Here’s hoping that your Thanksgiving was filled with just that, thanksgiving.  We have a lot to be thankful for in this great country, not the least of which is freedom, one that is unique and more precious than any metal or gem.  I’m grateful for all those that have gone before to secure it, either through their sacrifice or service.  I’m particularly thankful to still be standing after all that’s happened in recent years.  Now if we don’t over-regulate and overtax any recovery, we can pull out of this and minimize the effect on the next generation.

Though it’s still tough to get deals done, but we’re getting them done.  It takes a lot more work and attention to get through the details and close, but it’s the cost of more due diligence and structure resulting from the economic and financial meltdown.  We’re fortunate to have solid financial partners to work with and are getting more on a regular basis.  Thus our options have expanded and our abilities as well.

In trying to be effective and efficient, I’m concentrating on deals that are readily bankable with known sources.  Proper valuation, sufficient cash flow and capable operator/borrowers are all keys to successfully funding a transaction.  The exit strategy is essentially for any short term financing or investment.  We are now focusing on having that in place before we seek any bridge or mezzanine financing.   With that in hand, we can get the bridge lender to move forward knowing that they’ll have a solid plan for repayment in the future.

It’s taking a lot longer to get them done as well.  With all the added scrutiny, it takes deeper diving and more conversation to answer all the myriad routine questions now common with investors and underwriters.  It’s not for the faint of heart or the impatient.  Thus, if you’re in a rush, you’re in a more difficult spot.  So, take that into account when you’re computing your time frames.

As for other types of deals such as equity, they’re still worth a look.  It just has to make eminent sense, pass muster and offer enough consideration to be of interest to some very smart & careful folks, namely today’s investors.  I’m talking about distressed assets, hospitality, multi-family, office/retail and so on.

In discussions with both investors and those seeking investment, the one thing that’s changed has been the appetite of investors to look at deals now.  It wasn’t long ago that they had no desire to discuss it and no need to return calls.  Beyond the “low hanging fruit” that is always the preference, they want to see solid exits and returns.  There is no desire on their part to speculate or stretch on any deal.  They’re also not too interested in situations where they have potential dilution of their positions, too many partners, etc.  They would prefer to control the outcome as much as possible or team with those who are very capable of delivering the promised results.  The variables have to be under control as well.   So, you can see that what’s getting done are very solid, “old school” underwriting deals.

That’s my latest update.  I hope that the holidays bring you joy, blessings and glad tidings.  Cheers…

Beyond that there are continuing signs of life out there.  Investors that wouldn’t take calls are now giving me wish lists.  We have more lenders now, able to do bridge and distressed asset financing.  The only bad news, and it’s relative, is that the Democrats will let the ARRA stimulus program die at the end of this year.  It’s up to the Republican Congress to

Now that's innovative- A VW house!

figure out what to do with it from there.  So, we’re not counting on it continuing.  Only 30% or so of the funds allocated were spent and much of that is now under scrutiny since not much was given by the Feds as to guidance on how to fund the deals.   There are other ways to get those deals done and we’re working on putting something out on that soon.

It seems like most people I talk with in the real estate, finance and development arena are worn out from trying to get deals done.  It’s been tough and if you’re still standing, you either know what you’re doing or you’re in serious denial and need professional help.  I might need professional help anyway, even though I know what I’m doing.  But, we’re optimists and only need the chance to get it done to keep us going.  The perspective of the people that I’ve spoken with who are in good shape financially is that the opportunities are now presenting themselves.  They’ve waited for the right deals to rise to the top, above the fray and like it enough now to move off the sidelines.  That will help get things moving again, not the trillions in stimulus that hasn’t been executed as advertised.

When deals get closed, values are established and the market can then agree on what’s taken place.  Until that time, valuations are speculative and, without true data, you can’t gauge the validity or veracity of a potential investment or deal.  So, first, things have to change hands.  Either money or assets and then we can tell what the street believes.

That’s my short speech on why things have to sell to matter.  We live in an age where Britney Spears makes $100 million a year as a reward for her abundant talent.  (Dripping sarcasm sound here)  But, she sells and little girls buy.  The government offered $ 700 billion+ in stimulus incentives, much of it in programs like Recovery Zone Facility Bonds.  States, Counties and Cities had allocation to provide these bonds via lenders to businesses and developers for a much wider variety of projects than normal.  Most of it (90%+) went  unspent, partly because limited budgets didn’t allow for much publicity, but partly because no one knew what to do with it.  So, projects went wanting and what could have been great only fizzled.  Only lately did I find out how much it fizzled.  Perhaps if they’d used Britney Spears as their spokesperson it would have sizzled.

Belinda Savage is putting together a seminar that will feature 12 investment sponsors live and on TV in the San Francisco Bay area in January.  There will also be an additional live seminar in Orange County, date to be determined.  It will be an opportunity for qualified, accredited self directed IRA investors to kick the tires on some great, unique and high quality investments with some great companies.

For all of you optimists and producers, keep at it.  Your chances of being punished have been reduced.  We have some breathing room now and the Feds will perhaps be so busy fighting with each other that we can actually get something done while they thumb wrestle.  A repeal here, an injunction there and some of the obstacles for business to get back on track will be out of the way.  Keep fighting the good fight!

That being said, in all this morass of well intentioned hand wringing, there are opportunities.  This is what I’ve seen lately:  hedge funds have become the rescuer of the FDIC, buying portfolios of bank loans that the Feds can’t take over, getting sweetheart deals from the Feds to ensure that they don’t fire sale the assets and then they lean on the borrowers to get paid higher rates and paid off at higher multiples.  That has created opportunities for bridge financing to get rid of them and their attorneys while putting together long term exits using permanent loans from various sources, primarily muni bonds for qualified projects.  I know, you think I beat just that one drum, but we are now able to offer other solutions, too.  But the key is having real solutions for the bridge loans, which frankly have been a unicorn of sorts the last couple of years.  So, we’ve strapped together bits of the Titanic and made lifeboats.  Our clients are happy about that outcome.

Shady Dell- Where yesterday's players stay today!

As for other things, working with my colleague Belinda Savage, we’re also seeing movement amongst private equity seeking places to invest.  She’s a wizard in the self directed IRA field and known nationally as a business builder.  She’s putting together seminars for investors and investment sponsors to meet and greet and hopefully cross the altar together.  Some of the investment sponsors we’ve spoken with lately have excellent opportunities for investors with solid returns on good opportunities, mainly in alternative assets.

So, in spite of the plethora of conflicting reports, I see things still in flux with the high levels of uncertainty dominating the markets.  It is the #1 concern of businesses polled recently and affects their perspective on hiring and spending.  But, conversations I’ve had lately with fund managers indicates they’re getting back into the game, but looking more into alternative assets for opportunities.  Real estate is priced realistically now, it cash flows as an investment and the downside is generally covered.  Single family is still dicey, but multi-family is good as are other cash flowing properties.  We’re seeing new construction of senior housing and student housing still on the move.  Stalled projects that have potential in this market are attractive now with the right exit strategies.  We work on the exits first, then back into the deal.  With bridge financing, we can get rid of the nasty actors and move the deal forward.  We also have some great team members for advisory services on larger projects that have municipal impact, especially any Transit Oriented Development projects.  Call for more info.

Anyway, it’s been a while, but it’s been a good while.  I hope you’re doing well and doing good, wherever you are.

So, we’ve been looking at deals in a different light lately.  Instead of continually re-positioning deals, we’re more selective about deals, looking for bankable elements and situations.  With the real economic indicators not making it to the surface yet, I am very concerned that there is still a shock wave buried in the ocean of debt that we’re snorkeling through nationally.  $ 390+ Billion of commercial debt is coming up for re-sets at the end of this year on properties that are not cash flowing with lower CAP rates and rising vacancy rates.  Even in smaller communities and suburbs that were thought to have escaped the hard hit, we’re seeing the rippling effect of more vacancies in office and retail.

Making a tight fit work or home between a rock and a hard place...

That will translate to problems for the banks that have been able to “extend and pretend” for a long time.  They’ve had a very favorable arrangement with the TARP funds bolstering their balance sheets, providing phenomenal trading opportunities on commercial paper and the ability to stall the write downs on bad assets for what seems like forever.  This coming wave of commercial loans hitting the wall of valuation is not going to be pretty.  The Feds can’t help, they don’t have enough money to do anything about it, the lenders are on their own to negotiate the best solution they can with their clients.  We’ll have to see how that works out.  There’ll be some opportunities there I’m sure.

Meanwhile, we’re beginning to see the muni bond deal pipeline moving forward.  It seems like it’s been more of a pig in an Anaconda, but it’s moving and more are coming in weekly.  That snake isn’t going to be going anywhere anytime soon.  We’ll be putting up some more brochures and fliers on our LinkedIn site this week.  Also, we have some set up sheets for new deals that will give some guidance about how new deals should profile to be considered.

We’re still doing other creative financing such as asset based lending, business stimulus loans, hard money and bridge loans, too.  Float like a butterfly, sting like a bee and be flexible.  I like Dennis Miller’s catch phrase on his radio show, “always be closing”, ABC.  That’s good advice in the land of “white noise” and hot deals around every corner.  We won’t look at just anything, but if it’s in our wheelhouse, and many of them are, we’ll be all over it and, as quickly as possible, come up with some solutions.

Here’s our wheelhouse: Senior housing, CCRCs, assisted living and skilled nursing; charter schools; student housing; mixed use/affordable; Transit Oriented Development projects.  All essentially are funded to non-profit developers, we can help you get set up if you need that.  Land acquisition and new construction or existing facilities and rehab, all with permanent financing included.

Wishing you the best of success and good health in all your endeavors!

Nope, it wouldn’t have happened like this if they’d been watching over the pot.  It seems each succeeding generation authors great progress duly tethered to their character.  Mine has been altogether innovative, self indulgent and indulgent altogether.  But, it’s done and no one would have been able to predict how this played out.  Some have prospered mightily while others have had spectacular falls from grace.  I think most of us would agree that we’ve never seen such shenanigans both politically and commercially in all our lives.  All while fighting off an unseen enemy who apparently continues to adapt like a chameleon in our own back yard.  But, by the grace of God and some very brave and capable defenders, we’re still here and beginning to see some signs of life in the market.  The Dow is back up over 10,000 and continues to defy what apparently was only a rumor of gravity.  What a country!

What I’m seeing in the market-  lots of deals, senior housing, full senior communities, mixed use retail and office, charter schools and anything Baby Boomer related are all strong.  Our muni bond programs are the great alternative to HUD programs.

Adaptive Re-use in Honduras

Nothing wrong with HUD programs, mind you, but they take way too long to process, they’re adding more layers of oversight and you have to bring in more cash to close.  Our programs close quickly, make sense, have few moving parts and you don’t need therapy when we’re done.  In fact, we’re seeing more and more for-profit developers “get it” when we explain how this can expand their horizons and add value to their business.

We’ve had some very good meetings lately with city officials in L.A. and San Diego about providing solutions for stalled projects.  They’ve sent out invitations for bids on projects and no one is answering.  With our capital partners, we can p

rovide grants to complement our bonds for Transit Oriented Development projects nationally, which are a hot topic in many cities.  Light rail and modern bus services are tied together now and adding housing with retail and office mixes in conjunction with the new transit services are bringing life to once dead areas of the city.  Our solutions are a key component in that solution.  In some cases, we’re able to provide up to 100% non-recourse financing with rapid closing and great terms.  Any shovel ready projects that can close this year that are eligible for Build America Bonds can use these programs with potential costs of funds in the low 4% range, fully amortized, fixed for 30 years.  You can’t beat that, period.

So, we’re making progress daily.  We can figure out if your deal works quickly.  I have a great relationship with my banking partners and we

are excited about the possibilities for this year.  I hope that we’re able to make that happen for some of you as well.

As always, we’re in debt to our value add

ed partners and all of our great clients.  We continue to see more opportunities than solutions, so we’re continue to add more solutions.  If you want to know more, feel free to call and discuss your situation.  Best of luck in the March Madness pool, I hope your picks pan out.

That’s what it must feel like to many of us who are still standing in our chosen field of endeavor, we’re survivors.  I do believe we have more value than the folks who have re-invented themselves, because our experience and equity are still intact.   We haven’t traded in or up.  Not to demean anyone who has done a makeover or do-over, sometimes it’s the best thing to do.  I’ve done it a few times.  I originally planned on being a high school band director, but that was never meant to be.  Instead, I’ve hung around real estate, housing and finance all my life, endured the ups and downs and seen enough changes to know that, in the end, most of what is valuable endures and if it’s not that important, it won’t last.

What am I getting at today?  We’ve seen a lot of whipped up frenzy about this or that change, this or that game change or this or that big deal.  Truth be told, what is a big deal is when people keep their word, stay the course, finish well and take folks with them on the way.  The same old “me, me, me” thing is going on today as there was a generation ago, it’s just needing tech support now.  With all the communication devices we have, we don’t communicate any better.  With all the advancements we have, we still need a crisis to wake up.  So, all you survivors out there, I salute you.  Stay the course, remain faithful, don’t get swayed by fads and don’t worry about the crowds.  Our worth is not in being fully restored as much as it’s in being fully functioning after all that’s happened.

I’m very proud of my friends in business who’ve endured and those who’ve moved on as well.  They’re an inspiration to me and I can’t thank them enough for their contributions in my life.  Let’s rejoice a bit, as often as we can and be thankful that, as survivors, we remember our true worth to one another.

It’s the same in business.  Things come and go, events sometimes cause us to bolt in one direction or another.  But steady growth and pace are at a premium these days as is common sense and wisdom.  I still have good coaches in my life today and the message is the same, keep it simple, keep moving forward.

I’m looking forward to moving into 2010 with a full head of steam and deals.  We’ve added some more capabilities to help clients.  More commercial programs and A/R financing.  Still, the strongest program we have are the muni bonds for acquisition and development.

With our government posing more and more as an obstacle than a benefit to businesses, one might think that our biggest challenges are here at home.  I think you’d be right.  You have to be concerned with the constant added pressure of added programs and oversight to every business out there.  I know for myself, I have to take it into account as I move forward into what I expect to be a very good 2010.

So, plan ahead, keep moving, keep something in the tank for the finish and get a good tax attorney and CPA!

Best wishes, Merry Christmas and Happy Hannukah!

With our entry into renewable energy, we’ve looked at some wind projects that have strong numbers.  We’ve been putting together deals using Build America Bonds to fund projects with municipal energy companies.  There is no equity requirement and the initial findings are that they qualify very well.  Solar is a bit more of a challenge due to the initial cost basis, but we are nearly finished with a novel approach for those projects as well.  If you know of anyone seeking funding for a commercial renewable energy project, give us a chance to look it over.  With rates below 4.5% in today’s market for the net cost of funds, it’s hard to beat these programs.  The income generated can really help cities and counties who are seeking to bolster their finances.  We will assist and advise any interested party in establishing the structure to accommodate these programs.  Currently we have projects in the works in California, New Mexico, Texas and New Jersey.

747 as Swiss hotel- get miles and never leave the ground

We’re also getting very involved in acquiring and re-positioning distressed commercial real estate.  Of particular interest are hotels that have lost their flag and are bank owned and Class B and C multi-family.  With the growth of charter schools nationwide, we have programs that will quickly fund acquisition and rehab of existing buildings including full furniture, fixtures and equipment funding.

Our take on the current economy is that the wave of commercial defaults hasn’t fully crested and hit yet.  In addition, banks have been able to hide their bad assets off their balance sheets, but that is coming to a head soon as well.  There may be some real shockwaves in store for the financial markets.  The major players in finance have played their hands well, but that may coming to a head.  There is an unholy alliance between the titans of Wall St., Congress and the White House.  As evidenced in the deal made between successive administrations and all of these players, not much has changed.  The markets are trying to sort things out, but balancing all of this along with the trade balance and currency fluctuations is a delicate matter.  Congress tends to use blunt instruments for surgical procedures, the Federal Reserve remains obsessively obtuse and the White House dithers on.  So, we see opportunities and hope to capitalize over the next season.  Our conversations with clients and friends in the business have bolstered this point of view.

So, as Dickens would say, it’s “the best of times and worst of times” here in America.  We feel very fortunate to be in this position and look forward to helping our clients succeed in the coming season.

Most of the new business is multi-family and senior housing.  We also have some private and charter schools purchasing existing properties.  With bond rates going lower, it’s a great time to look into bond financing for these types of deals.  We’re hosting a webinar on Tuesday, 10/13 at 11:30 AM PST to show For-profit developers how to form a non-profit entity and qualify to use this financing for up to 100% financing on eligible projects.  We see many opportunities for the re-positioning of distressed assets, which are plentiful today.  Call us for details.

Japanese high density housing

We also have some alternative energy projects in the pipeline now.  If you know of any project related to sustainable, alternative energy such as solar, wind and the like, we have solutions using the same programs mentioned above and below.

The Build America Bonds are becoming a very exciting alternative for dead projects.  Developers can sell these qualified projects to cash-starved municipalities using our program.  The municipality can acquire and develop or rehab the property using fixed rate bonds that have a 35% Federal subsidy on the rate, reducing the cost of funds to the high 3% to mid 4%  rate on a 30 year fully amortized instrument.  All with no equity requirement.  That’s smart money, folks, no matter how you slice it.  Those communities that need cash flow or capital infusion can use this to revitalize their areas.  They just have to close and fund by 12/31/2010.  There are wide latitudes for qualifying projects.  See the document linked on the right for more information and feel free to call for more details.

Finally, we’re very optimistic about the next 24-36 months.  The way things are, there aren’t too many better places to be than offering viable financing for needed projects.  We’re helping, in our own way, to stimulate local economies by assisting local businesses and developers to acquire and develop projects for long term success.  With the population needing more housing for seniors and the ever-increasing numbers of retired baby boomers, this financing is the legitimate alternative to traditional methods.  We also have conventional programs, when the bonds are not the right fit, through our affiliation with a commercial investment bank.  We’re grateful for the continued blessing of new business and confident in our ability to assist our clients in capitalizing on opportunities unique to this present market.  We look forward to hearing how we can help you move forward.

Credit markets have loosened up a bit, but not much.  Commercial lending is running in a very narrow lane for only the most compelling of scenarios.  The old rule that “if you don’t need the money, we’ll be happy to lend it to you” applies without regard to status or region.  Our bond programs are the only means of obtaining significant leverage  and they’re not meant for everyone.  Conventional lending has adjusted and become much more stringent with more reviews at higher levels before funding.  Higher equity requirements and credit standards are de riguer  This is a good thing, it’s just waaaayy too late and way too much.  It’s the typical overreaction to an event.  Add to that the steep declines in every sector of our economy, except in certain legal and political arenas, and you have a deadly brew from which no one wants to drink.

Wooden shoe house in the Alps. Perfect for New Orleans rebuild effort.

I don”t blame the banks per se.  I spoke with an executive officer of a bank that has done well amidst the crisis and he told me that it was more effective for them to buy performing and non-performing notes than to underwrite loans.  The process was easier and the upside and risk were much more attractive.  So, banks can make more money buying and recycling bad assets than making new loans.  That’s just good business these days.  So when you try to get a loan to buy or build that apartment or office building you’re competing with the market that supports recycling assets rather than creation of new assets.  Profits are confined to investors only, not so much to producers and that does not bode well in the interim.  Other banks, “too big to fail”, are content to sit on TARP funds and bury their bad assets as long as possible, thus supporting current market perceptions of their valuation.

I’ve seen reports lately that residential builders are buying finished lots at 30% of present value in areas most affected by the downturn.  They want to start building again and that’s good.  What they’re building are new homes to compete with the bank REOs, down-sizing and down-featuring, i.e. formica instead of granite, smaller floor plans, less amenities and thus a lower price.  That’s what sells.   Even though the new buyers are stellar and very creditworthy, they face many new hurdles in obtaining financing.  Numerous new regs and rules now apply, but as usual, it’s like locking the barn door after the horses have fled.   Hotels are giving up their 4 stars for 3 stars because that’s what sells.  The market is voting and the producers are responding.

On the other hand, Federal programs haven’t produced anything but what I consider false positives.  Look at Cash for Clunkers.   One prominent dealer took in many clunkers in anticipation of the CARS program and sent them to the junkyard.  Then, when the program was enacted, the preliminary rules had been changed and in particular, you had to pour in an engine-killing  chemical so the car could not be re-sold.  All the cars that they had taken in were now worthless, a total loss to the dealer.  Add to that the problem of how the program is administrated with no payments to dealers forthcoming and it’s still a bad time to be selling cars.  Sales will tank through the end of the year now and ironically, more foreign cars were sold in the program than domestic.  Our hope is not in the government, it’s in the producers and they’re not being rewarded.  They’re adapting, but it is doubly hard.

Honk if your deal looks like this...

So, I’m optimistic on one hand because I see true believers in the American Dream out there slingin’ it back in an adverse market.  But, with all of the governmental opportunists in abundant supply and array, we’re not only battling against the market trends, but against those who still can’t figure out what happened.  They don’t let that ignorance stand in the way of their many efforts to “solve” the crisis.  Let the next generation figure it out.

In spite of that, we’re getting great deals put together, particularly in states that support producers, like Texas.  Texas is an oasis in the national desert.  When I was there in April, there were signs of life everywhere.  Sure, there are some problems like everywhere else, but producers aren’t punished like they are elsewhere, such as  California and New York.  Businesses in those states are feeding from a tube, in Texas they’re eating BBQ.  So, I look forward to more success in Texas and triage in California.  Thanks to all of you for the new business, we’re expanding our horizons in order to expand yours.  With new alliances and products, we can still work wonders.  We also have many opportunities for interested investors with solid returns, good collateral and reliable exit strategies.

Forgive the long windedness, it’s been a month since I’ve written.  That will change.  In the meantime, much has happened and it’s worth mentioning.  Please feel free to comment, they are appreciated.  Don’t hesitate to call and chat, I do look forward to hearing from you.