January 8, 2002

Commercial Mortgage:
New Year, New Opportunities

Welcome to 2002! It's a new year and with it comes a renewed sense of commitment and focus as the Capital and Commercial Mortgage Markets look to deploy their allocations for upcoming quarters. If you've been watching the 10-year Treasury over the last few weeks, you've noticed the only thing consistent has been its inconsistency - with commercial mortgage and loan rates vacillating between 5% and 5.30%+. Hopefully, if you were playing the rate game prior to locking, you hit it right, but most borrowers I spoke with were just happy to get deals closed in an extremely volatile commercial mortgage lending environment. Currently though, with favorable reports on unemployment, manufacturing and consumer confidence, there appears to be a widely held opinion that the US is, in fact, poised for recovery. That being said - it seems that confidence in US markets extends to Europe and Asia from a commercial mortgage lending perspective. This global interest in what the US has to offer opens new borrowing opportunities for those looking for commercial mortgages and debt financing.

US-based lenders, as you are probably aware, have instituted rate floors in an effort to maintain what they perceive as an acceptable yield on their notes. Although the indices upon which rates are priced have dropped to historical lows, borrowers haven't benefited proportionally to the sharp decline. With the Discount Rate at 1.25%, the 90-day LIBOR at 1.84%, and Prime at 4.75% we should be seeing commercial mortgage rates at 4% and 5% or lower. Yet, banks aren't passing their lower commercial mortgage rates on to the borrower, but instead taking advantage of higher margins for themselves. Why are they doing this? Well, primarily because they can. European and Asian interest rates, however, are in line with the true cost of funds. Foreign lenders have capital to invest, with a view that the US still offers extremely attractive market opportunities. Considering Japan's recent and continuing troubles, it's easy to understand their appetite for US-based investments. We're seeing fixed rates coming out of Germany in the 3% to 4% range - that's cheap money, but given the cost of funds across the board, it makes sense. There's a considerable degree of pent-up demand to invest capital in sound markets, and the US is certainly one of the more favored, if not the favored, market for commercial mortgages and real estate lending.

Steelhead Capital recently gained access to European and Japanese money looking for US-based investments, which include commercial mortgages, so please inquire if you have an interest in taking advantage of these lending sources.

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With an extensive lender and commercial mortgages network, Steelhead Capital has built its reputation on structuring commercial mortgages and commercial real estate loans requiring both debt and equity placement. Fluctuations in the capital commercial mortgages present significant challenges for investors and we are pleased to provide financing, as well as, guide and advise its clients through the process of obtaining commercial mortgages. Whether you are looking for apartment financing, commercial financing, commercial mortgages, or creative "out of the box" real estate loan alternatives, we can help.

Our success is measured by our clients' success, and our mission is to be your source for the most appropriate - and advantageous - commercial mortgage solution that helps you achieve your goals. Make Steelhead Capital a part of your commercial mortgage and real estate financing success. We look forward to hearing from you soon regarding our commercial mortgages and real estate financing services.

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