NBS Financial’s Wood Arranges $2.6M for Woodinville Industrial Building

NBS Financial Services Executive Vice President Mike Wood has arranged $2.6 million in financing for Underwood Gartland 216, a 71,750 sf warehouse/distribution building in Woodinville, Washington.

Symetra Life Insurance Company was the lender, and Underwood Gartland 216 LLC the borrower. This loan was a refinance of a maturing loan, and had a 5-year term, 25-year amortization, and a 43% loan-to-value ratio. Underwood Gartland 216 was built in 1999.

In these challenging financial markets, lenders are looking to lend on the strongest and most stabilized projects. So the fact that Underwood Gartland 216 was only 65 percent leased at the time of the loan provided a bit of a challenge, but not an insurmountable one, said Wood, of NBS Financial’s Seattle office.

“The borrower had enough income and cash-flow to qualify for the loan, and the lender recognized the quality of the real estate,” Wood said.

NBS Financial was Symetra’s top correspondent nationwide in 2008.

July 2009 Market Watch

Economic Outlook:
The FOMC met at the end of June and had some interesting insight into the future of the US economy. According to the Department of Commerce, US real GDP will begin to stabilize in the second half of ‘09 after contracting about 6% in each of the two previous quarters. This is an indication that economic growth might begin in 2010. A few reasons for the positive outlook include a slowing of speculative investment in the oil and housing markets, improved credit flows expected to unlock pent-up demand, slowing of businesses liquidation of inventory and other self-correcting actions, and bold changes in global monetary and fiscal policy.

Lending Environment:
In late June, the Mortgage Bankers Association released its First Quarter report showing a dramatic drop in loan origination from ‘08 to ‘09. Overall, originations are down about 70% from First Quarter ‘08. There was a 96% decrease for CMBS originations, 80% for banks, 60% for life insurance companies, and 25% decrease for GSEs (Fannie & Freddie). Even with the large decrease in originations, life insurance companies and GSEs are still very active in today’s market.

Refinancing Challenges:
The first two quarters of ‘09 have also brought some new challenges to light for many borrowers. Many loans that were originated in the past five to ten years are underwater or showing sings of stress due to lower rental rates, increasing vacancies, and higher underwriting capitalization rates. Many borrowers are realizing that they will need to bring equity to the table when refinancing an aggressive loan that was made less than ten years ago. It is prudent now more than ever to think through financing options well in advance of a loan maturity. Many proactive owners are already refinancing debt that expires three to five years out as current interest rates are historically low and there is a general uncertainty about inflation and the future of interest rates.

Commercial RE Loans:
There are commercial real estate lenders active in today’s market. Life insurance companies typically have an allocation each year for commercial real estate loans that they need to make in order to match debt to the different insurance products they sell. Life insurance companies alone originated about $2.62 billion in commercial real estate mortgages in First Quarter ‘09. With the recent spike in treasuries over the past two months, we have seen commercial mortgage rates rise slightly but they are still at all-time lows. It is always best to discuss financing needs early and often, so you aren’t surprised when it's time to obtain financing for an acquisition or to refinance an existing loan.

June 2009 Treasury Highlights:
• June 10 Year Treasury High: 3.95% on June 10th
• June 10 Year Treasury Low: 3.48% on June 29th

Issues Affecting Commercial Mortgage Rates:
• Steepened yield signaling an economic recovery may begin toward the end of 2009 and into 2010
• US Treasury rates remain volatile as the issuance of treasuries by the US government is offset by the treasury repurchase program
• Federal Reserve voted to hold the Fed funds rate target at 0-0.25%

May 2009 Market Watch

The month of May continued a steady increase in the 10-year Treasury yield. Since January 1, we have seen an increase of over 150 basis points, closing the month of May at nearly 3.75%. The 10-year Treasury note climbed over 50 basis points in the month of May alone. We have seen lenders adjust their pricing slightly upward as a result of the increase in Treasury rates, but overall, interest rates are still at or near historic lows. For well located and performing commercial real estate, we have the ability to deliver extremely attractive financing options even in today’s challenging market conditions.

NBS Financial prides itself on our correspondent relationships with Life Insurance Company lenders and a select group of local and national bank relationships as well as our DUS (Fannie, Freddie, & HUD) relationships. We have the ability to finance the entire capital stack, from a 1st mortgage to a mezzanine loan. Our sources of money have both confidence in our market and our people to find the best investments for their money. Call one of our Loan Officers today to discuss your next commercial real estate transaction.

May 2009 Treasury Highlights:
• May 10 - Year Treasury High: 3.72% on May 27
• May 10 - Year Treasury Low: 3.09% on May 14

Issues Affecting Commercial Mortgage Rates:
• $145 Billion of US Treasuries auctioned in the last 2 weeks of May, forcing Treasury yields upward of 50 basis points for the month
• FMOC released meeting minutes stating some signs of stabilizing in the economy but "significant downside risks to the economic outlook"
• A steepened yield curve resulting from LIBOR falling and long-term Treasury rates increasing, many expect this should provide a stimulus to the economy
• Fed continues to purchase Treasuries to try and curb inflation that is expected to affect long-term rates as the economy rebounds

Guenther Arranges $4.755 Million for Bozeman Manufactured Housing Community

NBS Financial Services Finance Officer Erich Guenther has arranged a $4.755 million loan with a low interest rate and attractive terms for King Arthur Estates, a 210-pad manufactured housing community in Bozeman, Montana.

The deal was funded through Fannie Mae. Guenther, of the company’s Seattle office, negotiated a 10-year fixed interest rate at 5.6%, with 65% loan-to-value and 1.50 debt service. The borrower was also able to pull out some equity.

As the credit markets have deteriorated over the past months, Fannie Mae requires extensive pre-review and due diligence for all manufactured housing properties. Guenther was able to negotiate with Fannie Mae on several fronts, to meet and exceed the borrower’s expectations for the loan proceeds and pricing. The proceeds were used to pay off the expiring mortgage on King Arthur Estates, an existing mortgage on another property, as well as financing fees for the transaction.

TALF Update

The Term Asset-Backed Securities Loan Facility, or TALF, began in an effort to jump start the economy by increasing lending on many different types of assets. So far, the $1 trillion fund has been used to lend money to investors who buy consumer debt. Recently, the Fed announced that they will allow the use of TALF funds for the purchase of commercial real estate debt. "This program is critical to restoring the flow of credit to owners of commercial real estate and preventing a damaging chain of events in this market," Treasury Secretary Timothy Giethner recently stated.

Two objectives of the program are to create a market for originated but unsold CMBS and to thaw the market for new CMBS issuance. As many banks and financial institutions begin to sell pools of loans off their books, the TALF program allows banks to originate new debt, confident there will be a market to sell the loans after they originate it. The overlying principal is conservative lending. TALF funds can only be used to buy the AAA, or highest rated tranches of CMBS pools. Many CMBS loans originated in the last 24-48 months were underwritten too aggressively as Standard & Poors expects to cut the ratings of many pools that were securitized between 2005 and 2007, making them ineligible for TALF funds.

With an influx of capital returning to purchase commercial real estate debt, some large banks and financial institutions have begun originating loans that will attract TALF buyers. As time passes and liquidity in the CMBS market increases, look for more and more banks to start originating debt that can be pooled and sold as CMBS, greatly increasing liquidity in the marketplace. Although it will take time, this liquidity in the CMBS market will relieve pressure for many lenders with commercial real estate loans on their balance sheet.

NBS Financial's Portland Office on MBA List

NBS Financial Services' Portland office was ranked second on the Mortgage Bankers Association list of the top commercial real estate/multifamily finance firms in the Portland metro area, based on total origination for the year ending Dec. 31, 2008. The Portland office arranged 37 loans worth $242 million in 2008, with an average loan size of $6.5 million.