Rising above, leaping ahead...

This time last year we were in the brunt of the crash, wondering when we would see the end of the Great Recession. Commercial Property lending was largely shut down.

August 2009, the Newmark team joined many local businesses to run, jog, walk in the annual JPMorgan Chase Corporate Challenge; a 5K race around the San Francisco Embarcadero. We didn't expect to win alongside teams from Pixar, Wells Fargo, HP, Cisco and other Bay Area legends... but we were sure to have fun.

Sporting T-shirts that read "Goodyear? Not! But rising above!", our goal was simple; enjoy the day and stay in the race...

Here we are a year later, running in the 2010 5K Challenge which benefited the YMCA Kids for Camp Fund. It was a cold San Francisco summer evening as we made our way along the waterfront course past AT&T Park, but the Newmark team was running well and feeling optimistic.

The theme for the event was "green" and our Newmark team returned with T-shirts bearing a smiling cartoon frog, who is wearing Newmark logo running shorts and the mantra "Leaping ahead!".  

We know many of our borrower and some of our lender friends felt their lives were turned upside down during the crash. Commercial real estate is still struggling to recover. Hanging over us even now is the threat of a second recession that some economists give a 50-50 probability.

Newmark is still in the race. And as we prepare for the 2011 Challenge, perhaps our T-shirt design should include a cartoon bowl of chips and salsa, with the caption "Please! No double dipping!"

Lowest rate or best loan?

With interest rates nearing a 50-year low, common wisdom says get the lowest rate fixed for as long as possible – but what does capital wisdom say?

Rates nearing a Fifty-Year Low
Chart courtesy of Federal Reserve Bank of St.Louis

I work with a wide variety of lenders to get them to put forward the most competitive rates they can offer. But just as important, I work closely with my borrowers to explore their full range of requirements so that we can match the best fitting loan option to their unique situation.  The best match is not always the lowest interest rate.

Lowest rate may mean lowest payment, but may not always mean best deal.

Evaluating various loan quotes and selecting a lender can be a process of comparing apples and oranges and it’s tempting for borrowers to focus on two quantitative measures… the interest rate and the amount of the loan.  What other criteria should be weighed in selecting a lender?

Over the life of the loan other issues may represent additional costs, require extra borrower resources, cause delays or even introduce business risks. The list below is not exhaustive, but represents common questions we cover:

• Does the lender have a reputation of being reasonable and responsive?
• What flexibility can be built into the loan documents?
• Who will service the loan?
• Will the information you submit for the loan request be made public to potential CMBS bond buyers and thus potentially to your competitors?
• When in the closing process will the interest rate be locked in? 
• Is the loan assumable; if so can you cleanly get off of any guarantees? 
• How often will you need to give the loan servicer rent rolls, operating reports and financial statements?
• Will all or most leases need lender’s approval?
• What is the likelihood of being re-traded during the due diligence or closing process?

In a nutshell

As a borrower, look for a solution tailored to your needs. Calculating a loan payment may be simple math, but calculating its full cost can be a science and selecting the right lender, an art.