on populist view not by what is necessary to fix the economy or the real estate business. The trouble is, they just dont know any better.
Posted by: Jack Cohen on 07.05.10 at 04:47
hope you are still flying and keeping up with the land of Marshall Arts!
Great post.
I am not sure what to do about real estate these days. The administration does not seem to have a clue and not one of them is or ever has been in business,,sad.
Take care,
Patrick
Posted by: patrick maloney on 07.07.10 at 11:45