Commercial Loans & Mortgage News - August 7, 2001
Commercial Loan Default Rate Low
We're seeing several mid-year reports indicating that default rates on core commercial loan types remain exceptionally low. The Wall Street Journal reported, "Credit losses on long-term commercial mortgages ticked up in the second quarter, but are still at very low levels, according to a new study, a sign that real-estate lending remains solid for this point in the economic slowdown. The recent losses are well below the historic average of about 0.70% since 1972 and nowhere near those during the real-estate debacle of the early 1990's, when credit losses finally peaked at 2.37% in 1993, causing big losses among institutional investors that reverberated throughout the economy. The property type showing the largest losses was retail, at 0.20%, with strip centers and malls hurt by a spate of store closings and retailer bankruptcies. The strongest sector was loans on apartment buildings, which recorded losses of just 0.04%."
A member of Steelhead Capital recently attended a San Francisco commercial real estate forum comprised of individuals with varying disciplines within the industry. Perspectives were shared from folks involved in REITs, lending, syndication, development and opportunity funds. The topic of discussion focused on what lies ahead in the next cycle of commercial real estate and the overall sentiment was that the market will present numerous buying opportunities over the next few years. Some of these opportunities will stem from sources like REITs disposing of "one-off" assets that were purchased as part of a larger portfolio and don't really fit within their standard investment parameters, developers with insufficient balance sheets to finish construction, or property owners defaulting on their loans as a result of vacancy increases. Additionally, it was noted that the so-called Fourth Quarter recovery was not likely, and we will see continuing market corrections over the next eighteen months. What this really means is that although default rates are extremely low, there may very well be a shift upward as the economy sleeps off the hangover. Everyone agreed that having sufficient "staying power" would ultimately lend itself to significant upside as new opportunities present themselves.
FYI...if corporate earnings continue to stumble, we may see investor "flight to quality" away from corporate bonds and towards Treasuries, thus flattening Treasury yields and lowering interest rates as a result.
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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.
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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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