Archive for the ‘Investing’ Category

Commercial Mortgage Lenders – Government Agencies Dominate Multi-Family (Apartment) Mortgage Sector

October 23, 2009

There is not much liquidity for commercial mortgages in the retail, office or hospitality sectors of the commercial real estate industry, but there’s plenty of capital available for multi-family (apartment) buildings. The good news is that the Government is lending massive amounts of money against apartment properties; the bad news is that no one else is.

Virtually all the institutional loans being made today to purchase, refinance or build apartments are being funded or otherwise supported by Fannie Mae, Freddie Mac, The Federal Housing Administration (FHA) or The Department of Housing and Urban Development (HUD).

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For almost 2 years now, these Government Agencies have been the primary lenders to the rental housing industry. They stepped in to counteract the liquidity crisis that was caused by the collapse in the commercial mortgage backed securities markets (CMBS) and, almost by default, have become the only game in town. Even the banks who claim to be lending right now are, in reality, just originating loans and selling them to Fannie or Freddie.

As the economy improves traditional multi-family lenders, such-as insurance companies, smaller regional banks and Wall Street investment houses, would like to re-enter the market place with their own commercial mortgage offerings.  Unfortunately for them, they are finding that they can’t compete with Uncle Sam who, of course, can simply print the money that it uses to lend.

Fannie and Freddie could maintain their dominance in multi-family finance indefinitely, but they won’t. They are lending at such levels because no one else can. As the economy improves and real, traditional banking becomes profitable once again, Government Agencies will retreat and allow the markets to provide the necessary capital. When that happens rates will be higher but the increased competition will mean more people will be able to qualify for loans.

Those lucky enough to meet the requirements of a Government Agency loan ought to apply now. When the time comes to lure lenders back into the market the Government will make itself less attractive by further tightening their underwriting criteria and lowering their loan-to-value ratios.

To secure the most favorable rates, terms and conditions that Government sponsored lending has to offer, a borrower must have decent credit (640 or better FICO) and a sound balance sheet that includes some liquidity (cash in the bank). Fannie and Freddie will lend up to 80% LTV but most loans that they are accepting now are in the 70%-75% LTV range. The property must be able to pay its own mortgage with a debt-service-coverage ratio (DSCR) of 1.2% or better and the building has to be stabilized (history of profitability). It goes without saying that the property must also be in good condition with little deferred maintenance necessary. The Government is sponsoring loans in all 50 states in-order to benefit the rental markets nationwide.

Loans typically come with 3, 5, 7 or 10 year terms and are amortized over 25 years. Currently rates are at historic lows due to the weak economy.

Apartment owners can get Agency backed loans through their local banks, larger national banks and through many other commercial mortgage lenders who enjoy direct and indirect relationships with Fannie, Freddie, FHA and HUD.  You can’t apply directly to the Government.

Property owners who don’t qualify for agency loans will have to pay more to a private lender or work to meet Government requirements.

It’s good to know that there is liquidity for multi-family investing, but it is disconcerting to realize that the only willing and able lender is the US Government. As things improve this should change.


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Morgan Stanley Lost $400mm in Commercial Real Estate but Turned a Profit Anyway.

October 21, 2009

Morgan Stanley returned to profitability for the first time in a year as income from its investment banking operations offset losses in commercial real estate.

Morgan Stanley said Wednesday that stock and debt underwriting from investment banking, and rising profits from its retail brokerage business, which includes the Morgan Stanley Smith Barney joint venture with Citigroup Inc., more than balanced out $400 million in commercial real estate losses.

The New York-based bank earned $498 million in the July-September period, after losing $13.18 billion during the last three quarters combined…READ MORE OF THE AP STORY HERE


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Your Tax Dollars at Work – For Prudential!

June 18, 2009

It seems the TALF money we the people so graciously provided to Prudential Financial Inc. is allowing them to turn a “very strong” profit. Nice for them.

Bloomberg reports the story here.


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Trump is Buying Commercial Real Estate; So What?

April 15, 2009

Donald Trump announced today on CNBC that he was buying commercial real estate. So what? Big deal, trump is buying, is that news supposed to encourage me?


Is “The Donald” some kind of guru?


Trump has a very particular kind of genius; he can convince other people he’s a genius. From the time he was 25 years old Trump had an amazing and highly enviable ability to sell his deals to bankers and investors. Donald Trump can borrow money and attract large investors like no one else in the business.


But I wonder what his track record of success in paying back his loans and making high returns for his investors actually is.


Google the words “Trump & Default” to get an idea.


So now he’s buying commercial real estate. No doubt he’s using other people’s money once again. Should we follow his lead because of his impeccable judgment and timing?


This is the guy who was so brilliant and in tune with the markets that he started Trump Mortgage in 2005 just as the entire mortgage industry was about to implode (didn’t see that one coming did you Doanld?), hired a fraud and a scam artist to run it, and then presided over it’s bankruptcy in 2007. Lot’s of people lost lots of money on that deal, but not Trump, never Trump, he was paid up-front for the use of his trademark name and for the imputed credibility he brought to the project.  


In short, the fact that Trump is buying commercial real estate is a worthless bit of triva.



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Commercial Mortgage Securities; Stock Down / Bonds Up

March 28, 2009

Market Watch points out that commercial mortgage stocks led the financial sector lower on Friday (3/27/09) while The Wall Street Journal reports that commercial mortgage bonds were big winners this week.


This is what we investment banker types call an inverse correlation.


Some inverse correlations are fixed. For instance interest rates and bond prices; when bond rates go up bond prices always go down, always, it can not be otherwise. Other inverse relationships are anomalies that may or may not happen with any regularity.


Commercial real estate stocks falling while commercial real estate bonds rise is an example of an anomaly. The inverse correlation does not have much to do with the securities that are fluctuating; it’s caused by other market and economic factors.


The point is don’t try and trade this trend unless you know what is causing it and when it will stop.


MasterPlan Capital LLC offers commercial mortgage loans, equity finacing and asset management to commercial property owners, investors and developers, nationwide. Click our logo below to apply online and recieve an answer the very next business day.



From First to Worst; Ken Heebner bet wrong on banking stocks in 2008

January 6, 2009

Ken Heebner’s CGM Focus Fund had incredible performance in 2007. Fortunate shareholders enjoyed returns of 80%. But that was then; in 2008 Heebner sold energy and bet wrong on banks. He lost over 60% each in Bank of America and Citi. Ouch!


How the mighty have fallen. For 2008 Mr. Heebner Fund was ranked in the bottom 96% of all similarly managed funds.

Bloomberg has information on Heebner and other falling stars including Harry Lang over at Fideltiy whose Megellan Fund lost 49% in ’08.

MasterPlan Capital LLC; Commercial Real Estate Investment Bankers – Apply for a commercial mortgage loan online. Our simple, 1 page commercial mortgage application takes just 2 minutes to complete and we will respond the very next business day.

Buy Commercial Mortgage Paper

December 1, 2008

Kenneth Stier over at the CNBC web-site says ivestors with long term outlooks and strong constitutions might do well buying commercial mortgage backed securities or other commercial mortgage paper.

He may be right…or…

Author, Marian Snow, Says “Buy Real Estate Now”

November 25, 2008

She’s a best selling personal finance author and a long time, albeit small time, real estate investor and now she’s pounding the table for real estate.

You can read here comments here, right next to those of comfort food star Rachel Ray.

Ms. Snow could be right, but she could be wrong. There is great potential for tremendous gains and excellent income from the real estate sector, particularly from commercial real estate where the buildings and dollar amounts are bigger, but that potential only exists because of the corresponding great potential for loss.

Money invested in real estate should be considered risk capital. Don’t buy a foreclosed building with the grocery money no matter what Guru tells you it’s a great idea.

MasterPlan Capital is still approving both private and institutionally funded commercial mortgage loans. Use our simple, 1 page commercial mortgage loan application and receive an answer the very next business day.