Wednesday, November 4, 2009

On the Road-Ormond Beach, Florida


I cannot begin to thank those of you who sent me personal emails this past couple of weeks relating stories about your own experiences with the death of parents or grandparents or other loved ones; your encouragement and your advice has really helped me. After two weeks in Florida, I went home last Saturday. But then I wasn't sure why I hadn't stayed. So after a Monday of deep thinking (and reflecting on a lot of your messages which told me "You'll know the right thing to do", "Just follow your heart") at 3:30 am on Tuesday I got up and made a reservation to fly back to Florida that morning and have been here since. This guy, my old man, is a tough cookie. He won't let go and while at times he looks like he's ready to cash it in, he'll come out with something that shows that his sense of humor, somehow, still exists! But he's not having any fun and while he is at home, he has no quality of life. We knew we needed to help him let go, to give him permission to let go and to make sure he knew that those of us who he would be leaving behind in this world will be all right. The hospice package includes a difficult but wonderful section called "Preparing for Approaching Death." I'd never known any of this stuff before and it has been very helpful for us although it doesn't make it any easier. For the most part, my dad sleeps a lot and really can't form words. I'd heard about dying with dignity but this is the first time I've been this close to it; my mother died in 1992 in a hospice of aggressive (is there any other kind?) of brain cancer and she went quickly at age 68 but even near the end, when my father, from whom she had been divorced from and hadn't seen in many years walked into the room, I heard her say, "I haven't seen you in a long time; let me mix you a drink." This was remarkable as she was pretty much out of it by then. The power of the mind and spirit is just plain amazing. So, thanks again for holding me up during this; you guys are very special to me.

RCA released it's Real Estate Capital Trends report for November yesterday which features "Hundreds of Active Lenders for Commercial Real Estate." Subscribers can probe deeply into the data which includes an analysis of more than 1,250 commercial mortgages originated in 2009. With permission of RCA, here are some extracts from their strategic summary:

1. While financing for property remains scarce, there are hundreds of active lenders albeit at terms far more conservative and expensive than before.

2. A full half of the properties were financed by regional and local banks.

3. The "too-big-to-fail banks" originated approximately 20% of CRE loans by volume and 14% by number.

4. For larger deals and higher LTV loans, international banks have become the primary financing source.

5. Although their share of the market is roughly double that averaged in 2006 and 2007, insurance companies have accounted for 13% of CRE lending by volume and 6% by number.

So, there is money out there but buyers will need to accept that things have changed, or perhaps just gone back to a time of more real-ism. Given that money is made on the buy, those who want to get into or back into the game need to make sure that their analysis, their discounted cash flows, their expectations of leasing or lease renewal (or rental) are as realistic, and I'd say conservative, as possible. I don't believe that lenders are going to fool themeselves again (at least not right now). And, given the amount of scrutiny (vs. pressure to put money out), they are more inclined to walk away from making a loan than risking either getting fooled by a borrower (formerly known as 'the customer') or by the market, economy or what have you. However, real estate has always been and will always be a great long-term investment. For those that are in a position to think long-term, this is the time of your lives (and those of future generations).

Photo: Ormond Beach, Florida ("Take a right at the ocean and go straight until night.")



These are my views and not that of my employer.

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