Commercial Loans & Mortgage News - May 7, 2002
Flying Under the Radar
There is a lot of chatter on the streets relative to perceived opportunities that await investors in the commercial real estate market. Interest rates are low and buyers are willing and able, but the challenge still lies in the availability of product. With continued weakness in the stock market, investors of all shapes and sizes are emerging to join an already crowded arena of old school commercial investors. Investor profiles range from "ma & pa" individuals all the way up to the "institutional" players - which are typically dominated by the Opportunity Funds and publicly traded REITs. Given Steelhead Capital's positioning as a direct financing channel for all non-institutional investors, I thought I'd share a few facts that may help you gain a competitive advantage over the long term. It's the old 180 degree rule: when the market place is crowded - look for ways to differentiate yourself, or perhaps look for a different market place altogether.
As has been mentioned in the past, there's a lot of capital chasing a limited number of deals. Both lenders and equity partners are aggressively seeking to put their capital to work in transactions with strong underlying fundamentals. Unless you have a distinct competitive advantage over the deep-pocketed institutional players, it will be increasingly difficult to identify and control transactions in the major metro markets. Banc of America Securities Equity Research Analyst, Lee Schalop, recently completed a brief describing the glut of available capital: "Everywhere we look in the real estate market, we see capital that is anticipating attractive investment opportunities materializing in 2002. In particular, we see opportunity funds, mezzanine lenders, and public real estate companies 'keeping their powder dry' in anticipation of real estate investment opportunities. Unfortunately for these hopeful investors, the real estate market is significantly healthier today than during the last downturn in the early 1990's. Then, the market was overbuilt and owners were overleveraged. Today, despite rising vacancy rates, most borrowers can service and/or refinance their debt, making the risk/opportunity of distressed assets less likely."
I spoke with one of our clients whose basic strategy is to pass on the major metro markets altogether, and focus solely on secondary and tertiary markets with good solid fundamentals. We've witnessed dramatic swings in our own backyard, both in Seattle and San Francisco, and the volatility, quite frankly, is a difficult factor to manage. So, not only do the major metros have explosive cycles of boom-to-bust to contend with, but the "sand box" is already crowded with extremely well capitalized players. Looking outside the major metros is hardly a new concept, but in light of Mr. Schalop's findings it is one worth reiterating. Financing is readily available in most markets that have basic fundamentals in place, and sometimes accessing deal flow in the smaller markets is a little easier in terms of developing key relationships.
As always, Steelhead Capital is eager to assist its clients in executing their investment strategy. Make us a part of your team!
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Chief Executive Officer Peter Slaugh founded Steelhead in 1999. In the relatively short period since its inception, Slaugh has built Steelhead into a leading resource for debt and equity placement nationwide. Slaugh is primarily engaged in growing the company and its lender relationships, as well as working on financings.
San Francisco Offices
With an extensive lender network, Steelhead Capital has built its reputation on structuring commercial loans requiring both debt and equity placement. Fluctuations in the capital markets present significant challenges for investors and we are pleased to provide financing as well as guide and advise clients through the process. Whether you are looking for apartment financing, commercial financing, mezzanine financing, or creative "out of the box" real estate loan alternatives, we can help.
For apartment loans below $2 million, we have a small apartment loan program with extremely competitive rates. For apartment loans and commercial mortgage loans above $2 million, we provide direct access to the country's most aggressive lenders. Make Steelhead Capital a part of your commercial real estate financing success. We look forward to hearing from you soon.
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